00:00 Speaker A
Now, the first story that we have today, I alluded to there in the title and it’s that banks are having a bad day and bad week and bad month.
00:08 Speaker A
Here’s my tweet on the subject. Bank stocks have been getting hit hard while the S&P sits about 1.6% off its record. To put some numbers to this.
00:16 Speaker A
KBW Bank Index, 13.8% below its August record close. Six straight weekly losses, the longest run since since 2008.
00:23 Speaker A
As you can see there, Goldman’s down 24%, Morgan Stanley 23, Bank of America 23, City 18, JP Morgan outperforming at a mere 9% down.
00:30 Speaker A
So, as it says there in the tweet, the weird part here is that Q3 earnings have actually been mostly fine and there’s no fundamental reason that you can look at in the actual bank’s earnings or structure that would make them down, but the answer obviously is rates right there at the bottom.
00:44 Speaker A
The Fed hiked in September, the 10 year touched 5.31% this month and is still 5.1%. US banks are carrying 326.7 billion in unrealized securities losses.
00:53 Speaker A
Not a crisis, a warning light worth watching.
00:56 Speaker A
Now, Jamie Diamond described the US economy as booming, which it has been, but warned about inflationary pressures.
01:02 Speaker A
Obviously, higher interest rates dramatically impact the model of banks because it’s hard for people to want to go take a loan at a higher interest rate, therefore they don’t.
01:10 Speaker A
Therefore banks are under pressure, therefore we see exactly this. I mean, you’ll remember when Silicon Valley Bank collapsed in 2023, it was effectively a result of rates rising, right?
01:16 Speaker A
They had a whole bunch of debt that was at lower rates and as rates went up, it put pressure on them.
01:21 Speaker A
That could happen again obviously, if we continue to see interest rates rising massively. The economy here is booming according to Jamie Diamond, uh, bank shareholders would like to know when their invitation to the party arrives.
