The Wrap: AI Sinks, Silver Surges & Mortgage Rates Fall

The latest edition of “The Wrap” features our view of the key events in Washington and on Wall Street over the past week. Don’t forget to watch “The Wrap” on The Julia LaRoche Show every Saturday on YouTube to catch our discussion of what’s hot and what’s not in the world of finance and investing. 

AI Market Rout Accelerates

February 27, 2026 | The noise from the unwind of AI is adding to the contagion across the equity markets, which is also hurting bank, credit and BDC stocks. The FDIC just released the bank industry data for Q4 and we'll be publishing The IRA Bank Book industry quarterly on Monday.

A viewer asked Julia if banks were required to back their gold holdings with cash under Basel III, but the answer is no. Under Basel III, physically allocated gold is classified as a Tier 1 asset with a 0% risk weight, placing it on par with cash and high-quality government bonds. This allows banks to hold physical gold without needing to set aside additional capital for risk under Basel III.

Credit costs were down for banks in Q4 and the only noise in credit is commercial property (CRE) and, of course, private equity and credit.  The world of private credit is unraveling pretty much as we predicted some months ago.

Institutional investors can and do abide by limits on redemptions for private equity and credit, at least for a while. Retail investors cannot and do not, and will run when there are clear signs of distress and illiquidity. Remember the deposit run at Silicon Valley Bank.

Liquidity seems to be the issue with Blue Owl (OWL) and some other fund sponsors. The fact that OWL and its companion BDC, Blue Owl Capital Corporation (OBDC), are public stocks only adds to the potential for a liquidity run. Selling private credit to retail investors created the circumstances for forced liquidation. Our finance company portfolio is below sorted by the 200-day moving average.

Finance Company Surveillance Group

Source: Yahoo Finance (02/26/26)

Despite the strong results for banks and other financials, the markets are giving back all of the gains of '25 and more. Almost every name in our nonbank finance group is down double digits. Note that legacy payments giant Fiserv (FISV) is near the bottom of the list along with OWL, Coinbase (COIN), Robinhood Markets (HOOD) and Upstart (UPST). 

Of note, we've learned this week that some of the larger private credit sponsors such as Apollo (APO) are funding themselves via the Federal Home Loan Banks. APO insurance subsidiary Athene, for example, is a member of the Federal Home Loan Bank of Des Moines and, through membership, has issued funding agreements to the FHLB in exchange for cash advances.

APO, KKR & Co (KKR), Brookfield (BN) and Blackstone (BX) have acquired insurers. OWL also has a relationship with an insurer as do many other private credit sponsors and managers. You'll be hearing more about private credit shops and the FHLBs in future issues of The IRA.

The selloff in technology stocks and related names continued this week, even after Nvidia (NVDA) reported upbeat earnings. The leading chipmaker gave a first-quarter outlook that easily beat the average analyst estimate and delivered a 73% surge in fourth-quarter revenue, but no matter. As we predicted last year, the bloom now seems to be off the rose for any stock related to AI.

FS KKR Capital Corp. (FSK) announced financial results for the fourth quarter and full year ended December 31, 2025, reporting results that fell short of Wall Street expectations and included a dividend cut.  FSK reported a $114 million ($0.41 per share) loss for the quarter and a ~30% cut from the previous $0.70 common stock dividend. 

United Wholesale, Rocket Report

United Wholesale Mortgage (UWMC) reported solid volumes for Q4, but then spooked the market by not taking questions from investors after releasing earnings. The change in routine by UWMC CEO Matt Ishbia, who normally loves to take questions from analysts, caught investors off guard and the stock fell sharply. 

The market-volume leading company guided to slightly lower Q/Q revenue in Q1 on the heels of its material acquisition announcement of Two Harbors (TWO). Big question: Will TWO shareholders approve the deal with UWMC, especially with the acquirer's shares falling?

As of Q1 2026, TWO book value per share is ~ $11.13.  Based on exchange rate and current trading price, investors will get around $9.00 per share in UWMC stock. What a deal. 

By comparison, on of our favorite portfolio holdings, Annaly Capital Management (NLY), reported strong fourth-quarter 2025 results on January 28, 2026, exceeding analyst expectations for both earnings and revenue.  Like many stocks, NLY sold off after earnings were released, but is still trading at a 10% premium to book value vs a 20% premium at the end of 2025. 

And finally, Rocket Companies (RKT) beat Street estimates for revenue and net income, ending a transformational year that included the purchase of Redfin and Mr. Cooper. The stock jumped on the positive news after the close yesterday and confirms RKT as the clear leader of the residential mortgage sector.

"Rocket proved itself this quarter as a category of one," said Varun Krishna, CEO and Director of Rocket Companies. "This is the power of an integrated homeownership ecosystem - massive top of funnel, scaled origination-servicing recapture, expansive distribution for industry professionals and a technologically advanced foundation for infinite capacity - built for the AI era. We exceeded guidance in a quarter that closed out a transformational year. I'm so proud of how the Rocket, Mr. Cooper, and Redfin teams executed together."

"Bottom Line: The stock is our favorite way to position for an acceleration in overall housing activity, backed by the thematic catalyst of leveraging proprietary technology..." writes Eric Hagen if BTIG. "We're especially bullish around management's guidance for the $500 million of guided synergies from the COOP merger to get realized 6-12 months ahead of schedule, which is mostly the result of effectively pruning the servicing portfolio now that it's fully integrated onto a single tech platform. The stock has pulled back 20% from the 52-week high in mid-January, though we attribute much of the correction to negative read-throughs from other lenders..."

Mortgage Rates Fall

Our latest column in National Mortgage News on Federal Reserve Board Vice Chairman Miki Bowman's Basel III proposal to reduce capital requirements for bank investments in mortgage loans and servicing assets is below.

https://www.nationalmortgagenews.com/opinion/basel-proposal-helps-banks-but-changes-little

We appreciate the feedback we received from our colleagues in the industry. Our background note on the history of Basel III is here ("Miki Bowman Pushes Back on Basel III & Residential Mortgages").

The good news about housing finance, of course, is that the average for 30-year fixed rate mortgages dipped below 6% this week, although more aggressive lenders have been below 6% for some time. Remember, lenders set mortgage rates on loans, markets set the yield on bonds and mortgage-backed securities. 

We expect short-term interest rates to move lower over the course of 2026, but mortgage rates are priced off of the 10-year Treasury and may be a good bit more volatile.  We are arranging a new 30-year mortgage for a home purchase in FL and we do not intend the price the loan until late April.

Silver Market Continues to Tighten

Last but not least, we note again that supply problems in the silver market are threatening the market position of both the COMEX and the London Base Metals Exchange (LBME). The tightness of the physical market for silver and the rapidly eroding confidence in the pricing of the two main western exchanges suggests that a seismic shift is underway in the global market for silver.

"India's markets regulator on Thursday directed mutual funds to use domestic stock exchange spot prices to value their physical gold and silver holdings from April 1, 2026," Reuters reports. "The Securities and Exchange Board of India (SEBI) said mutual funds may now use polled spot prices from recognized stock exchanges that settle physically delivered gold and silver derivatives contracts, ensuring that valuations reflect domestic market conditions."

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