"The last leg of a bull market always ends in hysteria; the last leg of a bear market always ends in panic." Jim Rogers July 15, 2026 | In this issue of The Institutional Risk Analyst, we provide a few thoughts on bank earnings and a portfolio update before our quarterly subscriber call tomorrow. A couple of observations seem to be appropriate on record Q2 2026 earnings and equally large bank risk to public and private markets as exuberance reaches a near-term peak. JPMorgan (JPM) had a very strong quarter, with net revenue up 28% YOY and 15% sequentially. CEO Jamie Dimon noted this is hard to beat, perhaps presaging a slower pace in 2H 2026. Dimon likes to talk down his stock, so take his warning about market conditions with adequate seasoning. Fact is, while JPM has record earnings from market sources they also have the biggest risk to public and private markets of any US bank. Among major U.S. banks, JPM carries the largest total volume of exposure to non-depository financial intermediaries (NDFIs), with nearly $240 billion.

July 13, 2026 | This week in The Institutional Risk Analyst, we feature the latest edition of Mortgage Notes, one of our regular features. While everyone and anyone able to operate a smart phone seems to be involved in non-QM lending, we continue to see and hear indications that the bloom is off the rose in the world of non-QM and particularly debt service coverage ratio (DSCR) loans, an early indication of larger problems ahead in residential mortgage finance. “In plain English... a DSCR loan is a mortgage on a rental property where the bank basically shrugs at your pay stubs and asks one question: does the rent cover the payment?,” writes Rich Swerbinsky on LinkedIn. “If the house pays for itself, you qualify. It is landlord lending, demand is surging, and it carries higher risk and higher margin than a standard agency loan.” “The plain-vanilla agency loan gets sold straight to Fannie, Freddie, or a big aggregator,” Swerbinsky continues, “But non-conforming loans, DSCR and the rest of the non-QM world, do not qualify for that path. So they get sold, directly or indirectly, into private-label securities: a few hundred loans pooled together and turned into a bond that investors buy. It is the corner of the market growing the fastest...” The market for Debt Service Coverage Ratio (DSCR) loan securitizations — part of the Non-QM residential mortgage-backed securities (RMBS) market — reportedly is dominated by Verus Mortgage Capital, Angel Oak Capital Advisors (AOMR), and Redwood Trust (RWT), but most of the larger lenders are involved as well. JPMorgan (JPM) and Goldman Sachs (GS) are the leading issuers of non-QM and DSCR deals. If you can fog a mirror, you can get a DSCR loan for a rental property. The good news is these loans typically require 30-40% down payments, but that may not help if the asset is overvalued. This has led to a rather pernicious problem of home buyers pretending to want to get a DSCR loan for a rental investment, then instead living in the house as their primary residence. Unfortunately this is illegal, but high home prices and rising interest rates tend to increase the risk of fraud to lenders and investors alike. TBA: FANNIE MAE 5.5s for August Source: dataQollab Moving into a property financed with a Debt Service Coverage Ratio loan is a violation of your loan agreement. Because these are non-owner-occupied business loans, Housing Wire notes, using the home as your primary residence breaches the occupancy affidavit you sign at closing, putting you at risk of loan acceleration, foreclosure, and potential state and federal mortgage fraud charges. But the greater risk to borrowers and investors is the widely held illusion that the valuations for rental properties grow to the sky. Take the example of China, where two decades of home price appreciation has been reversed and home prices have now fallen steadily for the past three years. How did this happen? Because the Chinese foolishly imitated the US mortgage market and particularly the flawed methodology for tracking home prices, giving their citizens a false image of the actual conditions in the housing market. “You need to understand that the Chinese have copied the U.S. approach of repeat sales indices,” notes Berlin-based housing expert Hans-Joachim (Achim) Dübel, “without having the transaction volumes. So what you ‘measure’ in terms of house prices is essentially condo flipping of speculators. Repeat sales indices exacerbate price moves in both directions.” Repeat sales indices like the S&P CoreLogic Case-Shiller or FHFA HPI measure price changes of the same properties over time. They sometimes inflate home price appreciation compared to the broader housing stock because they exclude renovations, drop highly distressed sales, and are subject to selection bias. A 2011 paper published by the Federal Reserve Bank of St Louis noted: “Housing price indexes are calculated by tracking home prices in a given region over a period of time. Ideally, one would track the price of a random sample of houses. However, this method has operational problems because, at any particular point in time, not all houses are for sale; additionally, there may be variations in the type of houses sold. If one merely tracked the price of homes sold over time (e.g., as is found in median house price indexes, such as the NAR and the Census indexes), observed changes could be due to changes in the composition of homes sold as opposed to changes due to market conditions. Dealing with houses that differ in "hedonic" characteristics—such as the square footage, number of bedrooms and distance from city center—can be tricky.” For those of you fortunate enough to read our 2024 biography of Freedom Mortgage founder Stan Middleman, "Seeing Around Corners," the smart money got out of the US mortgage market in mid-2005 -- three years before the GFC. But this time around, the crowd chasing private label mortgages is far larger. For many investors, it's already too late to get out. One insider tells The IRA that the massive boom in DSCR loans to fund rental properties is no surprise and that the same phenomenon was seen in the 2000s, prior to the 2008 mortgage market collapse. The crowd this time around is bigger and includes many institutional investors. He relates: “I think that there's multiple aspects of how the industry has bifurcated. Most of the folks that were in the distressed asset game post-GFC moved into private credit. It's also, by the way, private credit and private lending, asset-backed lending. Whether it's on mortgages or any other types of assets, is also where the guys that ran Countrywide and Option One. A lot of the folks who never got handed any responsibility for the exotic way that they originated loans to consumers just went to private credit.” DSCR loans are attractive for lenders because they can feed the originate-to-sell machine and manufacture the appearance of profitability, but without the regulatory risk that accompanies residential mortgages. The borrowers are supposedly investors and DSCR loans are commercial loans or what is know as “business purpose loans.” There is far less media attention on this market because, in legal terms, these are commercial loans. Also, it's literally an easier asset to foreclose, but the borrowers are often consumers chasing fix-and-flip opportunities rather than professional investors. “Of course, memories are very short,” relates the insider. “If you're a 35-year-old managing director at Goldman Sachs or Blackstone, which, by the way, many of the managing directors are in their 30s and some of them even still in their 20s. Those people were in high school or middle school when the last mortgage crisis hit, when there was any sort of real turbulence or downturn in the real estate economy or the economy in general. So they are ill-equipped from a experience perspective on what markets look like when they're not just headed in one direction.” Smarter investors have already figured out that we are headed for a correction in housing. A growing number of private lenders are reportedly looking to sell pools of non-QM mortgages and DSCR loans -- this even as street firms like Goldman and JPMorgan are pumping out securitizations of new deals at a brisk pace. “You know, anecdotally, the number of private lender calls and texts that I get on a personal level is starting to scare me,” the insider confesses. “A year ago, I would get one or two texts a week from investors in the non-QM world or, you know, a private lending group or some broker that wants a quick closing. Now I'm seeing one or two inbounds a day. I'm getting text messages. I'm getting phone calls. I'm getting offers of second mortgages. I'm getting offers of first mortgages. It seems like there is almost a level of desperation within private credit. It kind of feels like the hysteria in the 2005 era when the Alt-A market began to crack.” The Mortgage Surveillance Group Below we take a look at our mortgage surveillance group, twenty-seven publicly traded stocks that track the world of residential mortgage finance. More than half of the members of the group are down over the past several months since the start of the Iran war and the resulting surge of inflation. As we've noted, the markets have taken interest rates up even though the FOMC has yet to act.

This week in “The Wrap,” we feature the top events in Washington and on Wall Street over the past week. And please watch “The Wrap with Chris Whalen” 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. July 10, 2026 | Over the July 4th weekend, we updated the WGA Precious Metals Top 25 list and added a new security, Bunker Hill Mining Corp. (BHLL). BHLL was incorporated in 2007, is headquartered in Vancouver, Canada and is undergoing an active restart under new management. Discovered in 1885 in Idaho's Silver Valley, the Bunker Hill Mine quickly grew into one of the largest lead, zinc, and silver producers in the US. Operations thrived for nearly a century until environmental disasters, labor conflicts and management failures forced its closure in the 1980s. We’ll be writing further about the new incarnation of BHLL in coming issues of The IRA. As we predicted, the fragile ceasefire between the US and Iran ended this week. “U.S. Central Command said Tuesday that it launched a ‘series of powerful strikes’ on Iran in response to Iranian attacks on three commercial vessels in the Strait of Hormuz,” CBS reports. “CENTCOM said the operation targeted air defenses, radar sites and anti-ship missile sites, as well as dozens of small boats used by Iran's Revolutionary Guard.” In addition to the strikes, the U.S. has revoked sanctions waivers that allowed for the sale of Iranian oil. Democrat Graham Platner withdrew his bid for the Senate race in Maine amid allegations of sexual assault by a former girlfriend as the November midterms approach. The scandal has rocked the Maine Senate race, which is seen as necessary to win a Senate majority for the Democrats. Jonathan McKernan, a top Treasury Department official who has been a central player in the Trump administration’s push to ease regulation on Wall Street, is expected to step down next week, according to published sources. His exit comes only nine months after being confirmed by the Senate as under secretary for domestic finance. McKernan had been on the board of the FDIC before going to Treasury. Mark Halperin’s latest midterm election analysis indicates that while Democrats are well-positioned to potentially retake the House of Representatives, they face a steep uphill battle in keeping or taking the Senate majority. He points to underlying vulnerabilities for both parties driven by historical trends, candidate recruitment, and the political environment. But inflation (aka "affordability") is still the single biggest political issue in 2026. Oil prices fell after the announcement of a truce between the US and IRA, but over the past 6 months, U.S. diesel prices have risen significantly. This key fuel has risen from around $3.50 per gallon in January 2026 to roughly $4.57 per gallon. This represents an increase of over $1 per gallon or roughly 30%, heavily driven by global shipping disruptions and geopolitical tensions. Is that double digit inflation? Note that oil fell to $20 per barrel during COVID in 2020. Meanwhile, the Federal Open Market Committee said in the most recent minutes that they view the AI infrastructure buildout as an upward driver of inflation. Officials noted that the intense demand for computing power and data centers puts pressure on prices for technology products and electricity, which could force the central bank to raise interest rates. The demand for technology is also a huge driver of silver prices. No surprisingly, consumer expectations regarding inflation are also rising. The Federal Reserve Bank of New York said Tuesday that its measure of consumer expectations for inflation one year from now rose to 3.7%, the highest in nearly three years. Consumer expectations for inflation in three years rose to 3.3%, a four-year high. And LT interest rates continue to climb of inflation expectations and growing market turmoil. Source: dataQollab Source: dataQollab While the financial markets and media are obsessed with large cap AI stocks, some of the best performing stocks over the past week were in pharmaceuticals. Lianhe Sowell International Group (LHSW), Crinetics Pharmaceuticals (CRNX), Tvardi Therapeutics (TVRD), ClearOne (CLRO) and Biolabs Group Limited (VRAX) were all noted in the financial media as gaining double or triple digits. AI stocks experienced heavy volatility and a broad sell-off over the past five trading days. While some shares briefly rebounded, many major tech giants and semiconductor firms posted notable losses on growing investor skepticism about the real returns on massive AI infrastructure investments. Advanced Micro Devices (AMD) saw its stock price drop by over 10%, while Broadcom (AVGO) and Micron Technology (MU) both fell by over 5%. Our friend Fred Ramberg (“Fred Ramberg on AI, Agentic Trading and the Necessary Past”) noted in an email this week that MU has been on a wild ride. Does the chart below suggest any stock price appreciation? Source: YahooFinance (07/09/26) “Done right (the AI agent way),” he avers, “you would have made 60% in 30 days…….things that make you go hmmm.” Fred adds that you could make a lot more with appropriate options strategies. Since no one in Washington cries foul about the way stocks like MU are trading, Fred’s pondering the creation of a “following agent.” If you can’t beat em, join em, right? Over the past five trading days, gold and silver traded in a volatile pattern, primarily reacting to shifting perceptions of Middle East tensions and equally fickle views on Federal Reserve interest rate expectations. There is said to be a split in the FOMC on raising interest rates, at least until the White House starts replacing Reserve Bank Presidents, starting in Atlanta. We predicted just this eventuality a year ago. Stay tuned. “A lot of people are talking about one rate increase. The committee does not generally do that. I mean, what’s the point of that?” former St. Louis Fed President Jim Bullard told CNBC. But we suspect that the White House has already signalled to Warsh that one hike is acceptable if there is no follow-on action this year. Truth is, nobody knows what is gonna happen next week in Washington with Donald Trump in the White House. But if the Democrats take the House in November, then Donald Trump will definitely be impeached for a long list of crimes, misdemeanors and acts of sheer stupidity. As a Democratic House proceeds with impeachment of President Trump, you can be sure that investigations of Trump loyalists like FHFA Director Bill Pulte and Commerce Secretary Howard Lutnick will figure prominently. Senator Chris Murphy (D-CT) has already highlighted some of the most egregious instances of Trump, his family, and members of his administration using their positions of power to enrich themselves and do favors for their billionaire buddies at the expense of American taxpayers. Murphy has written a script for a Democratic House to use in impeaching President Trump. Recent Posts Monetary Metals" The Gold Exchange Podcast https://open.spotify.com/episode/6hxtWnSxpxn0O8Kluo51pL?si=KqyccsgMRa6xe8un-c39jg Consumer Lenders: ALLY, AXP, AX, Barclays, COF, HAPN, SOFI, SYF https://www.theinstitutionalriskanalyst.com/post/theira865 The Institutional Risk Analyst (ISSN 2692-1812) is published by Whalen Global Advisors LLC and is provided for general informational purposes only and is not intended for trading purposes or financial advice. By making use of The Institutional Risk Analyst web site and content, the recipient thereof acknowledges and agrees to our copyright and the matters set forth below in this disclaimer. Whalen Global Advisors LLC makes no representation or warranty (express or implied) regarding the adequacy, accuracy or completeness of any information in The Institutional Risk Analyst. Information contained herein is obtained from public and private sources deemed reliable. Any analysis or statements contained in The Institutional Risk Analyst are preliminary and are not intended to be complete, and such information is qualified in its entirety. Any opinions or estimates contained in The Institutional Risk Analyst represent the judgment of Whalen Global Advisors LLC at this time, and is subject to change without notice. The Institutional Risk Analyst is not an offer to sell, or a solicitation of an offer to buy, any securities or instruments named or described herein. The Institutional Risk Analyst is not intended to provide, and must not be relied on for, accounting, legal, regulatory, tax, business, financial or related advice or investment recommendations. Whalen Global Advisors LLC is not acting as fiduciary or advisor with respect to the information contained herein. You must consult with your own advisors as to the legal, regulatory, tax, business, financial, investment and other aspects of the subjects addressed in The Institutional Risk Analyst. Interested parties are advised to contact Whalen Global Advisors LLC for more information.

July 6, 2026 | In this issue of The Institutional Risk Analyst, we look at the major bank consumer lenders – Ally Financial (ALLY), American Express (AXP), Axos (AX), Barclays USA, CapitalOne (COF), Happen Bank (HAPN) -- fka as Lending Club -- SoFi Technology (SOFI) and Synchrony Financial (SYF) – as Q2 2026 earnings are about to begin. We publish this edition of The IRA as a special feature for all our readers as an example of the content that subscribers to the Premium Service receive on a regular basis. We also want to welcome our friends at Monetary Metals as a new sponsor of The Institutional Risk Analyst. “U.S. retail sales were up an eye-opening 6.9% YoY in May, prompting commentary about the supposed strength/resilience of consumer spending,” writes Adam Josephson of Sakonnet Research. “Commentators acknowledged that much of the growth came from inflation but nonetheless characterized the report as strong.” Yet despite this important qualitative aspect of consumer spending, credit default rates have fallen five quarters in a row since the end of 2024, suggesting that consumers who actually have access to credit remain strong. Yet even as credit costs have remained stable, yields and funding costs fell sharply in Q1 2026, before the markets took interest rates higher in Q2. Net loss rates among the consumer lender group followed the general trend in the banking industry for lower credit expenses, although Axos Financial (AX) jumped to 31bp in Q1 2026 vs just 10bp in Q4 2026. CapitalOne Financial (COF) likewise saw net credit losses inch up higher in Q1 2026, making us wonder if this is the start of an upward trend. COF set aside $4.07 billion for potential bad debt and included a $230 million loss provision build, reflecting downside economic scenarios and specific reserves in the commercial real estate portfolio. Source: FFIEC Notice in the chart above that both Synchrony Financial (SYF) and HAPN, the two outliers in the consumer credit group, both reported lower net losses in Q1 2026. Synchrony projects its net charge-off rate will remain below 5.5% for the full year of 2026, with losses seasonally peaking in the second quarter. After looking at net loss rates, the next factor to consider is the pricing on loans, which is summarized by the gross loan yield reported by the FFIEC. As we’ve noted in our reports on the top banks and also the largest investment banks, loan yields have fallen significantly, but the consumer lenders have seen less of a decline. Note that SYF is the top of the group around 17% average gross yield before funding costs, credit and operating expenses. Next is the US unit of Barclays Bank plc (BCS). Source: FFIEC The average gross loan yield for the 100 or so banks in Peer Group One is just 6%, thus it is easy to see that the consumer lenders are in a very different business than the average large commercial bank. For this reason, we don’t peer COF at over $600 billion in assets with U.S. Bancorp (USB), for example. Next above Peer Group One is AX and then Ally Financial (ALLY) around 8% gross yield. While an 8% yield may sound like a lot, when you subtract funding, credit and SG&A, ALLY just barely makes money. Above ALLY are COF and HAPN around 12% gross yield. After looking at credit expenses and loan yields, the next factor to consider is how the bank runs its treasury. Most of the banks in this group manage to exceed the average return on securities for Peer Group One at 3.5%, although ALLY is below 3% and close to the studied mediocrity seen at Bank of America (BAC), which we discussed last month (“Earnings Setup: Top Seven Banks | BAC, C, JPM, TFC, PNC, USB & WFC”). Source: FFIEC CapitalOne is another laggard in the group when it comes to treasury management with an average yield on securities of 3.37% in Q1 2026. As we’ve noted before, any large bank that cannot manage its securities portfolio so as to at least be at or above the average yield for Peer Group One needs to start firing people in the CSUITE. Notice that tiny HAPN has a yield of almost 6% on its securities portfolio. AXP is over 4.3%. After we ponder the ability of our consumer lenders to effectively manage their liquidity, the next key factor to assess is non-interest income. As we’ve noted with respect to JPMorgan (JPM), having a balance between net-interest income and non-interest fee income adds stability and strength to an institution. While you might think that consumer lenders do earn lots of income via fees, and most are above the Peer Group One average of 1% of assets, in fact American Express is the clear winner by orders of magnitude. AXP is in the the 97th percentile of Peer Group One with non-interest income equal to almost 20% of total assets. Source: FFIEC How does this relatively small $300 billion asset AXP manage this feat? Volume. American Express reported a worldwide network volume of $1.9 trillion for the full-year 2025, representing a 7 percent increase year-over-year. In addition to its overall network volume, its worldwide processed volume reached $227.2 billion for the year in 2025. Non-interest income at AXP — aka "non-interest revenues" — is primarily driven by three core components: discount revenue, net card fees, and service fees and other revenue (which includes network partnership revenue). Note that other consumer lenders such as SYF, AX and ALLY have relatively modest fee income, which means that they are dependent upon net-interest income to support earnings and loss mitigation. Now that we have considered the revenue side of our consumer lenders, we look at funding costs and operating expenses – SG&A for short. The tale of funding costs tells you a lot about how the markets view consumer lenders. The average funding costs for the top 100 banks is below 2%, but Barclays US is almost 5% because the monoline consumer lender lacks a retail deposit base. Next just above 3% is AXP, which likewise funds its business in the wholesale deposit market. But just below AXP is Ally Financial followed by the bank formerly known as Lending Club. Source: FFIEC Once we get down to looking at the cost of funds for a bank, this allows us to make some tough comparisons. Let’s take ALLY, which we have always viewed as having a weak business model because of the low gross spread on the bank’s loans and the high funding and operating costs. All of the figures below are from the FFIEC and are a percentage of average assets. Source: FFIEC Bottom line is that ALLY makes half the net income as a percentage of average assets as most large banks. But to make clear that we are not beating on ALLY unduly, you could say the same thing about Citigroup (C). Citi has an efficiency ratio of 58% (h/t CEO Jane Fraser), equal to the average for Peer Group One. So why don't they make more money in terms of earnings? Funding costs. Less than half of Citi's deposit base is onshore. ALLY was at 62% efficiency in Q1 2026, not bad but needs to be down in the low 50s or high 40s for the bank to really be competitive. Many smaller banks have efficiency ratios in the 40s and 30s, one reason that Ally at 62% is in the 64th percentile of Peer Group One. Synchrony, for example, has an efficiency ratio of 35% and an ROA of 2.7% or 5x ALLY. Why does SYF run such a lean operation in terms of operating leverage? Because it boosts profits in good times and leaves lots of income for loss mitigation in a recession. The chart below shows return on assets (ROA) for all of the consumer lenders in the consumer group. Source: FFIEC Happen Bank (HAPN), formerly known as Lending Club, is the leader of the group up 50% in terms of equity market performance over the past year. HAPN has a 2 beta, yet the small bank is not very profitable and shows remarkable volatility in its financial results and equity price. The originate-to-sell lending model is the culprit here. AX and ALLY are next followed by SYF. Why does ALLY's stock perform so well given the bank's mediocre financial performance? Only equity portfolio managers know the answer to this question. The chart below shows AXP, HAPN and SOFI over the past year. Source: YahooFinance (07/05/26) AXP is next in line after SYF in terms of 1-year equity returns. The stock has doubled in the past five years and management are projecting 9-10% revenue growth in 2026. But AXP is probably too pedestrian for this market, which prefers high risk plays like HAPN. After AXP comes COF and SOFI, both of which are down for the past year. SOFI was one of the best performing bank stocks in the US in 2025. SoFi has reportedly faced recent stock weakness primarily due to a lower-than-expected outlook for its fee-based technology platform, a shift toward lending revenues rather than higher-margin fees, and broader macroeconomic concerns. Is SOFI a buy given the retreat of the past year? Perhaps. But it is worth noting that ALLY and Citi, neither of which has great fundamentals, are among the better performing bank stocks in today's market. HAPN has surged due to strong earnings, the launch of its Happen Bank rebrand, and expansion into new loan verticals like home improvement financing. Happen Bank sells roughly 50% of its newly originated personal loans to outside institutional investors and private credit buyers. The remaining half of these loans are retained on its $11 billion asset balance sheet and funded directly through consumer deposits. The bank expects to originate $11-12 billion in new loans in 2026. When investors get their fill of these assets, however, the revenues of HAPN will suffer. One reason that we believe that consumer loss rates are so low is that more aggressive lenders like HAPN and many others are ready and willing to provide unsecured financing to consumers. Given the signs of stress we see building in the private residential loan channel, we'd be more inclined to take the short side of HAPN -- especially if they are so anxious to take risk in home improvement lending. Home prices are starting to slide in many residential markets and we expect to see "misery on the 8s" two year hence. The Institutional Risk Analyst (ISSN 2692-1812) is published by Whalen Global Advisors LLC and is provided for general informational purposes only and is not intended for trading purposes or financial advice. By making use of The Institutional Risk Analyst web site and content, the recipient thereof acknowledges and agrees to our copyright and the matters set forth below in this disclaimer. Whalen Global Advisors LLC makes no representation or warranty (express or implied) regarding the adequacy, accuracy or completeness of any information in The Institutional Risk Analyst. Information contained herein is obtained from public and private sources deemed reliable. Any analysis or statements contained in The Institutional Risk Analyst are preliminary and are not intended to be complete, and such information is qualified in its entirety. Any opinions or estimates contained in The Institutional Risk Analyst represent the judgment of Whalen Global Advisors LLC at this time, and is subject to change without notice. The Institutional Risk Analyst is not an offer to sell, or a solicitation of an offer to buy, any securities or instruments named or described herein. The Institutional Risk Analyst is not intended to provide, and must not be relied on for, accounting, legal, regulatory, tax, business, financial or related advice or investment recommendations. Whalen Global Advisors LLC is not acting as fiduciary or advisor with respect to the information contained herein. You must consult with your own advisors as to the legal, regulatory, tax, business, financial, investment and other aspects of the subjects addressed in The Institutional Risk Analyst. Interested parties are advised to contact Whalen Global Advisors LLC for more information.

February 26, 2018 | None other than Warren Buffett of investment fame started off the week complaining to Becky Quick of CNBC that there’s not enough big things to buy. Railroads? Airlines? Not even Wells Fargo & Co (NYSE:WFC) suffices to satiate Mr. Buffett's hunger for assets. With over $120 billion in cash burning its way through his trouser pocket, the best that the Sage of Omaha can come up with is buying one of the most overvalued stocks of all, namely the computer cult led by Apple Computer (NASDAQ: AAPL). Sure sounds like inflation to us. Too much cash chasing too few goods or at least good opportunities? Of note, we’re scheduled on CNBC WorldWide Exchange this Tuesday at 5:50 ET with Wilfred Frost to talk about the outlook for JPMorgan (NYSE:JPM) and other financials. In a year with rising volatility and slow loan growth, valuations for large banks are back to 52-week high but with virtually no change in the outlook for earnings save from changes in corporate taxes. In 2017, the only two loan categories at JPM that grew were real estate and agriculture, including some festering CRE multifamily exposures we can see out the office window here in Midtown Manhattan. As we’ve noted previously, the gross yield on JPM’s loan book was only 4.57% through the end of Q3 ’17 vs. 6.9% for Citigroup (NYSE:C) due to the subprime consumer and credit card book. But the gross yield on Citi’s commercial loan book is half JPM’s, illustrating the extreme competition for assets in the world of large commercial bank credits. Once you net out 100bps of SG&A, getting to the Street's 6% revenue growth rate for JPM obviously depends on the trading and advisory side of the bank. Indeed, Street analysts have JPM growing revenue 6% in Q1 and ~ 4% for all of '18. Positives are rising interest rates in terms of NIM and a positive mark on the bank's MSRs. Net interest income was up mid-teens for JPM in 2017. Negatives include slowing loan growth, still modest trading/FIG volumes, and a soft residential loan market. JPM, Wells Fargo & Co (NYSE:WFC), and Bank America (NYSE:BAC) are paying up big time for jumbo mortgages in major MSAs, a large but unprofitable business for years to come. Same goes for C&I loans and CRE, which really peaked in terms of volumes in '16 and have been slowing every since. Like WFC, big negative for JPM is size. The bank's yield on earning assets is in the bottom decile of large bank peer group. The bank’s overall results are boosted by trading/asset management, which is half of the bank, but precious little vigorish is coming from the loan book. The same shortage of assets that so vexes Warren Buffett is putting enormous downward pressure on bank loan yields and even relatively inaccessible assets such as GNMA MSRs, which are changing hands around a 9% unlevered yield according to our friends at Mountain View. This is half the yield seen for GNMA MSRs back in 2012, another indication of the tightness of asset markets. So on Tuesday as former Fed Chairs Janet Yellen and Ben Bernanke are celebrated at Brookings Institution in Washington, we will no doubt hear some cautious discussion about rising risks of inflation. But in fact Chair Yellen and her colleagues on the Federal Open Market Committee have already baked double digit inflation into asset prices. This type of thinking apparently prompted Goldman Sachs (NYSE:GS) to issue a report suggesting a stock market collapse if the 10-year Treasury bond reaches 4.5% yield. We take some comfort that bond spreads have not moved significantly even as the yield on the 10-year has backed up three quarters of a point from the 2016 lows (see chart below). But the latest CBRE report on cap rates for commercial real estate shows record tight spreads in multifamily. And we keep wondering if the systemic shortage of investable assets will cause another bond rally such as followed the 2016 election. Now the slow increase in interest rates and, dare we say, volatility will eventually boost the possibility of revenue growth on the trading side of banks like JPM and C. Our former colleague Mike Mayo has triple digit growth targets for earnings from JPM and Citi over the next three years. But to hit those generous levels of earnings growth, the FOMC needs to figure a way to lighten the system portfolio and increase trading volumes on the Street. With rates rising and the “economic cycle” showing signs of maturity, it is hard to see where we can grow volumes in the large banks to fulfill those sort of bullish earnings estimates. Indeed, the biggest risk to the overheated equity markets is the Fed. If Fed Chairman Jerome Powell is true to form during his two congressional appearances this week, look for him to continue speaking forthrightly about things like inflation and deficits. Powell also may surprise everyone and scold Congress for again raiding the Fed's capital to "pay" for the most recent spending bill. The Federal Reserve Chairman is the nation’s banker. He has a duty to speak up when Congress and the Executive Branch are so badly wrong on so many issues. He can start by explaining to members of Congress why the Fed and Treasury are alter egos and why remittances from or the assets of the Fed are not valid sources of new public revenue. None of this is particularly good for the markets. Powell is the most intelligent, forthright and decisive Fed Chair we've seen in many years -- and he is not an economist. We think Chairman Powell is likely to break the golden rule of Washington, which is to never tell the truth in public. #JeromePowell #JanetYellen #JPMorganChase #WellsFargo #Citigroup #C #JPM #WFC #GS #GoldmanSachs

This week in the July 4th edition of “The Wrap,” we feature the top events in Washington and on Wall Street over the past week. And please watch “The Wrap with Chris Whalen” 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. July 3, 2026 | The U.S. national soccer team secured a 2-0 victory over Bosnia and Herzegovina in the World Cup round of 32, advancing to the next stage. Team USA actually scored their second goal a man down after star striker Folarin Balogun was sent off with a red card. The US team plays Belgium on Monday in Seattle. In Washington, President Donald Trump’s latest public disclosure shows that his various crypto ventures pulled in an estimated $1.4 billion last year, Emma Tucker at The Wall Street Journal reports. Yet roughly two-thirds of investors who bought into his signature meme coin are deep in the red. If you’ve followed President Trump’s investment history over the decades, he usually manages to profit at the expense of everyone else in the room. “Citigroup, Manufacturers Hanover (a predecessor of JPMorgan), the British lender NatWest, and of course Bankers Trust—had endured hundreds of millions of losses at the hands of Trump,” wrote David Enrich in his 2020 book "Dark Towers." Also this week, President Trump said acting Director of National Intelligence Bill Pulte would be in his role for “a month or two months or something” and is empowered to “declassify almost everything,” he told reporters on Wednesday. In the meantime, Jay Clayton, the president’s nominee for the full-time DNI post, will have his Senate confirmation hearing in two weeks, Trump said. Private Credit Firms Sinking The majority of publicly traded business development companies (BDCs) — the visible part of the private credit market — have turned unprofitable due to falling asset values and ​rising costs, a Reuters analysis shows, in the latest sign of pressure building in this highly leveraged corner of finance. Higher interest rates are pressing corporate borrowers across the board. Source: dataQollab A Reuters analysis of balance sheet data from S&P Global Market Intelligence examined 53 publicly traded BDCs, finding that their loan losses and debt costs have jumped. A number of those BDCs are also utilizing ​more off-balance-sheet borrowing to conceal support for portfolio companies. Len Tannenbaum, founder of Tannenbaum Capital, told Bloomberg's Carrol Massar that some BDCs could buckle as the pressure mounts, depending on how leveraged they are, their overall exposure to troubled loans and “how long they’ve swept things under the rug” using such methods as "payment in kind" or PIK to avoid default. “PIK is POOP — Principal On Outstanding Principal — and it doesn’t matter how much, POOP smells,” Tannenbaum said. “That pile of stuff builds up and when liquidity is draining, it all shows up.” Meanwhile, as AI stocks swoon, Blackstone (BX) is selling its stakes in a trio of data centers across Northern Virginia for $3.5 billion, cashing out of part of a bet it made less than three years ago. Digital Realty Trust will pay $1.2 billion of cash and offer $2.3 billion of its shares to Blackstone funds. BX has a talent for selling private equity assets when the operational and/or political prospects of the investment change. Housing Inflation Surges Co-op and condo prices in New York City rose to a record $1.25M median sales price as year over year gains extended into a sixth straight quarter, reports housing market expert Jonathan Miller. The market share of sales above the $1 million threshold reached the highest share on record due to a lack of inventory, he relates, and overall apartment sales declined annually with the exception of the $2 million to $4 million range. Gold, Silver Rally In the precious metals markets, over the past five trading days, gold and silver have experienced a strong bullish rebound, with both metals recovering from recent lows and posting solid gains. Of note, gold's disappointing performance over the past four months may not signal the end of the precious metals rally this year. "Gold is not done," Goldman Sachs co-head of global commodities research Samantha Dart said in a note on Sunday evening. Noting the precious metal has gained 123% since 2022, Dart and her team wrote, "we continue to see further upside, driven by both structural and eventually cyclical factors." We continue to accumulate positions in gold and silver, taking advantage of what we see as ST weakness in both metals. We Don’t Need More Credit Scores This week in The Institutional Risk Analyst, we featured an important comment by David Battany, Executive Vice President, Capital Markets, at Guild Mortgage Company. He talked about the disconnect between the desire to improve the use of credit scores in the world of mortgage finance and the poor quality of consumer credit data maintained by the like of Experian, TransUnion (TRU) and Equifax (EFX). Bottom line: “If all three bureaus had identical data, we would know this because they would all produce nearly identical credit scores. The current tri-merge rules give no incentive for any bureau to get all data… and arguably provides a disincentive to do so. If each bureau had a complete data set, each would produce effectively the same and correct credit score, so there would no longer be a need for a tri-merge report.” Jobs, Jobs, Jobs “There are too many inconsistencies within the jobs report to make sense of the June data relative to May that showed a 57,000 increase in payrolls but a 507,000 plunge in household employment,” writes John Ryding of Brean Capital. “Yesterday, Chair Warsh described the labor market as "steady" and said that it is important to look at "trends" in the data. Noting that the Fed cannot influence the labor force or immigration trends (so staying in its lane), is the labor market still steady when examining trends? Yes.” Recent Posts Mortgage Notes: Getting Consumer Credit Scores Right https://www.theinstitutionalriskanalyst.com/post/theira863 Size and Risk/Return: Morgan Stanley vs Goldman vs Charles Schwab https://www.theinstitutionalriskanalyst.com/post/theira862 The Institutional Risk Analyst (ISSN 2692-1812) is published by Whalen Global Advisors LLC and is provided for general informational purposes only and is not intended for trading purposes or financial advice. By making use of The Institutional Risk Analyst web site and content, the recipient thereof acknowledges and agrees to our copyright and the matters set forth below in this disclaimer. Whalen Global Advisors LLC makes no representation or warranty (express or implied) regarding the adequacy, accuracy or completeness of any information in The Institutional Risk Analyst. Information contained herein is obtained from public and private sources deemed reliable. Any analysis or statements contained in The Institutional Risk Analyst are preliminary and are not intended to be complete, and such information is qualified in its entirety. Any opinions or estimates contained in The Institutional Risk Analyst represent the judgment of Whalen Global Advisors LLC at this time, and is subject to change without notice. The Institutional Risk Analyst is not an offer to sell, or a solicitation of an offer to buy, any securities or instruments named or described herein. The Institutional Risk Analyst is not intended to provide, and must not be relied on for, accounting, legal, regulatory, tax, business, financial or related advice or investment recommendations. Whalen Global Advisors LLC is not acting as fiduciary or advisor with respect to the information contained herein. You must consult with your own advisors as to the legal, regulatory, tax, business, financial, investment and other aspects of the subjects addressed in The Institutional Risk Analyst. Interested parties are advised to contact Whalen Global Advisors LLC for more information.

In this issue of The Institutional Risk Analyst, David Battany, Executive Vice President, Capital Markets, at Guild Mortgage Company talks about the disconnect between the desire to improve the use of credit scores in the world of mortgage finance and how consumer credit data is gathered and assembled into a score. Consumers and policy makers will probably be surprised to learn how imprecise the world of aggregating consumer data remains in 2026, almost 40 years since the first standardized consumer credit score, known as the FICO Score, was published in the United States in 1989. The fact that several new scores have been published by the aggregators of consumer data has not improved the situation appreciably. How can the consumer finance industry and the regulatory agencies get this right? Getting Consumer Credit Scores Right By David Battany July 1, 2026 | The correct credit score for a borrower is obtained by gathering the data from all of their reported credit accounts and running all of this data through the most current credit score model. There is only one correct answer to the question of a borrower’s credit score, regardless of which credit model is used. Obtaining three different credit score reports, each created based upon three different and incomplete credit account histories, will produce three different and three wrong credit scores. Averaging these three wrong scores will not create the correct credit score to predict a person’s probability of default. Assume a person has a history of 10 total credit accounts, and eight have perfect pay histories, one has a few late pays, and one has several late pays or no pays. Late payments are not the only factor that determines if a particular credit history has a “good” or “bad” impact to a person’s overall credit score. The length of time an account has been open, the account balance and many other factors determine how a specific credit history has a good or bad impact on a person’s overall total credit score. Let’s assume for the sake of this discussion that a sample person has eight “good” and two “bad” accounts with respect to all factors evaluated by a credit score model. Assume the creditors for all 10 accounts each report to at least one credit bureau. Today when a lender orders what is known as a “tri-merge” credit score report, it is highly likely that not all three bureaus are getting the data from all 10 reported accounts. Tri-merge credit report rules are primarily set by the Federal Housing Finance Agency (FHFA) for conventional loans, and the Department of Housing and Urban Development (HUD) for FHA and VA loans. These government entities mandate that lenders pull data from all three major bureaus to ensure standardized underwriting. If all three bureaus had identical data, we would know this because they would all produce nearly identical credit scores. The current tri-merge rules give no incentive for any bureau to get all data from all 10 accounts and arguably provides a disincentive to do so. If each bureau had a complete data set, each would produce effectively the same and correct credit score, so there would no longer be a need for a tri-merge report. Each bureau today uses slightly different versions of FICO Classic, so there could be single digit score deltas between the three scores produced by the three bureaus. Assume in this hypothetical scenario that bureau A gets data on nine of the 10 accounts, bureau B gets data on eight of the 10 accounts and bureau C gets data on seven of the 10 accounts held by a consumer. If each bureau had a complete data set, each would produce effectively the same and correct credit score, so there would no longer be a need for a tri-merge report. As each bureau is running a credit score on a prospective borrower, if they happen to pick up the two accounts with bad histories, that means the consumer is not getting any positive offset from their other 1- 3 accounts with positive histories that are not picked up by the bureau. By not including their 1-3 accounts which had perfect pay histories, this borrower’s score is derived from this incomplete history and is incorrectly lower than their true correct credit score. On the flip side, if any of the bureaus miss one or both or the two bad accounts, then they are reporting credit scores incorrectly higher than a borrower’s true correct credit score, by not including their 1-2 accounts which had bad pay histories. When we see a tri-merge report with three very different scores, we know for a fact that at least two of the three scores are wrong, and possibly all three are wrong. However, we have no idea which ones are wrong and whether they are wrong to the high side or low side. The average of three wrong scores does not bring us to the correct score, and the average of the three wrong scores could be materially off the borrower’s correct score. What is the “correct score?” The score we would see if all 10 of their reported accounts were run through the same credit score model. To generate an accurate credit score, we need all 10 of the borrower’s accounts – their complete reported credit history – to all be run through the credit score model in order to know their correct credit score and their most accurate prediction of their probability of default. The evidence of the above is plainly visible when we pull a tri-merge report and see a 40-80 point range in the scores from the three bureaus for the same borrower on the same day. Roughly speaking, every 40 points of FICO score has historically translated to about a doubling of expected future default rates. If we see a score range of 80 points, one bureau is telling us a borrower is about 4X as likely to default as another. This is a material gap, and averaging the scores does does not fix the math error of three incorrectly calculated credit scores if some or all are based upon incomplete reported credit history data. Simply put, any time a credit bureau is running a credit score utilizing a person’s incomplete credit history, meaning they are not looking at all of their reported credit accounts, the credit histories they are missing would likely have had a positive or negative impact on the person’s score. In the cases of 40-80 point score variance between the three credit data bureaus, the impact of not running a score on the complete reported history is material to the borrower, the mortgage lender, and the credit risk holders behind the mortgage. Our industry and home buyers rely upon credit scores to be accurate predictors of default. A score determines the possibility of a person being approved for a loan, the type of products they are eligible for, and the interest rate and points they must pay for the loan. The credit score also impacts the value of a mortgage servicing right or MSR, in some cases the value of the MBS, and the amount of capital a GSE or private mortgage insurer or MI would need to hold to offset their future expected credit losses. There is no excuse to not get credit scores right. Using partial data to run a score does not produce the correct score. The solution to the above is straightforward. We should modify our current process of having the three credit bureaus, each running three partially complete sets of consumer data, knowing each have some amount of overlap, through a model which is highly sensitive to the data from every single credit history, and then averaging the three poorly calculated credit scores, incorrectly thinking this average is the correct score. Instead, we should gather all of the reported data from all three bureaus, eliminating duplicates, giving us one complete reported credit history data set, and then run this single complete data set through the credit score model, one time. The resulting single credit score will be the person’s correct credit score. It will be much more predictive of a person’s default than the current process of averaging three incorrect credit scores derived from three incomplete data sets. As our industry moves to more modern credit score models such as FICO 10T and Vantage 4.0, for us to benefit from the improved ability to predict default risk, we need to change how we feed the data into these new models. A borrower’s credit score should always be determined by analysis of all of their reported credit histories, not by the random good or bad luck that happens in today’s tri-merge process where each bureau is very possibly, and perhaps likely, calculating scores on an incomplete credit histories. Incomplete consumer data is unfair to borrowers and results in incorrect credit scores, which understate or overstate a person’s true probability of default. Today the mortgage industry is playing a stupid game of Russian Roulette, but this situation is so easy to fix. As an industry that serves the needs of consumers, we should want a complete data set of all of a person’s reported credit history and for it to be assessed as one complete credit file through the best available credit score model. It does not matter which credit score a lender uses if the data is not complete. We have a legal and moral obligations to get this right. The Institutional Risk Analyst (ISSN 2692-1812) is published by Whalen Global Advisors LLC and is provided for general informational purposes only and is not intended for trading purposes or financial advice. By making use of The Institutional Risk Analyst web site and content, the recipient thereof acknowledges and agrees to our copyright and the matters set forth below in this disclaimer. Whalen Global Advisors LLC makes no representation or warranty (express or implied) regarding the adequacy, accuracy or completeness of any information in The Institutional Risk Analyst. Information contained herein is obtained from public and private sources deemed reliable. Any analysis or statements contained in The Institutional Risk Analyst are preliminary and are not intended to be complete, and such information is qualified in its entirety. Any opinions or estimates contained in The Institutional Risk Analyst represent the judgment of Whalen Global Advisors LLC at this time, and is subject to change without notice. The Institutional Risk Analyst is not an offer to sell, or a solicitation of an offer to buy, any securities or instruments named or described herein. The Institutional Risk Analyst is not intended to provide, and must not be relied on for, accounting, legal, regulatory, tax, business, financial or related advice or investment recommendations. Whalen Global Advisors LLC is not acting as fiduciary or advisor with respect to the information contained herein. You must consult with your own advisors as to the legal, regulatory, tax, business, financial, investment and other aspects of the subjects addressed in The Institutional Risk Analyst. Interested parties are advised to contact Whalen Global Advisors LLC for more information.

June 29, 2026 | In this issue of The Institutional Risk Analyst, we look at the large investment advisory firms – AMP, SCHW, GS, MS, RJF & SF – for subscribers to our Premium Service. The major Wall Street investment firms tracked by the WGA Bank Top 50 followed the industry trend and reported lower credit costs in Q1 2026. Income was higher due to the brisk activity in the capital markets in the first three months of the year, but asset returns and funding costs fell significantly. We suspect that both trends will be partially reversed in Q2 2026 results and very visible in 2H 2026. Suffice to see that Elon Musk was lucky indeed to get his IPO for SpaceX (SPCX), which we own, to liftoff before the AI selloff. One notable development in Q1 was Goldman Sachs (GS), which reported only 7bp of net losses in Q1 vs 46bp in Q4 2025. Why were Goldman Sachs' credit expenses were notably lower compared to the prior quarter? Because the firm recognized a massive $2.12 billion credit loss benefit in Q4 2025 following the transfer of its problematic Apple (AAPL) credit card loan portfolio to a held-for-sale status, which artificially flattened the baseline for Q1 2026's provisions. Big question: What will Goldman’s credit losses look like once the Apple portfolio is gone? If it turns out that the GS net loss rate ex-Apple is closer to MS and the other investment houses, then the decision by GS CEO David Solomon to get into business with AAPL becomes even more suspect. Source: FFIEC

This week in “The Wrap,” we feature the top events in Washington and on Wall Street over the past week. And please watch “The Wrap with Chris Whalen” 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. June 26, 2026 | Several major private credit firms capped investor withdrawals this week, as an accelerated exit wave hit the industry. Firms typically limited redemptions to their customary 5% quarterly threshold. The firms that restricted withdrawals include: Ares Management: The Ares Strategic Income Fund capped withdrawals at 5% after receiving requests to redeem 14.4% of shares. Apollo Debt Solutions: Apollo's flagship $26 billion retail-focused fund curbed redemptions at 5% after investors attempted to cash out 16.8% of their holdings. The Next Housing Crisis This week we published a piece in National Mortgage News about the growing risk from a type of business loan used to finance rental properties – debt service coverage ratio or “DSCR” loans. These aggressive business purpose loans have caused a foreclosure crisis in Baltimore and other parts of the country and are being promoted and purchased by, you guessed it, private credit firms. We expected some pushback, but instead everyone in the mortgage industry -- and we mean everyone -- agreed with our take that DSCR loans are the start of a larger problem. And of course, many of the insurance companies that are buying DSCR loans for their portfolios are owned by private credit firms. One interesting response we got was from a young reporter from The Baltimore Banner in Baltimore, a tiny publication that has done extensive reporting on DSCR fraud in this long-suffering city. The latest article, “The loans behind Baltimore’s foreclosure crisis are surging in cities across the nation,” included this passage: “The private credit industry has poured money into a variety of sectors in recent years, and high-profile busts have roiled Wall Street and stoked fears about opacity and risk. Still, little attention has fallen on private creditors’ quiet expansion into America’s rental housing market, which was made possible in part through debt service coverage ratio, or DSCR, loans.” In our 2024 bio of Stan Middleman, the founder of Freedom Mortgage predicted we'd see a housing market reset in 2028. Recalling that the 2008 financial crisis really started in 2005 with the collapse of private alt-A, his timing seems quite prescient. This time around, perhaps the gold rush into DSCR in '25 fueled by insurers owned by private credit firms was really the beginning of the end of the bull market in residential real estate. BTW, we still have a few signed copies of “Seeing Around Corners” available in The IRA online store. Are AI Bots Manipulating Stocks? AI and semiconductor stocks experienced severe volatility this week, with key AI-focused equities dropping anywhere from 4% to 24% over the past five trading days. Are AI powered agentic bots manipulating AI stocks, up and down? We featured an important interview this week (“Fred Ramberg on AI, Agentic Trading and the Necessary Past”) with AI expert Fred Ramberg, who warns: “Anybody focused on investing not concerned about agentic trading is is fooling themselves. And it comes from a discussion I had with one of my sons about what may be happening inside virtual chat rooms that now exist that humans cannot enter. Only AI agents can enter these chat rooms. And they work with each other, not necessarily on trading and on strategies, but they work with each other on numbers and issues. Humans are barred from these chat rooms.” Over the past 5 trading days, gold and silver have experienced significant downward corrections, hitting their lowest prices since late 2025. Pressured by a stronger U.S. dollar and hawkish Federal Reserve expectations, gold fell below $4,000, while silver dropped to roughly $57 per ounce before bouncing slightly. We have been using the weakness to add to our LT positions in both metals. Washington Notes Meanwhile, Representative Thomas Kean Jr. (R-NJ), who had been missing from Washington for nearly four months with little explanation, is back home in New Jersey, the New York Times reports. He is expected to return to Washington next week. The Congress passed bipartisan housing legislation, with limits on institutional investor purchases of home significantly watered down. "The bill is a major accomplishment for Congress," notes Ian Katz of Capital Alpha. "But that’s partly because expectations for Congress have sunken so low." Katz: "Our view from the start has been that the legislation is a collection of small-ball measures that should, if executed properly, smooth the process of home-building and buying in certain circumstances. But it’s not going to reduce mortgage rates or significantly change either supply or demand. That doesn’t mean it’s not useful, but if the bill is landmark, it’s because Congress finally did something in this area – not because the impact would be huge." President Trump, however, suddenly refused to sign the housing legislation until Congress prioritizes election security legislation, stalling the Republican legislative agenda. The Senate began its recess early while Speaker Mike Johnson (R-LA) once again headed to the White House to salvage the GOP's agenda, Politico reports. Fresh inflation data out this morning confirms the expected trend – prices are rising. This morning's headline Personal Consumption Expenditures index rose to 4.1% for May compared to 3.8% in April on an annual basis, matching expectations. "Core" PCE rose to 3.4% for May versus 3.3% in April. Many observers are focused on the end of the Iran war as an indication of inflation, but we continue to expect shortages of key refined products to push prices higher for the balance of the year. Mark Zandi of Moody’s Analytics wrote in The Philadelphia Inquirer: “$1,000. That's what the Iran war has cost the typical American household so far — at the pump, at the grocery store, in higher mortgage rates, and in what we're spending as taxpayers.” Recent Posts NMN: DSCR boom masks rising risk in non-QM market https://www.nationalmortgagenews.com/opinion/dscr-boom-masks-rising-risk-in-non-qm-market Fred Ramberg on AI, Agentic Trading and the Necessary Past https://www.theinstitutionalriskanalyst.com/post/theira860 The Institutional Risk Analyst (ISSN 2692-1812) is published by Whalen Global Advisors LLC and is provided for general informational purposes only and is not intended for trading purposes or financial advice. By making use of The Institutional Risk Analyst web site and content, the recipient thereof acknowledges and agrees to our copyright and the matters set forth below in this disclaimer. Whalen Global Advisors LLC makes no representation or warranty (express or implied) regarding the adequacy, accuracy or completeness of any information in The Institutional Risk Analyst. Information contained herein is obtained from public and private sources deemed reliable. Any analysis or statements contained in The Institutional Risk Analyst are preliminary and are not intended to be complete, and such information is qualified in its entirety. Any opinions or estimates contained in The Institutional Risk Analyst represent the judgment of Whalen Global Advisors LLC at this time, and is subject to change without notice. The Institutional Risk Analyst is not an offer to sell, or a solicitation of an offer to buy, any securities or instruments named or described herein. The Institutional Risk Analyst is not intended to provide, and must not be relied on for, accounting, legal, regulatory, tax, business, financial or related advice or investment recommendations. Whalen Global Advisors LLC is not acting as fiduciary or advisor with respect to the information contained herein. You must consult with your own advisors as to the legal, regulatory, tax, business, financial, investment and other aspects of the subjects addressed in The Institutional Risk Analyst. Interested parties are advised to contact Whalen Global Advisors LLC for more information.

June 24, 2026 | In this issue of The Institutional Risk Analyst, we catch up with an old friend and colleague, Fred Ramberg, a serial entrepreneur who we had the pleasure of working with in the 2000s in the world of semiconductors and specialty capital equipment. Fred holds multiple patents and worked in the world of machine learning long before the deal-maker machinery behind the Wall Street narrative coined the term “AI.” Fred is the sort of sophisticated technologist who writes his own patent descriptions and understands the different physical and virtual layers of technology in a profound way. The IRA: Fred, great to reconnect. Did we see that you somehow found time to start a new coffee company while you remain focused on what we now call AI?? We recall your fondness for strong coffee. Ramberg: Keurig's base patents had expired. And we said, why do you put coffee in this little basket? Why not put it in the lid? So we have a lid, standard size, standard cup. You put it under your Keurig machine or a very simple machine that we buy from China for six dollars and ninety-five cents. And it makes coffee. The IRA: Great idea. You know what? You could push this into the hospitality channel with Marriott (MAR). They use many different funny little machines that, you know, produce hot water and you can make tea with them too. Ramberg: My board is comprised of two early employees of Keurig. It was very interesting how they started. The first market for Keurig was not mass market humans, direct to consumer. Their first market was small and mid-sized business. They would go in and say, “put this in your break room.” Then they fulfilled through W.B. Mason and then ultimately Office Depot and Staples. They only had to sell to just three customers. They shipped out coffee pods to three customers which fulfilled the orders. The IRA: Sounds like a great story. W.B. Mason is a fascinating family-owned business that carries everything for the office. They sell a lot of coffee. And coffee is a vast global market. Ramberg: It's kind of a big one. The reason we stuck with it and we've now filed two patents, BTW, is that Keurig ultimately sold to Dr. Pepper for eighteen billion dollars. Coffee is not a small market. And Keurig is not the number one coffee in the world, believe it or not. It's JDE Pete's NV (JDEPY). The IRA: So besides coffee, we take it that you are still focused on technology and semis? Ramberg: I have three recent patent applications in AI, but I've got seven issued. They're assigned but they're issued. Bottomline purchased our machine learning company in 2014. When Bottomline later sold to private equity, they virtually abandoned the patent portfolio, including my patents. And it's one of the most valuable AI patent portfolios I've ever seen. But we were paid nicely. The IRA: That's a striking comment. Why do you believe that Bottomline abandoned the patents? Ramberg: Well, because they sold themselves as a payments company. We did banking software and payments. And in 2014, the patents were seen as non-core. Right. I tried to license one of the patents back, but they wouldn't even enter a discussion. The IRA: Yeah, it's funny how people's behavior changes when you're trying to sell yourself to a big corporate takeout. We’ve seen this over and over again with entrepreneurs. We know a fascinating AI play in residential mortgage due- diligence that is going through this process now. Ramberg: Wind the clock forward a decade and today it's very hard for startups to get into the technology channel.. It's hard to get into business with the company that we sold back then. We sold our machine learning predictive analytics company more than a decade ago. We were fortunate to have a financial backer, Mark Rosenblatt. The IRA: Last week you started talking to me about the AI market and stocks and all the rest of it. I had to actually go online and do a little reading about agentic agents. We find “agentic trading” quite amusing because of the obvious cinematic metaphors. Call me Neo. And we are friends with Michael Green, Chief Strategist at Simplify Asset Management. He was one of the people who years back started teaching us about passive investing via exchange traded funds (ETFs). The steady bid from passive strategies tends to push stock prices up – until is doesn’t, like yesterday (06/23/26) in AI names. How does agentic trading impact stocks? Is agentic trading a large part of the AI surge due to this sort of trading? Is it significant? Ramberg: I don't know how significant agentic trading is today, but it is big. Trading algorithmically represents, in my reading, 60% plus of daily volumes, trades which are algorithmically driven. But algorithmic trading has been around for a long time. The bots trade with a purpose. The algorithms recommend, you know, move you with a purpose. And they don't work with one another. However, as they become better with machine learning, and I won't use the term “AI” quite yet, they tend to correlate. The IRA: That sounds like more passive bid for stocks, but this correlation goes both ways, correct? Ramberg: What the algorithm senses for data is the same data as the other algorithms are seeing. So they tend to recommend the same actions based on that same data. What that does is amplify moves. So should you be worried about amplification of moves where what might have been a one or two percent move is now a five or six percent move. They're all trading on the same data in the same direction at the same time. The IRA: Insider trading by machines is still insider trading. This discussion of AI and agents reminds us of a question we wanted to ask. Do we need more than one large language model (LLM), Fred? Are the developers of LLMs actually creating value by staring at the same dataset? Ramberg: Yes. The IRA: So each LLM is different even though they use the same data? We are suing Anthropic, BTW, for stealing several books. Wonderful people. Ramberg: Yes. Absolutely. They all build an ontology in a very different way. Do they get to the same place often? Yeah. But do we need more than one? Yeah, definitely. The IRA: So in addition to passive strategies, we now have to worry about free agentic agents driven by a multiplicity of AI models? Ramberg: Yes. That is known and it's an interesting question. What's not well studied, though, but is talked about, for example, by the the Bank for International Settlement, is what happens when agents trade with agents without any intervention or any input from human beings. The IRA: Indeed. So these little AI bots can also come together with no human intervention. In other words, they can come to the same conclusion and then act together even though they're not really acting in concert. Isn't that illegal? Ramberg: Yes they do. They correlate a lot because they're operating on the same model, with the same data at the same time. That is what's called accidental concert. So, in accidental concert, yes, the agents work together and that causes the amplification I was talking about. If everybody does the same thing at the same time, um, moves can be larger. The IRA: So what should people be worried about? Ramberg: Anybody focused on investing not concerned about agentic trading is is fooling themselves. And it comes from a discussion I had with one of my sons about what may be happening inside virtual chat rooms that now exist that humans cannot enter. Only AI agents can enter these chat rooms. And they work with each other, not necessarily on trading and on strategies, but they work with each other on numbers and issues. Humans are barred from these chat rooms. So what I started to look for was rather than just amplification, moves that were, large on a daily scale in both directions. So now, if you go back to the days of pump and dump on Wall Street, what you might have going on, if you can detect it, is AI agents working with one another to pump up the price of an issue and then at some point short it and sell it down. Or short it to start off with and then buy it up. The IRA: For example? Ramberg: If you bought Micron Technology (MU) last Thursday at the close, sold it by the open Tuesday and shorted it, and then shorted it some more - by the open Wednesday you would be up 30%. In one trading session! Q.E.D. And this type of behavior is increasingly likely in AI and AI adjacent stocks where the moves are unreasonable. The fundamentals of the company would not suggest it. You and I talked about MU last week and covered the stock for years. The fundamentals of Micron as a company would not suggest sometimes 10% daily swings between the short and then the close. The IRA: Indeed. We had several sleeping semi positions explode the the past year. The markets are taking profits in AI today in a way that suggests that the passive strategies are adding to the volatility. But you believe that agentic trading may be responsible for some of the short-term volatility we’ve seen? Ramberg: Yes. And that's where I started to examine whether, you know, it looked like agents were acting in concert, I'll use the word collusion, that's a legal word, with one another. And though nobody's proved collusion, it's in the research for agents. There are no patents or IP filings that are published that reference it. However, there is significant academic research to see what the implications of collusion among agents would be. The IRA: Well, this topic of agents really got our interest after our discussion last week. We started wondering about banks because there are times when these obscure small cap entities just fly for no apparent reason. Last year, for example, Lending Club (LC), which is one of the smallest banks in the top 100, took off. It was the best performing banks for six months. And it's not that it has great fundamentals. It's almost too small for most people to own and yet off it went like a rocket. Another one is SoFi Technologies (SOFI), which was the leading bank stock for most of last year. And now it's at the bottom of the group, by the way. You see this behavior and you think to yourself, who is doing this? Ramberg: I've recognized a meme in certain stocks that you just described. And the question then becomes, who's doing it? And the answer might be nobody. The answer might be that agents have been let loose. They have identified factors based on parameters they've been given, volume, price, you know, and any other metric you might find. The agents have found data where they say, “this is likely to be susceptible to doing this.” And then they work together to do it. And that's all happening in this room that humans are not allowed to go into. The IRA: Why do we feel like we’re in a sequel to the film "The Matrix?" The owners of the servers that support agentic trading are manipulating markets, plain and simple. Yet these agents act only based on rules. Ramberg: Yes, but the agents don't even necessarily have to talk to each other. You know, the models are such that they probably both got to the same stock at the same time. So yeah, this is based on everything we can do, not that has been done, based on everything we can do, it's likely that this is a good candidate. And then they do it. Because their command isn't to go manipulate XYZ Corp, the command is, go find an issue that allows us to make a large amount of money. The IRA: How does this world of AI and independent agents evolve? Ramberg: So, what's coming, and I'll keep this short because you've probably heard me say it. But this looks like spreadsheets in the 1990s. There were seven makers of spreadsheets, and it was all a technology fight. This one made a mistake in pi in the thirty-second decimal place, and you know, it was about whose product is better than whose. And that continued forward. But, how many spreadsheets are there today? The IRA: One at Microsoft (MSFT). Two if you count Alphabet's Google (GOOG). Ramberg: Correct. But someday AI is going to be an integrated solution like Microsoft Office. And so as we move towards that end, the hype around AI is going to continue for some time to pull the adjacents, the MUs of the world. The IRA: We think it is tough to pick winners and losers at this stage. Your comments about Oracle (ORCL) and Adobe (NMS) resonated. But will AI continue to be about merely understanding the past or will it start to focus on the future and how to create a specific desired future? Ramberg: Bingo. I did some work on this aspect of AI and I wrote a patent that said, I need this to happen. What has to happen first? And we coined a term called a "necessary past." And so what we did is to articulate what we could do to create a necessary past. And lo and behold, the result pops out. So that's closer to utilizing the type of technology that makes up AI than asking it what'll happen if this customer buys sneakers and laces and socks, what'll they buy next? The IRA: So like the Avengers, we go back in time, collect the infinity stones and get a desired future? That sounds a little scary. And all done by independent agents? Ramberg: Yes. Most if not all of the AI models are infringing on that patent we discussed earlier. And that's why I wanted to license it back. The IRA: It is human nature to speculate, but not necessarily take a structured approach to the speculation. How does the structured world of AI help to give us specific outcomes? Is this even legal? Ramberg: Right. The agents are smart enough to parse a necessary past that leads to a desired outcome. This is comparable to the boiler rooms in the 1930s that Joe Kennedy had to legislate against, well, regulate against as the first SEC chairman, right? Your father was the first biographer of Joe Kennedy. Well, that's what you see here. And they better get some strong regulation and strong detection for this. Because once they start asking the agent the question the right way, I want this to happen. This is what I'm going to make happen. What do I have to do? What has to happen for that to be the result? As soon as agents are let loose to answer that question, then you got a problem. The IRA: Thanks Fred. Recent Posts Mortgage Notes: UWMC Loses Two Harbors; Fed Researchers on MSRs https://www.theinstitutionalriskanalyst.com/post/theira857 The Institutional Risk Analyst (ISSN 2692-1812) is published by Whalen Global Advisors LLC and is provided for general informational purposes only and is not intended for trading purposes or financial advice. By making use of The Institutional Risk Analyst web site and content, the recipient thereof acknowledges and agrees to our copyright and the matters set forth below in this disclaimer. Whalen Global Advisors LLC makes no representation or warranty (express or implied) regarding the adequacy, accuracy or completeness of any information in The Institutional Risk Analyst. Information contained herein is obtained from public and private sources deemed reliable. Any analysis or statements contained in The Institutional Risk Analyst are preliminary and are not intended to be complete, and such information is qualified in its entirety. Any opinions or estimates contained in The Institutional Risk Analyst represent the judgment of Whalen Global Advisors LLC at this time, and is subject to change without notice. The Institutional Risk Analyst is not an offer to sell, or a solicitation of an offer to buy, any securities or instruments named or described herein. The Institutional Risk Analyst is not intended to provide, and must not be relied on for, accounting, legal, regulatory, tax, business, financial or related advice or investment recommendations. Whalen Global Advisors LLC is not acting as fiduciary or advisor with respect to the information contained herein. You must consult with your own advisors as to the legal, regulatory, tax, business, financial, investment and other aspects of the subjects addressed in The Institutional Risk Analyst. Interested parties are advised to contact Whalen Global Advisors LLC for more information.

June 22, 2026 | The 100 large financial stocks tracked by Whalen Global Advisors in our Bank Top 50 rankings have been quiet much of the year, but began to move significantly higher in the past six weeks. Over the last year, financials ranked 10th on the Fidelity Research Sector tool, up just over 6%. But in the past 30 days, financials jumped to second behind the industrial sector and ahead of the information technology sector, aka “AI.” Click on the image below to see the updated chart on Yahoo.com. Source: Yahoo Finance (06/19/26) As it has been over the past couple of years, Citigroup (C) continues to lead the top seven group in terms of equity market performance, but lags looking at key financial metrics. Meanwhile, as we've predicted, PNC Financial (PNC) and U.S. Bancorp (USB) are taking leadership positions in the group based on improving financial performance. Citi reminds us of loanDepot (LDI) in the mortgage space, namely a momentum driven stock that outperforms the group and always hopes for improved fundamentals. Make no mistake, we give CEO Jane Fraser kudos for the improvements in the business model, but asset returns and operating leverage can still improve, as we discuss below. Notice how many banks in the top seven have efficiency ratios below 60% in Q1 2026. Source: FFIEC It may be time to do a transformative deal Jane. But please, let us do nothing like the 2019 BBT + Suntrust fiasco, which has given us five years of misery in the form of Truist Financial (TFC). Look where pre-fiasco BBT traded before the 2019 close of the Suntrust merger -- over 2x book. Now TFC trades below Citi and even BAC in terms of book value multiple, a striking commentary on the post-deal performance of TFC management and the board. Really? Source: Yahoo Financial (0621/26) The servicing on our fixed rate conventional mortgage just got sold to TFC by Freedom Mortgage, so we’ll be keeping close tabs on the bank. Below we provide readers of the Premium Service of The Institutional Risk Analyst with a detailed look at the top seven depositories in the US – BAC, C, JPM, PNC, TFC, USB and WFC – and talk about how the business models of these money center banks are evolving through time. We introduce a new chart that illustrates the relative importance of the fee generation side of the bank ledger.

This week in “The Wrap,” we feature the top events in Washington and on Wall Street over the past week. And please do watch “The Wrap with Chris Whalen” 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. June 19, 2026 | After weeks of false starts, the Trump Administration cut a concessionary deal with the government of Iran to end hostilities in the Persian Gulf -- for now. You can bet that Israel will look for the first opportunity to restart hostilities. Vice President JD Vance had to warn Israeli officials to stop attacking the United States and President Trump over the newly struck peace deal with Iran. The accord comes as supplies of crude oil in the US are at the lowest levels in decades. More important, as we discussed with John Dizard earlier this week, the US and the world are facing a prolonged shortage of fuel and refined products in the second half of the year and thereafter. Washington is still not talking about shortages, but President Trump did note that the US is running short of crude oil. Even as the global supply of crude oil and refined products tightens, Ukraine launched one of its largest drone offensives of the war with Putin's Russia, hitting a major oil refinery in the Kapotnya district of Moscow in a massive multi-wave attack. The intense blasts sent massive plumes of thick black smoke and fireballs into the sky over the capital and forced the closure of regional airports. The tightening supply of oil comes as liquidity in the financial markets continues to ebb as well. After peaking on June 2nd, the S&P 500 Index has moved sideways even as some prominent AI stocks have slipped lower. Can AI stocks continue to appreciate if market liquidity is falling? The tech-heavy Nasdaq index surged nearly 2% yesterday to close at 26,517.93, but remains below its record closing high of 26,683.94 set on June 15. “The stock market’s supports are falling away as liquidity tightens and rates become increasingly restrictive,” writes Simon White of Bloomberg. “Kevin Warsh presided over a surprisingly hawkish Federal Reserve rate-setting meeting yesterday, his first as chair. But the FOMC is just catching up to the decidedly hawkish direction the market has already been heading in this year, as financial conditions experience their most significant tightening since the pandemic induced inflation shock.” We have sold most of our AI-related stocks and continue to add to gold and silver positions as the metals display weakness. Will Anthropic and the other AI bubble names be able to price IPOs before the equity market cracks? We’ve been adding to our income producing assets like Annaly (NLY) and a new position in PennyMac Mortgage Trust (PMT), but also adding exposure to silver as well. The FOMC meeting this week with Chairman Kevin Warsh was about what we expected. Less is more in terms of forward guidance, maybe pivot to even less talk medium term. Models being renovated, personnel evaluated. Maybe the end of the idiotic dot plots is in sight? No guidance will be forthcoming from the Chairman. "The bond market thinks it's more likely the Fed is going to increase rates this year. And why do they think that? The Dot plot,” Goldman Sachs Vice Chairman Rob Kaplan told Kathleen Hays this week, noting there were nine members looking for rate increases this year. “And Kevin Warsh, as he should have, was very clear that we intend to meet our 2% inflation target, and he didn't provide any other interpretation.” Warsh followed the Trump line with no rate hike in June due to "transitory" war inflation? Only problem with the no rate cut strategy is that prices will continue to rise into 2027. So, if we take Chairman Warsh at face value when it comes to defending the 2% inflation target, we'll just have to change the definition of inflation to keep peace with the White House. Indeed, liquidity pressure is already growing on the credit markets, as the de facto tightening already visible in the bond market is creating a perfect storm for corporate obligors and private credit sponsors. Moody’s this week published a research comment that warned that distressed transactions are on the rise and noted that “private equity – backed issuers will continue to lead [distressed debt exchange] activity, which has accounted for more than 70% of US defaults since 2022.” Despite the growing evidence that the bloom is off of the AI rose, credit spreads remain very stable and are, indeed, are back down to the lows. The public interest in the private credit mess forced spreads higher in April but the subsequent market rally has pulled bond spreads over Treasury paper down. Why are spreads so tight? More buyers than sellers. The crowd of equity and credit managers need to buy duration in order to generate fees. The rule of two and twenty still prevails on Wall Street in private equity and credit, although public markets abandoned these fees long ago. Why are private credit managers bidding above par for distressed residential assets being sold by HUD? Call it a bet on home price appreciation. Meanwhile, the software stocks that caused the upsurge in worry regarding private credit back in April have gotten slaughtered since June 1st. This week Bitcoin extended its slide back toward the $60,000 level, a decline driven by mounting concerns over Strategy’s (MSTR) liquidity and shaky funding mechanism. MSTR has been the sole large buyer of bitcoin in recent months, begging the question about this ersatz market. False rate-hike fears are dampening demand for all risk assets, including crypto and precious metals. Over the past five trading days, gold and silver experienced downward pressure, dropping significantly from mid-week onward. Gold fell roughly 2.5% to $4,227 per ounce, and silver declined over 3.5% to $66.28 per ounce. Market comments attribute this dip to a hawkish Federal Reserve signaling potential interest rate hikes to combat inflation. We also think that selling pressure in New York and London will only offset structural shortages of both metals for a limited time. Recent Posts John Dizard: Energy Shortages Loom Despite Peace Deal https://www.theinstitutionalriskanalyst.com/post/theira856 Mortgage Notes: UWMC Loses Two Harbors; Fed Researchers on MSRs https://www.theinstitutionalriskanalyst.com/post/theira857 The Institutional Risk Analyst (ISSN 2692-1812) is published by Whalen Global Advisors LLC and is provided for general informational purposes only and is not intended for trading purposes or financial advice. By making use of The Institutional Risk Analyst web site and content, the recipient thereof acknowledges and agrees to our copyright and the matters set forth below in this disclaimer. Whalen Global Advisors LLC makes no representation or warranty (express or implied) regarding the adequacy, accuracy or completeness of any information in The Institutional Risk Analyst. Information contained herein is obtained from public and private sources deemed reliable. Any analysis or statements contained in The Institutional Risk Analyst are preliminary and are not intended to be complete, and such information is qualified in its entirety. Any opinions or estimates contained in The Institutional Risk Analyst represent the judgment of Whalen Global Advisors LLC at this time, and is subject to change without notice. The Institutional Risk Analyst is not an offer to sell, or a solicitation of an offer to buy, any securities or instruments named or described herein. The Institutional Risk Analyst is not intended to provide, and must not be relied on for, accounting, legal, regulatory, tax, business, financial or related advice or investment recommendations. Whalen Global Advisors LLC is not acting as fiduciary or advisor with respect to the information contained herein. You must consult with your own advisors as to the legal, regulatory, tax, business, financial, investment and other aspects of the subjects addressed in The Institutional Risk Analyst. Interested parties are advised to contact Whalen Global Advisors LLC for more information.