Rates Down, Gold Up; RITM Buys PGRE at One Quarter of NAV? Yikes...

September 24, 2025 | Updated | In preparation for our quarterly reader call, a few thoughts below on the markets and the remarks by Fed Chairman Jerome Powell. Then we reflect on some of the developments in the world of mortgage finance,  with one of the larger players in residential mortgages making moves in commercial office properties that frankly leave us a bit perplexed.

Is Michael Nierenberg, CEO of Rithm Capital (RITM), really paying a double digit cap rate for an "Irreplaceable Portfolio of Class A" properties in San Francisco and New York? What does this say about the true market value of all New York commercial properties? Holy bananas Batman!

Rates Down Small, Gold Up Large

While speaking to the Greater Providence Chamber of Commerce in Warwick, Rhode Island this week, Chairman Powell told us nothing that we don’t already know. But the question is, does this hyperbolic market want to know anything that detracts from the higher and higher market price narrative? 

Yesterday we had a discussion with Myles Uland at Yahoo Finance about the banks and our view of the sector going into Q3 2025 earnings. The basic thrust is that the large-cap banks seem to be running out of gas, while the story stocks led by SoFi Technologies (SOFI) are still near 52-week highs, like much of the rest of the market. But as we told Uland, higher credit costs are going to force investors to reevaluate many of these names and perhaps take some profits.

Suffice to say that in a falling interest rate environment, we like the nonbank members of our residential mortgage group a lot more than we like the banks at all-time highs.  And yes, make sure you read the timely front-page article in the FT today about the sudden collapse of Tricolor Holdings at the start of this month and the impending collapse of First Brands Group. When we see that federal regulators are preparing to start ignoring the impairment of modified assets owned by banks and REITs, this is not a great endorsement for bank stocks.

We must note that crypto token leader Bitcoin is trailing gold by a significant percentage this year, refuting the idea of tokens as a substitute for real money. "Money is gold, nothing else,” banker J.P. Morgan famously said in 1912, thirty years after the US restored gold convertibility of dollars, but few people in the 21st Century even understand Morgan’s perspective.  They're all too busy staring at their smartphones, the new god of the 21st Century.

Meanwhile, a growing number of crypto Treasury platforms that chose to go public in order to accumulate worthless tokens are now desperately buying back stock to prevent their equity prices from plummeting. Could we be witnessing the unwind for the great crypto trade? The number of banks and other companies that have committed to facilitating crypto trades will make a wonderful target list for members of the trial bar in the event that this classical ponzi scheme collapses. 

Despite the public whining by Chairman Powell, the lower interest rate narrative is already starting to see an uptick in residential lending volumes. Many lenders pushed down  loan coupons over the past three months in anticipation of a half-point rate cut, but now the market is backing up a bit – although loan volumes should continue to grow into the end of the year and 2026. 

“Mortgage applications remained elevated last week, with the conventional indices down slightly (-1.8%) and government indices up modestly (+5.28%),” writes Scott Buchta at Brean. “While primary rates are up about 1/8 of a point from their recent lows, they remain well below our first threshold (6.50% for conventionals) and we expect refi application volumes to remain elevated.”

But not all mortgage issuers are created equal. And REIT stocks often don't reflect NAV. Subscribers to our Premium Service get all of the details. 

RITM Buys Paramount Group? At One Quarter of NAV?

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