Roger
Business Owner, Former Assistant Research Professor
Opaque private credit held by insurers adds a GFC-style warning to the bearish case on regional banks. About 19.7% of insurer-held private securities are unrated and rely on confidential private letter ratings, and the last time private credit avoided ratings was right before the GFC. Insurance regulators now require disclosure of every private placement. A quoted post notes firms are switching ratings agencies on downgrades at the fastest rate since the GFC. x.com
US regional banks returning to all-time highs is the last missing sign of a peak before a major crash. Euphoria is everywhere, from novice commercial real estate investors to traders going all-in on SanDisk after a 20% jump. Regional banks are rallying despite record defaults on boats, RVs, ATVs, credit cards, student loans and autos, as yields and rates rise. x.com
Regional banks rejected a double top at their 4Q21-1Q22 peak, and pumping them now is market foolishness. Rising yields, falling high-yield and investment-grade corporate bonds, and collapsing real estate all argue against owning them. x.com
Regional banks are next in line as commercial real estate cracks, because they hold a massive share of CRE loans that go bad as property values crater. Private credit cracked first: Apollo, Ares, Barings, Morgan Stanley and Cliffwater capped redemptions, and Apollo's co-president said some private-market marks are wrong. Now buildings sell for up to 90% off; a Chicago office bought for $68.1M fetched $4M. As loans mature and refinancing bites, every forced sale resets prices for everyone. x.com … Show more
US regional banks are among the underowned, lower-volatility areas now ripping, driven partly by earnings and an overall rotation. Alongside transports, medical devices and homebuilders, they are drawing money as overcrowded, highly margined, growth-at-any-cost areas such as semiconductors are unwound. x.com
CoreWeave's plan to reach insurer capital by improving its credit rating runs into the very reason credit ratings exist: assessing credit risk. A report says the company is courting insurers to lower financing costs for AI chips and infrastructure. Management says investment-grade ratings on more chip-backed debt could lift CoreWeave's own rating and open insurers' capital pools. x.com
Big banks' negative earnings reactions leave regional banks looking likely to continue lower. Regionals were a leading bear sector in many previous negative markets, including the 2025 bear market and the early-2023 regional banking crisis. x.com
Regional banks' CRE refinancing wall did less damage than models projected because banks had been quietly de-risking for two years beforehand. CRE as a share of total bank loans fell about 400bp from 2022 to 2024. Extend-and-pretend needed a forced refinancing event, but sponsors found their own exits as rates peaked earlier than projected. x.com
Moody's is one of the world's most beautiful businesses because trusted ratings take decades to establish, protecting its duopoly with S&P and its pricing power. Operating margins exceed 45%, and Moody's Analytics subscriptions make revenue quite resilient when companies issue less debt. Decades of credit-risk data are a huge AI product opportunity; fast-growing private credit also needs ratings. x.com
Life insurers such as F&G Annuities & Life are carrying very large unrealized bond losses in accumulated other comprehensive income as yields rise. If they ever need to sell bonds early, things could get very ugly, and many also hold a decent amount of private credit. x.com
CoreWeave's need for so much cash that it is turning to insurance companies for financing is the worrying signal. CEO stock sales amid scrutiny are less informative because executives sell for many reasons; the source of funding is why the stock remains one to stay out of. x.com
Large-cap banks such as JPMorgan and Carvana are exposed to a coming credit crisis that war headlines are distracting investors from. The private debt market keeps imploding, and troubles at JPMorgan, Morgan Stanley, BlackRock and Deutsche Bank are symptoms of a broad debt-market problem. More esoteric debt such as subprime auto loans is likely to come under scrutiny next, which is why the short positions remain. x.com
