Grant’s Current Yield Podcast PARALLELS TO HISTORY
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Jan 23, 2025 In this discussion with Christopher Whalen, chairman of Whalen Global Advisors and financial history expert, fascinating insights unfold regarding the modern banking landscape. Whalen analyzes the overvaluation of banking equities and the transition of Fannie Mae and Freddie Mac out of government control. The conversation highlights the impact of changing mortgage rates on market dynamics and critiques the Federal Reserve's current challenges, drawing parallels to historical financial missteps. They also emphasize the need for improved oversight in American finance.
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Bank Stock Valuation
- Bank stocks are currently overvalued relative to their earning potential.
- The better-performing banks like Synchrony, Ameriprise, and American Express, saw increases of 60%-70%.
Fannie Mae and Freddie Mac Performance
- Fannie Mae and Freddie Mac have been the best-performing financial stocks in recent years.
- Hedge funds are pumping and dumping these stocks, creating a risky trade with no real destination.
Mortgage Credit Quality
- Mortgages held by Fannie and Freddie are currently in pristine condition, with low default rates.
- FHA delinquency rates, while around 11%, are likely understated due to forbearance and modifications.