It’s banking season. With the big U.S. banks set to report their third quarter earnings, Jack speaks to veteran banker Chris Whalen about what investors should be looking for. Whalen, author of The Institutional Risk Analyst, argues that while some lines of business, such as investment banking and mortgage origination, have slowed rapidly, the core business of banking (taking in deposits and making loans) is stronger than its been since before 2020, because interest rates are significantly higher and banks can now make money on their loans.

That being said, problems abound. Many small banks, Whalen argues, would be rendered insolvent if forced to sell their mortgage-backed securities (MBS), because the surge in interest rates has caused their market value to plunge. To hear Whalen’s unabridged thoughts on JPMorgan Chase, Goldman Sachs, U.S. Bank, Wells Fargo, Charles Schwab, Bank of America, and more, you’ll have to listen to the whole interview! Filmed on Friday, October 14.

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(00:00) “Bittrex Ad”

(00:10) Intro

(00:57) Overall Outlook on U.S. Banks

(03:27) "The Party In Investment Banking Is Over"

(07:03) Loans Are Going Up, Deposits Are Going Down (The Opposite of Post-GFC Trend)

(09:17) Jamie Dimon's Recession Warning

(12:35) Where Will The Credit Losses Be?

(16:49) Cost Of Funds As A Threat To Banking Business

(21:23) Quantitative Tightening (QT)

(23:18) “Bittrex Ad”

(23:49) Winter For Investment Banking

(27:48) The Biggest Risks

(30:40) Interest Rate Risks As A Systemic Threat

(35:53) Huge Losses In Mortgage-Backed Securities (MBS)

(38:39) Can Banks Hide The Losses?

(47:49) Bank of The Ozarks and Bank of America

(55:00) How Can Banks Do Well In A Recession?

(58:09) FinTech

(59:30) Credit Suisse ($CS)

(01:01:51) Outro

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.

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