finance
Julia La Roche brings her listeners in-depth conversations with some of the top CEOs, investors, founders, academics, and rising stars in business. Guests on "The Julia La Roche Show" have included Bill Ackman, Ray Dalio, Marc Benioff, Kyle Bass, Hugh Hendry, Nassim Taleb, Nouriel Roubini, David Friedberg, Anthony Scaramucci, Scott Galloway, Brent Johnson, Jim Rickards, Danielle DiMartino Booth, Carol Roth, Neil Howe, Jim Rogers, Jim Bianco, Josh Brown, and many more. Julia always makes the show about the guest, never the host. She speaks less and listens more. She always does her homework.
Chris Whalen argues that Fed Chair Kevin Warsh's lack of action on interest rates and failure to address the massive budget deficit are eroding his credibility. Whalen compares Warsh's pause to Paul Volcker's political maneuver ahead of the 1980 election.
Analysing the upcoming midterms, Chris Whalen predicts that Democrats will pick up 20 or more seats in the House, and notes that the Senate remains a toss-up. He highlights the race involving Susan Collins in Maine as a key indicator of a shift to the left.
Chris Whalen predicts that tech companies will be forced to issue stock rather than relying solely on debt to fund their massive AI buildouts. He also notes that roughly half of planned data centers may not happen due to resource constraints and local political opposition.
Chris Whalen discusses the National Association of Insurance Commissioners (NAIC) backing away from policing private credit ratings used by insurers, calling it a public humiliation. He warns that life insurance and annuity holders lack federal regulatory protection under the current state-based system.
According to Chris Whalen, Chase has acquired a significant block of conventional servicing assets from United Wholesale Mortgage. Whalen notes the move aims to help raise cash to pay back a capital infusion from Oaktree Management.
Chris Whalen stated on the podcast that there is no realistic possibility of releasing Fannie Mae and Freddie Mac (the GSEs) from government control during the Trump administration. He described comments about restructuring as a 'pump and dump' and noted that the GSEs have done no work to prepare to become private companies again.
Chris Whalen discussed auction.com data showing that overall foreclosure auction volume is up 25% from a year ago. He explained that this is driven by the Trump administration eliminating special COVID-era treatments for defaulted government mortgages.
Chris Whalen predicted that credit will become a bigger problem going forward and expects foreclosure activity to rise further next year. He noted that while home prices remain high relative to pre-COVID levels, softening prices and normalizing markets will bring credit issues to the surface.
Chris Whalen highlighted that mortgage REIT Annaly Capital Management performed best among its peer group in managing the past quarter's rising yields and falling bond prices. He noted that Annaly is currently back to trading around book value.
Discussing a note from fixed-income expert Ralph, Chris Whalen stated he is less bullish on 10-year Treasury yields dropping back down to 4%. Whalen argued that markets are normalizing after 15 years of extraordinary Fed intervention and yields will likely remain near current levels.
Chris Whalen pointed out that while natural gas prices are down significantly year-over-year, refined petroleum products and diesel remain elevated because 20% of the world's refining capacity was located in the Gulf and has been lost, taking years to rebuild.
Dr. Mark Thornton highlights that the bond market is signaling a significant downturn, with long bond yields at their highest in 24 years. He attributes this to rising government deficit spending and inflation, suggesting a pivot to a higher interest rate regime. Thornton fears this could lead the U.S. towards hyperinflation.
Dr. Mark Thornton argues that the U.S. government's extensive borrowing, exceeding $40 trillion, significantly reduces the capital available for private sector investment in productive ventures. This competition for savings hinders the growth of new businesses, facilities, and tools, ultimately suppressing productivity and wage growth.
Dr. Mark Thornton, an Austrian economist, explains that while stock market indexes and tech sectors appear strong, this boom is artificially induced by Federal Reserve policies and government spending. He believes this creates an unsustainable economic cycle that distorts the macro picture and disproportionately benefits those with existing wealth.
Dr. Mark Thornton observes a growing interest among the younger generation in Austrian economics, driven by their direct experience with economic challenges. He notes that young people are disillusioned by unaffordable housing, student debt, and healthcare costs, leading them to question the establishment and seek deeper explanations for economic problems.
Dr. Mark Thornton anticipates that the conflict in the Persian Gulf will worsen existing upward trends in oil and energy prices. He also warns of significant disruptions to the fertilizer and chemical industries, which will negatively impact global food production for several crop cycles, leading to scarcity and higher costs for food and energy.
Dr. Mark Thornton explains that as government borrowing increases interest rates, the Federal Reserve may be compelled to engage in quantitative easing by purchasing government debt. This action requires the Fed to create new money, which he argues fuels inflation. He believes the Fed is constrained and may need to print money to prevent interest rates from harming the economy, despite the inflationary consequences.
Dr. Mark Thornton reiterates concerns about the U.S. being on an 'on-ramp to hyperinflation,' citing large national debt and the declining ability to manage it. He draws parallels to historical instances of hyperinflation in countries like Germany and Yugoslavia, warning of severe economic and societal breakdown. Thornton emphasizes that Austrian economists advocate avoiding hyperinflation at all costs due to its destabilizing effects.
Dr. Mark Thornton advises individuals to protect themselves from potential hyperinflation by investing in hard assets like precious metals, commodities, and energy stocks. He contrasts this with the low expected returns of financial assets like the S&P 500 over the next decade, suggesting that real assets are better positioned to outperform due to current economic policies and inflationary pressures.
Chris Whalen argues that the recent rise in long-term bond yields is primarily due to a decline in the credibility of the United States, rather than Federal Reserve policy. He dismisses the Fed's current actions as having little real impact on the market, stating they are 'redundant'.
Chris Whalen states that mortgage rates consistently above 7% are the new normal, explaining that they typically track the 10-year treasury yield plus two points. He anticipates significant structural changes in the housing market, including industry consolidation and job losses, as a result of this shift.
Chris Whalen predicts a global monetary system shift, moving towards a model similar to the pre-World War I era where countries compete based on currency value. He believes gold will re-emerge as the foundation of this system, with countries increasing their gold reserves at the expense of U.S. dollar holdings.
Chris Whalen asserts that despite short-term fluctuations in response to rising yields, gold's medium to long-term strength is driven by structural market changes, including global central bank accumulation and persistent fiscal deficits. He notes that countries like China and Russia are increasing their gold holdings.
Chris Whalen believes the Federal Reserve's credibility is low, and their actions, such as a 25 basis point hike, are inconsequential to market movements. He argues that the Fed is 'redundant' and cannot significantly influence the market unless they engage in direct, large-scale security purchases, which he doubts would be helpful.
Michael Pento, founder and president of Pinto Portfolio Strategies, forecasts that 2027 will be a challenging year for investors. He attributes this outlook to rising long-term interest rates, which he believes will be the catalyst for a significant economic downturn.
Michael Pento stated that the bottom 80% of consumers have been significantly impacted by persistent inflation for over five years. This situation has been exacerbated by recent geopolitical events, leading to increased oil prices and commodity costs.
Michael Pento refuted a CNBC commentator's argument that the U.S. does not have a debt problem because interest rates are not rising. Pento countered that the U.S. debt-to-GDP ratio is actually higher than stated and that the idea of taxing 100% of GDP to pay off debt is unrealistic.
Chris Whalen expressed his disappointment with the Federal Reserve's recent 25 basis point rate hike, calling it "pretty lame" given the backdrop of a two trillion dollar deficit. He believes the Fed's actions are largely symbolic and insufficient to combat persistent inflation, especially with rising energy prices.
Chris Whalen forecasts significant turmoil in the housing sector, predicting "death and destruction" for companies and an increase in default rates. He attributes this to persistent inflation, which he believes will prevent the Fed from intervening with lower interest rates as they have in the past.
Chris Whalen notes that the current interest rate environment is causing significant stress in the private equity and private credit markets. He observes that while some investors are still actively buying, many companies within these sectors are finding it difficult to raise capital.
Chris Whalen argues that the Federal Reserve's actions are becoming increasingly irrelevant in controlling inflation due to the significant two trillion dollar annual deficit. He believes many are still trying to combat inflation with outdated economic tools from the 1980s, failing to account for the impact of government spending.
Chris Whalen observes that despite rising interest rates, the market continues to show demand for assets, with corporate bond yields tightening relative to Treasuries. However, he cautions that difficulty in raising capital is becoming a significant issue for various non-bank entities.
Danielle DeMartino Booth, CEO of QI Research, views the recent 25 basis point rate hike by the Fed as a mistake, citing it as a "dose of accommodation." She believes the market reacted negatively to signals that further action is expected from the Fed.
Following the Federal Reserve's announcement, the market has priced in three subsequent rate hikes, with the two-year Treasury currently trading at 4.73%. There is even a possibility of another rate hike before the upcoming election in October.
Despite Federal Reserve Chair's emphasis on a "unanimous" decision, DeMartino Booth highlights potential internal disagreements. She notes that individuals like Michelle Bowman are expected to call for rate cuts next year, contrasting with more hawkish views, suggesting a "family fight" within the committee.
Danielle DeMartino Booth disputes the Fed's assertion that the workforce is keeping pace with job creation, citing her observations of college graduates earning less than expected and data on AI-displaced workers. She suggests the Fed is pursuing a 'Goldilocks' narrative that may not align with economic reality.
Danielle DeMartino Booth asserts that real retail sales are in decline, despite nominal increases being driven by price inflation. She criticizes the Fed's focus on trends over specific data releases, such as the recent retail sales report, which she believes was misleading.
Danielle DeMartino Booth expresses concern that the current hype around Artificial Intelligence is masking significant risks in the broader economy. She points to bankruptcies of companies bought by private equity, like HVAC and nursing homes, and high interest rates on credit as indicators of trouble.
Despite economic concerns, Danielle DeMartino Booth finds optimism in the work ethic of young Americans, describing it as "stellar." She notes their drive and determination, believing it to be a crucial element for the country's future.
Jeffrey Gundlach, founder and CEO of DoubleLine Capital, stated that the S&P 500's Shiller CAPE ratio is at an elevated level, suggesting that forward 10-year real returns could be negative. He noted that historically, when the CAPE ratio has been 35 or higher, subsequent 10-year real returns have been negative, averaging around -5% per annum.
Jeffrey Gundlach observed a concerning shift in the narrative surrounding AI, moving from strong belief to concerns about its potential negative impacts. He drew a parallel to the perceived success of private credit a year ago, noting that newly reported numbers suggest previous performance figures were inaccurate.
Jeffrey Gundlach highlighted a notable divergence in the high-yield market based on AI-related borrowing. He stated that while the non-AI sector remains strong, AI-related borrowing shows significantly wider spreads, with junk bonds out about 50 basis points and bank loans out about 130 basis points from their tightest levels.
Jeffrey Gundlach suggested that the bond market is not aligning with the credit ratings assigned to certain companies, citing SpaceX and Oracle as examples. He noted that SpaceX's bonds widened significantly, implying a lower credit quality than its rating, and that Oracle's bonds also widened considerably after receiving a junk bond rating.
Jeffrey Gundlach pointed to an erosion in the weakest sectors of the bond market, specifically triple-C rated bank loans. He reported that these loans are down several percent in price and have seen a total return of about 5-6%, contrasting with higher-rated bank loans that are still up around 4%.
Chris Whalen anticipates a rise in fuel prices, including diesel and heating oil, in the coming fall due to ongoing conflicts and supply shortages. He suggests this issue of affordability is a major factor that has likely already influenced the upcoming midterm elections.
Chris Whalen criticizes politicians for offering 'giveaways' rather than addressing fundamental issues like the budget deficit. He likens this approach to historical vote-buying tactics and states that neither party demonstrates leadership on 'real stuff.'
Chris Whalen asserts that the country is heading towards insolvency and that Congress avoids necessary cutbacks on federal programs due to political considerations. He points to historical examples where tough decisions led to electoral losses, causing a pattern of avoiding fiscal responsibility.
Chris Whalen states that $100 a barrel for oil and 5% on the ten-year treasury are becoming the new normal. He attributes this shift to global factors like the Ukraine-Russia conflict impacting supply and suggests that consumers and those in the housing market will need to adjust to higher financing costs.
Chris Whalen notes that the Federal Reserve's buyback strategy has been insignificant in impacting the market. He observes that long-term yields are rising independently of the Fed, yet there remains strong investor demand for debt, leading to tightening spreads for corporate debt, commercial real estate, and mortgages.
Larry McDonald observes that a significant portion of "smart money" investors are allocating 1-2% of their financial gains to purchase downside protection for their portfolios. This strategy is seen as buying insurance on their investments, which is currently relatively inexpensive compared to market risks.
A prominent investor who was bullish on the financial sector for the past two years has now become bearish on major banks like Bank of America and Goldman Sachs. This shift in sentiment is shared by other investors, including Lee Robinson, who has launched a new fund focused on tail risk strategies.
Larry McDonald notes that aggressive data center financing is making many billionaire investors increasingly uncomfortable about the potential payoff timeline. He suggests that this aggressive investment environment is nearing a point where it may slow down, possibly within the next few months.
The performance of the Mag7 ETF is described as 'pathetic,' with only a 4-5% year-to-date gain. McDonald highlights that companies controlling hard assets are significantly outperforming Big Tech, attributing this to investor discomfort with the return on invested capital in tech companies.
Behind the scenes, board members at companies like Meta and Microsoft are reportedly uncomfortable with the 'vicious' cash burn due to high capital expenditures. To appease investors, these companies have resorted to significant off-balance sheet financing, with Meta reportedly raising up to $600 billion in recent years.
Banks are reportedly engaging in speculative lending practices to appease major tech companies like SpaceX, OpenAI, and the Mag7. While these loans are often secured by double-rated free cash flow, there's concern about the long-term viability if these companies fail to become cash flow positive by projected dates in the late 2020s or early 2030s.
Larry McDonald suggests that the recent move in diesel prices could begin to impact inflation in the coming months, drawing a parallel to the situation in 2022. He recalls that in late 2021 and early 2022, high earnings expectations and the Fed's stance on transitory inflation led to an explosion in inflation rates.
Chris Whalen discusses the potential for government restrictions on gold ownership during times of debt crisis, drawing parallels to FDR's actions in 1933. He suggests that holding physical gold offshore is the best way to protect against such risks.
Chris Whalen highlights the significant increase in gold purchases by China, suggesting it will create upward pressure on gold prices and, consequently, downward pressure on the U.S. dollar. He notes that as central banks diversify reserves away from dollars, it will impact the dollar's role as a global means of exchange.
Chris Whalen discusses his upcoming book on gold, noting how central gold was to trade and compensation in ancient Rome. He contrasts this with the Middle Ages, where silver played a more prominent role due to limited gold availability.
Chris Whalen predicts that if the Federal Reserve resorts to monetizing debt, gold could become the 'anti-dollar,' with its price soaring. He reiterates that the dollar's strength relies on its widespread use as a medium of exchange, a role that could be threatened by fragmentation if the dollar loses global acceptance.
Responding to a viewer question about owning precious metals without holding physical metal, Chris Whalen states that the most accessible method is through a variety of stocks and ETFs. He personally uses this method, noting he doesn't own a large amount of physical gold himself.
Chris Whalen discusses the bankruptcy of 777 Partners, a fund involved in insurance, reinsurance, sports teams, and financing an airline, as a preview of private credit's downfall. He notes that the fund's collapse, possibly due to fraud, highlights the risks in the largely undefined private credit sector, which he believes will take years to unwind.
Jim Rickards believes that the US strategy of applying economic pressure on Iran is likely to fail. He suggests that Iran's current leadership, which is younger and more radical, is better positioned to withstand this pressure. Rickards also notes that US actions have inadvertently strengthened Iranian nationalism.
Jim Rickards discusses how geopolitical and geo-economic factors have merged into a single sphere of influence. He highlights that modern warfare increasingly involves economic and financial tactics such as sanctions and asset freezes, in addition to traditional kinetic warfare.
According to Jim Rickards, US pressure on Iran has inadvertently unified the Iranian population and strengthened nationalism. He suggests that despite internal dissent, the Iranian people are rallying behind the regime due to the external conflict.
Jim Rickards posits that the Iranian Republican Guard Corps is effectively in control of the country due to a perceived power vacuum at the highest levels. He notes that the current Supreme Leader's health issues and limited public appearances suggest the IRGC is the true decision-making body.
Chris Whalen argues that United Wholesale Mortgage (UWM) has demonstrated a complete lack of competence in running a public company, comparing its situation to Countrywide during the financial crisis. He specifically criticizes their failed attempt to hedge the balance sheet of Two Harbors before acquiring it, a deal that ultimately fell through.
Chris Whalen notes varied performance in the mortgage industry, with Rocket Mortgage reporting strong earnings while Pennymac had a weaker quarter. He attributes Rocket's success partly to its integrated model, combining mortgage origination, real estate, and servicing.
Chris Whalen anticipates the Federal Reserve will lower short-term interest rates as a form of quantitative easing, despite upward pressure on long-term yields from the bond market. He believes this strategy will be accompanied by the Treasury's actions to push down short-term rates.
Chris Whalen suggests a significant housing market correction could occur by 2028, but believes large investment banks may hold the market steady until they complete more IPOs. He notes that the timing is uncertain and dependent on these market activities.
Chris Whalen suggests that financial repression could make a comeback. He links this to potential Federal Reserve actions and fiscal concerns, noting that gold and silver have rebounded due to worries about these issues.
Chris Whalen expressed concern over Federal Reserve Chair Kevin Warsh's credibility, stating that Warsh is not projecting enough power and is being too cautious. Whalen believes that Fed chairs need to have some 'drama' and willingness to challenge the system, comparing Warsh unfavorably to Paul Volcker.
Chris Whalen predicts an economic slowdown, citing the market's actions and the Federal Reserve's past creation of 'inflationary assets.' He notes that the 10-year Treasury yield at 4.7% will lead to higher mortgage rates, potentially impacting the housing market.
Chris Whalen, referencing insights from John D'Amico, warns of potential diesel and fertilizer shortages in the upcoming fall. D'Amico's analysis indicates that shortages of crucial inputs like sulfur, used in fertilizer production, are likely. Whalen suggests the Trump administration is not adequately addressing these issues.
Chris Whalen views gold primarily as a hedge and a store of value, rather than an asset expected to outperform others. While acknowledging its importance, he suggests that tech stocks and industrial companies offer better growth potential. He advises using gold as a safe haven, especially if economic conditions worsen.
Julia La Roche highlights a piece by Thomas Gober from the Institutional Risk Analyst that raises concerns about the solvency of insurance companies. She notes that this is a recurring issue, especially after the financial crisis, and that people often overlook the stability of the insurance industry while focusing on other markets.
Chris Whalen anticipates a correction in home prices, driven by higher interest rates impacting the mortgage industry. He specifically mentions that the mortgage industry is already showing signs of slowdown due to these rate increases and expects prices to drop.
Showing the latest 15 of 20 covered episodes.