Forward Guidance

Latest Episodes:

Commercial Real Estate Is In Serious Trouble | Nick Halaris Mar 30, 2023

Show notes

Nick Halaris, President of real estate investment firm Metros Capital, joins Jack to share insight on the challenges commercial real estate faces after a surge in interest rates and the fall of two U.S. banks.

The phrase “commercial real estate” is a catch-all terms that refers to offices, apartment buildings (“multi-family”), retail, and industrial spaces. Unlike residential real estate, which is typically financed with long-term fixed-rate mortgages, a lot of commercial real estate was financed with floating rate debt, which means that as interest rates rose last year, the interest expense of some commercial real estate developers rose dramatically. Halaris argues that the turmoil in the banking system will likely induce banks to tighten their lending, which would inflict further hardship onto commercial real estate, much of which is financed via smaller regional banks.

Filmed on Tuesday, March 28, 2023.

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Nick Halaris website: https://nickhalaris.com/

Profit+ Subscribe Link: https://nickhalaris.beehiiv.com/

Nick Halaris on Twitter: https://twitter.com/NickHalaris

Nick Halaris on LinkedIn: https://www.linkedin.com/in/nick-halaris-4a25b93/

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Research, news, data, governance and models – now, all in one place. As a listener of Forward Guidance, you can use code GUIDANCE10 for a 10% discount when signing up to Blockworks Research https://www.blockworksresearch.com/

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Market commentary, charts, degen trade ideas, governance updates, token performance, can’t-miss-tweets and more. Subscribe to the Blockworks Research “Daily Debrief” Newsletter: https://rb.gy/feusos

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Timestamps:

(00:00) Intro

(00:25) What Is Commercial Real Estate?

(03:20) Interest Rates Have A Huge Impact on Real Estate Valuations

(11:48) "Commercial Real Estate Is In Serious Trouble"

(16:58) Delinquency Rates Are Rising...

(19:13) Real Estate Is No Longer An Inflation Hedge

(22:45) Permissionless Ad

(23:48) Real Estate "Cap Rates" And Why They Are So Often Misunderstood

(26:53) "Accounting Games" In Real Estate

(35:02) How Bank Turmoil Will Impact Real Estate

(38:42) The End Game For Real Estate

(44:30) "it's Really Hard To Get A Loan"

(46:37) Prices Will Go Down More

(48:36) Blockworks Research Ad

(49:36) Silver Lining: Rates Could Go Down

(53:33) Retail Real Estate (Shopping Malls, etc.)

(54:39) The Housing Market Will Probably Remain Strong

(59:29) Private Equity's Investment Into Housing

(01:01:51) Nick Halaris' Newsletter, Profit Plus

(01:04:25) Closing Thoughts On Rising Interest Rates

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Disclaimer: Nothing discussed on Forward Guidance should be considered as investment advice. Please always do your own research & speak to a financial advisor before thinking about, thinking about putting your money into these crazy markets.

Former Central Banker on China, Global Discord, and Financial Stability | Sir Paul Tucker Mar 27, 2023

Show notes

Sir Paul Tucker, research fellow at The Harvard Kennedy School and former deputy governor of The Bank of England, joins Forward Guidance to discuss ideas from his latest book, “Global Discord: Values And Power In A Fractured World Order.”

Tucker tells Jack Farley that China’s growing economic might and rejection of liberal values poses a challenge to the U.S.’ role as global hegemon, and he details ways to reinvigorate international cooperation during the current period of geopolitical strife. Tucker shares his views on the recent turmoil in the banking system, weighing on Silicon Valley Bank, Credit Suisse, and the acute need for bank resolution that can maintain financial stability while winding down ailing banks. Tucker and Farley also discuss concepts such as the Triffin Dilemma, the offshore (“Eurodollar”) dollar system, and central banks’ role as lenders of last resort.

“Global Discord” from Princeton Press: https://press.princeton.edu/books/hardcover/9780691229317/global-discord

Global Discord on Amazon: https://www.amazon.com/Global-Discord-Values-Power-Fractured/dp/0691229317

About Paul Tucker: http://paultucker.me/resources/

About Tucker’s work at The Harvard Kennedy School: https://www.hks.harvard.edu/centers/mrcbg/about/fellows/research-fellows#sir_paul_tucker

More about today’s guest:

For over thirty years, Sir Paul Tucker was a central banker, and a member of the Bank of England’s Monetary Policy Committee from 2002. He was Deputy Governor from 2009 to late 2013, including serving on the Financial Policy Committee (vice chair) and Prudential Regulatory Authority Board (vice chair). He was knighted by Britain in 2014 for his services to central banking. Internationally, he was a member of the steering committee of the G20 Financial Stability Board, and chaired its Committee on the Resolution of Cross-Border Banks to solve “too big to fail”. Tucker was a member of the board of directors of the Bank for International Settlements, and was chair of the Basel Committee for Payment and Settlement Systems from April 2012. After leaving central banking, Tucker was chair of the Systemic Risk Council from December 2015 to August 2021. He now writes at the intersection of political economy and political philosophy as research fellow at Harvard Kennedy School's Mossavar-Rahmani Center for Business and Government. In addition to “Global Discord,” Tucker is also the author of “ Unelected Power: The Quest for Legitimacy in Central Banking and the Regulatory State” (2018).

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Timestamps:

(00:00) Intro

(00:55) The Rise Of China Will Have Immense Consequences On A Global Scale

(04:44) Shortcomings of Trade Policy and Enforcement

(10:41) Downsides of U.S.' Trade Deficit

(20:18) The Bretton Woods Regime

(21:59) The Triffin Dilemma

(26:32) The Eurodollar System

(27:31) The Fed's Swap Lines In 2008

(28:49) Importance of Multi-Disciplinary Understanding For Policymakers

(31:17) The Debt Ceiling

(21:27) Thucydides' Trap

(25:57) The Contest Between China and The U.S. Is "Everywhere"

(39:26) Document 9 of The Chinese Communist Party

(45:29) Inflation

(49:37) Regional Bank Failure In The U.S.

(55:43) The Takeover Of Credit Suisse By UBS

(01:02:49) Defining A "Bailout" As A Use Of Taxpayer Money

(01:07:09) Bagehot's Dictum

(01:15:31) Credit Suisse Contingent Convertible ("CoCo") Bonds

(01:17:55) Tying Geopolitical And Banking Together

The Next Phase Of The Banking Crisis | Joseph Wang & Randy Woodward Mar 23, 2023

Show notes

Today Jack interviews Randy Woodward, managing director at Raymond James Financial, and Joseph Wang, author at https://fedguy.com/, for a conversation on how the recent banking turmoil has muddled the Federal Reserve’s inflation-fighting mission. Woodward, a banking veteran with a rare understanding of the regional banks’ investment portfolio, gives a glimpse into the interest-rate exposure (“duration”) of the mid-sized and community bank community that is unavailable by just looking at public filings.

Woodward argues that Silicon Valley Bank’s (SVB) fall was not due to its interest rate risk management and that the Federal Reserve is to blame. Wang vehemently (but very politely) disagrees and what ensues is a masterclass on the most salient issues facing the U.S. banking industry. Filmed on Thursday, March 23, 2023, a day after the Fed raised interest rates by 25 basis points to 5.00% at the March Federal Open Market Committee (FOMC) meeting.

Today's show is sponsored by Public.com: Get a 4.8% yield when you open a government-backed Treasury Account by going to https://public.com/forwardguidance

Follow Joseph Wang on Twitter https://twitter.com/FedGuy12

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Timestamps:

(00:00) Intro

(00:59) Joseph's Take On March Federal Reserve Meeting (FOMC)

(04:59) Is The Fed To Blame For The Fall Of Silicon Valley Bank (SVB)?

(12:35) Available-For-Sale (AFS) vs. Held-To-Maturity (HTM) Accounting Treatment

(26:16) Public.com Ad

(27:20) Was Silicon Valley Bank's Lack of Interest Rate Hedges Negligent?

(34:30) There's No Way To Hedge Perfectly"

(41:10) Uninsured Deposit Base As A New Vulnerability For U.S. Banks

(53:01) The Psychological Aspect of Bank Runs

(57:07) Bernanke on The Great Depression: Bad Visuals Are Self-Fulfilling Prophecies

(01:00:06) Should The FDIC Deposit Guarantee Be Raised?

(01:02:39) Will Bank Turmoil Cause Banks To Curb Lending?

(01:06:41) How Many More Times Will The Fed Hike (If At All)?

(01:08:39) BTFP is NOT Quantitative Easing, Says Joseph Wang

(01:10:13) Central Banking 101

(01:14:22) Closing Thoughts

Michael Howell: Can The Fed Keep Raising Rates During A Banking Crisis? | Michael Howell Mar 22, 2023

Show notes

On today's episode of Forward Guidance, we sit down with Michael Howell Managing Director at Cross Border Capita to discuss the most recent FOMC meeting. With a backdrop of banking turmoil, historic bond market volatility and above target inflation, how will Powell react to the recent market action? To find out, you'll have to tune in!

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Something Systemic Has Happened | Daniel Neilson Mar 21, 2023

Show notes

Does the ongoing turmoil in the banking world constitute a “Minksy moment”? Daniel Neilson, assistant professor of monetary economic at Bard College at Simon’s Rock and author of “Minsky” (2019), argues yes. Neilson explores the potential of contagion within the banking world, and he makes the case that the Federal Reserve’s Bank Term Funding Program (BTFP) as well as the FDIC backstop might make this banking crisis short-lived. Neilson shares with Jack Farley several in-depth charts on the Fed’s balance sheet that might indicate a turning point and the pair share their views on the Federal Reserve’s meeting on March 22, 2023.

Filmed the afternoon of March 21, 2023.

Daniel Neilson’s article on Silicon Valley Bank: https://www.soonparted.co/p/silicon-valley-bank

Daniel Neilson’s article on Fed’s BTFP and other refinancing channels: https://www.soonparted.co/p/svb-ii

Daniel Neilson’s chart pack on the SVB Panic: https://www.soonparted.co/p/svb-iii

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Timestamps:

(00:00) Intro

(05:08) "This Is A Minksy Moment"

(18:04) The Takeover of Credit Suisse

(28:30) Permissionless

(29:33) The Fed's Bank Term Funding Program (BTFP) vs. The Fed's Discount Window

(39:32) Can The Banking Panic Be Stopped In Its Tracks?

(43:33) Blockworks Research

(44:37) First Republic Bank ($FRC) and Bank Profitability

(49:32) The Fed Readies Its Dollar Swap Lines

(55:43) The Federal Reserve's New Hiking Path

Marc Cohodes: The Stock Market Is Not A Game Mar 20, 2023

Show notes

Marc Cohodes, accomplished short-seller and financial bloodhound, is on the ultimate hot-streak. Over the past six months, he has been the sternest critic of FTX, Silvergate, and Signature Bank, all of which either have ceased operations as a corporate entity or will do so shortly. He shares what led him to call out FTX in the summer of 2022 (months before its bankruptcy in the fall) and why he shorted the stocks of Silvergate ($SI) and Signature Bank ($SBNY), which have both collapsed in value (a share of Silvergate trades at less than two dollars and shares of Signature Bank no longer trade after it was taken over by the Federal Deposit Insurance Corporation on March 12).

Cohodes also explains the immense difficulties that short-sellers frequently face, and he shares his opinion on turmoil swirling around the U.S. regional banking system. Over the course of this interview, Cohodes makes several allegations which are solely his own opinion. Filmed the afternoon of March 20, 2023.

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Timestamps:

(00:00) Intro

(14:59) Silvergate and Signature Bank as "Publicly-Traded Crime Scenes"

(23:47) Silicon Valley Bank

(31:30) Is This Similar to 2008? (Answer: Not Really)

(58:43) What Marc Is Working On Now

(01:04:18) Blockworks Research

(01:05:18) The Dangerous Life Of A Professional Short-Seller

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The Banks Didn’t Hedge Enough | Mustafa Chowdhury Mar 19, 2023

Show notes

For 40% off an annual subscription to Macro Hive Prime (220 / year instead of 374 / year), go to https://macrohive.com/jack or use discount code JACK at checkout.

Macro Hive sample report on Silicon Valley Bank (co-written by Mustafa Chowdhury): https://macrohive.com/hive-exclusives/silicon-valley-bank-how-the-government-plans-to-contain-the-fallout/

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Just how bad was the risk management at Silicon Valley Bank (“SVB”) when it came to the threat of rising rates? And now that rates have exploded higher over the past year, is this interest rate risk limited to only a few banks, or are these risks spread throughout the entire U.S. banking system?

Jack’s today is uniquely qualified to answer these questions. Mustafa Chowdhury, chief rates strategist at Macro Hive, practically invented the field of interest rate risk management, and two decades ago he was successfully managing interest rate risk on Freddie Mac’s giant portfolio of mortgages worth hundreds of billions of dollars (several times that of Silicon Valley Bank). Chowdhury argues that, contrary to claims otherwise, the U.S. banking system was not sufficiently hedged for 2022's interest rate shock.

Filmed on March 16, 2023.

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Timestamps:

(00:00) Intro

(01:33) Mustafa Chowdhury's Background

(4:39) "That's The Mortgage Game"

(11:27) Collapse of Silicon Valley Bank: Interest Rate Risk Lurking At The Scene Of The Crime

(21:14) How To Properly Hedge Interest Rate Risk Properly

(27:37) Chowdhury Pioneered Use Of Swaptions In 1990s

(29:36) Silicon Valley Bank (SVB): Who To Blame?

(33:20) Accounting Treatment (Available For Sale Vs. Held-To-Maturity)

(41:47) The Fed's Convexity Quantitative Easing (QE) Continues

(50:35) Bank Profitability With Higher Deposit Costs

(01:03:50) Interest Rate Risk Is Spread Throughout The U.S. Banking System

(01:11:52) "There Will Be Fewer Bank Runs" Because Of FDIC Relief

(01:19:29) Will Fed Cut In 2023?

This is NOT 2008 | Harris Kupperman Mar 17, 2023

Show notes

Harris “Kuppy” Kupperman, chief investment officer of Praetorian Capital, returns to Forward Guidance to explain why he doesn’t think the ongoing turmoil in the regional banking system will have much effect outside on the economy or markets. He explains why he thinks the banking businesses do not make great investments. When Jack Farley asks what he does like, Kuppy’s answer is simple: oil. He explains why he remains exceptionally bullish on “black gold” and also shares a stock which he has invested in: Journey Energy. Lastly, Kuppy shares his “do’s and don’ts” of investing. Filmed the afternoon of March 16, 2023.

Follow Harris “Kuppy” Kupperman on Twitter: https://twitter.com/hkuppy

Kuppy’s Event Driven Monitor (KEDM): https://kedm.com/

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Use code GUIDANCE10 to get 10% off Permissionless 2023 in Austin:

https://blockworks.co/event/permissionless-2023

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Get top market insights and the latest in crypto news. Subscribe to Blockworks Daily Newsletter:

https://rb.gy/5weeyw

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Timestamps:

(00:00) Intro

(01:58) The Run on Silicon Valley Bank

(03:49) Will Measures By Fed Treasury & FDIC Be Enough To Prevent Future Panics?

(05:55) Kuppy on Bank Stocks

(10:26) Are Rising Rates Good Or Bad For Banks?

(15:05) Blockworks Research

(16:04) Kuppy Is Very Bullish On Oil

(25:34) Natural Gas

(29:10) Journey Energy

(31:41) How To Value Oil Companies

(36:14) Hedging At Oil Companies

(37:33) Permissionless

(38:36) Kuppy's Shorter-Term Market Views

(44:19) Kuppy's "Dont's" of Investing

(49:55) KEDM

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Governor Kuroda: The Decade’s Most Consequential Central Banker Mar 16, 2023

Show notes

This debut episode is from our brand new podcast Market Depth hosted by Weston Nakamura. Follow Market Depth using the links below to stay up to date with the latest episodes!

Follow Market Depth On Spotify: https://spoti.fi/3mVTs9U

Follow Market Depth On Apple Podcasts: https://apple.co/40dA2vm

Follow Market Depth On YouTube: http://bit.ly/3JKhw8I

Follow Weston: https://twitter.com/acrossthespread

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Get top market insights and the latest in crypto news. Subscribe to Blockworks Daily Newsletter: https://blockworks.co/newsletter/

Disclaimer: Nothing discussed on Market Depth or Forward Guidance should be considered as investment advice. Please always do your own research & speak to a financial advisor before thinking about, thinking about putting your money into these crazy markets.

Lyn Alden: Bank Runs And The Financial Repression End Game | Lyn Alden Mar 15, 2023

Show notes

For some time now it has been the belief of many Fed-watchers that the Federal Reserve would continue to hike interest rates until it “breaks something.” Lyn Alden of Lyn Alden Investment Strategy returns to Forward Guidance to argue that the stunning collapse of two large U.S. banks represents such breakage. Alden tells Jack Farley that this damage will soon give way to a period of low real interest rates, where inflation runs above Treasury yields.

Filmed the afternoon of March 15, 2023.

Today's show is sponsored by Public.com: Get a 4.8% yield when you open a government-backed Treasury Account by going to https://public.com/forwardguidance

Follow Lyn Alden on Twitter https://twitter.com/LynAldenContact

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Alden’s writings can be found at https://www.lynalden.com/

Timestamps:

(00:00) Intro

(00:43) The Cause Of The Turmoil In Banking System

(07:08) Are Rising Interest Rates Actually Good For Banks?

(08:50) Alden's Outlook on Banks As A Business

(12:47) Has Something "Broken"?

(15:38) Interest Rate Risk In The U.S. Banking System