Roger
Business Owner, Former Assistant Research Professor
Bank OZK's apparent credit improvement partly reflects loans moving into foreclosures that may not sell at full market value. Problem assets fell about 14%, but foreclosed assets rose 43% to $420 million; the annualized net charge-off rate eased from 0.69% to 0.53%. Management expects losses to stay elevated into part of 2027 but anticipates improvement that year. Fed rate increases should instead drive losses dramatically higher. This is the calm before the storm, not a turnaround. x.com x.comÂ
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.comÂ
Fair Isaac faces regulatory momentum that could push lenders off FICO scores, and its terminal value might literally be zero. Lenders' models are all trained on FICO, and retraining on VantageScore is painful for little gain, so a switch happens only when a senior executive forces it. Regulatory pressure is what makes executives call the scores basically the same and swap in Vantage, and that momentum is hard to unwind. The credit bureaus backed Vantage because FICO is a thorn in the industry. … Show more
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.comÂ
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
Banks' weak response to earnings despite low expectations warrants caution into the rest of Q3 reporting. JPMorgan, Wells Fargo, Citigroup and Goldman Sachs all fell after mixed results, while the bank ETF also declined. x.comÂ
JPMorgan's miss on both revenue and earnings strengthens the case for avoiding bank and financial stocks. The earlier bank-index chart rollover had suggested possible profit disappointment, but the observed JPMorgan share weakness is not a near-term price forecast. x.com x.com x.comÂ
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.comÂ
US large-cap stocks are at risk because credit markets move before equities, with junk bonds leading the S&P 500. Elliott Wave International notes CCC-rated junk-bond spreads have widened sharply to their widest level in nearly three years, and that widening junk spreads have often preceded weakness in stocks. x.comÂ
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.comÂ