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As Stocks Swoon, Residential Mortgages Surge

Updated: Mar 2, 2020

New York | Last week, financial markets wiped out about a quarter of the market value of large US banks and nonbank companies. One of our core holdings, U.S. Bancorp (NYSE:USB), closed Friday just shy of 1.6x book vs over 2x only a couple of weeks back. When USB goes below 1.5x book, we’ll be nibbling again.

In a funny way, as we said on Twitter last week, the coronavirus or COVID19, took some excess air out of the obvious bubble in US equities. This market wanted to go down, but did not know how. Thanks to Uncle Xi Jinping and COVID19, Federal Reserve Board Chairman Jay Powell’s problem is fixed for now. Yet the low level of interest rates remain both an immediate opportunity and also the most important long-term problem facing the US banks and the broader financial sector.