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Let's get into it. Got a very important

episode today. I'm joined once again by

my friend and business partner, Max

Weey. Max, good to see you.

>> Good to see you too, Jack.

>> Max, earning season is upon us. I want

to get into JP Morgan's earnings number,

which was very interesting. But first,

we got to start out talking about some

significant policy announcements from

the US executive branch that are already

moving markets in a big way. You know,

Venezuela has already happened. The

market impact was somewhat muted, but

there are very important things going on

right now with regards to credit card

interest rates, with regards to

mortgages and and particularly mortgage

back securities, defense stocks, and

several other things. So, Max, let's

start with uh interest rates. President

Trump announced on Truth Social that he

was planning to cap interest rates at

10% which is well below the level that

they uh are at for for many Americans.

And this caused a selloff in bank stocks

which are dependent on credit cards for

actually a great deal of their profits.

In particular, the payment uh giants

Visa and Mastercard which make money not

directly from interest but they make

money from the volumes. And when

interest rates are high and banks are

making money, surprise surprise, credit

card volumes are are very very high. Um

so so this matters a lot max because a

great deal of of profits is comes from

the the bank share. You know banks in

terms of volumes, mortgages, they do a

lot of mortgages. They do a lot of

commercial loans. Uh obviously they do a

lot of investment banking. But I think

people if they looked at the where the

actual profits come from credit cards is

very profitable. You know, surprise

surprise, making loans at 20% or 28%

APRs, it tends to be a good business

even if it is an unsecured loan and the

charge off rate can be 3% normally or in

a recession as high as 10% or maybe even

higher. Um, so first off, Max, I want to

note that I think it if I uh I I don't

think that this is going to happen. Um,

but I think that the market is currently

toying with the possibility that this

actually is going to happen. I think

that let's just assume that it does

happen, Max. I think that uh comp the

companies that make the credit card

loans with the higher APRs are going to,

you know, feel the heat the most. So

that would be companies like Capital One

which focus on the middle market more

subprime consumers companies like

Synchry which you know many people don't

think oh I have a Synchry card but

actually they probably do because

they're big in partnership so you'll

probably you know when I go to my Dwayne

Reed owned by Walgreens and they have

some you know oh we're would you like to

join our credit card sir you know that

may it may as well be synchry I don't

know but that they're in that business

and so those APRs are at uh 25 and 28%

Um and whereas uh JP Morgan um they also

make AP APR loans they reported today

that their their net yield on their

credit cards is roughly 10% but that

takes into account uh deposit costs. So

they're they're probably you know

they're a lot higher and if you know if

you actually look at your credit card

statement it is uh materially higher

than 10%. I think American Express, who

targets uh the the more prime customer,

wealthier folks, they might not be um as

affected by this cap. Uh uh the the

Bloomberg article today was saying how

JP Morgan was was announcing that it's

going to do everything it can to fight

this. And that is part of the reason why

I think it's probably not going to be

enacted. Um, but actually Max, just

before we started recording, there was

another Bloomberg article and it cited

that actually the uh some some credit

card companies are toying with the idea

of trying to appease the president by

putting out a teaser card, like

launching a credit card that has a 10%

cap. Um, but but not changing any any of

their other business or not giving it to

anyone, right? like you can you can put

the car on the market and deny a lot of

people the the 10% cap. I think it is

pretty obviously a political stunt kind

of running I mean we're here in New York

kind of running the Mum Donnie playbook

of running on affordability issues. You

know as uh as James Carvville once said

it's it's the economy stupid and we're

in this K-shaped economy where I'm sure

the people who are actually feeling the

pain of these super super high interest

rates on their credit cards are the

people most concerned about the state of

the economy. And so you know Trump this

is his his last term. This is his last

midterms. Uh so in November we are going

to vote and you know he would like to

maintain control of the legislative

branch so that they can

make appointments. They can pass

legislation and he can solidify his

legacy. Um so I just think it's the type

of thing that he gets to trot out now.

talk about it can get all slogged down

uh slogged up in in Congress, not

actually happen, but he can say, "I

brought this forward." And uh then if

they win, then the Republicans don't

actually have to pass it or mess around

with it uh because they already won. And

if the Democrats win, then they won't

pass it because it's a Trump bill and it

won't happen. So, you know, I am with

you that I do not believe it is going to

happen. And um you know I I certainly

don't think it could be done by

executive order.

>> Yes. And I want to be clear that when

Max and I say that we don't think it's

going to happen, we do not think that

there is going to be a law capping

interest rates at 10% on credit cards

that will actually be effectual. you

know, JP Morgan and Bank of America

could announce the the Trump card that

has very low uptake that has a 10% cap

and that will allow the president to uh

uh declare victory. But, you know, I

don't think that come Q2 or Q3 when Bank

of America and JP Morgan report that it

will lead to a material decrease in

actual credit card uh uh fees paid. So,

I just want to be clear, you know, when

Max and I make a prediction, what the

prediction actually is, so we can see if

if we're right or wrong. Um, also from a

Bloomberg quote, from a Bloomberg

article, uh, there's a quote that

Trump's demand to cap rates was not

backed up by legislation and he provided

no explanation for how the lenders would

be breaking the law. So the president

did did declare that if on by January

20th, so in only a handful of days max,

the cap interest rate uh interest rates

on credit cards are not capped at 10%

that the president those companies will

be in violation of the law, but uh

unclear what that law is. Uh uh we will

see. Max, there was a another um uh uh

post by Truth Social uh you know on on

Tuesday, January 13th that actually did

uh surprise me today because I saw on

January 13th Visa and Mastercard selling

off, you know, businesses that that are

famous for being extremely high quality

of extremely high profit margins, very

high returns to shareholders, very high

growth for a business that you might not

associate with with growth, uh credit

cards. and those stocks were selling off

today. Uh and you know it was deemed to

me by you know to to be a a buying

opportunity you know in my own personal

opinion and but then I wasn't aware of

this second post that the president made

uh and this was in in support of Roger

Marshall's credit card competition act

uh Roger Marshall a Republican in

Congress and also uh from the Democrat

Dick Durban. And this act uh basically

uh requires at least one of the it

requires two companies to uh to be

available to when people go into a store

and one of them has to be a company

that's not Visa or Mastercard. Uh so

Visa and Mastercard do have a very large

share of the the card market. The two

only two competitors of any note would

be American Express which is its own

network and then uh Discover which was

recently acquired by Capital One a bank

and American Express is a closed network

meaning that American Express is the

bank American Express is the network

whereas Visa and Mastercard are networks

on which banks can issue cards

themselves. Um, so that so I want to say

that the credit card competition act has

been bandied about within Congress for a

while and I think you know with with

very little upkeep perhaps because of uh

lobbying efforts and the like I think

Max if this card you know if this act

was passed I don't think it would have

super negative consequences uh and I

think that there might be some temporary

uh relief for small business owners. I

mean, I think you know, if you go to a

store and buy something, particularly

for the non Walmarts, the small

businesses, the small uh, you know,

bodegas in New York, for example, that

they, you know, the the interchange fees

that is are collected by Visa and

Mastercard, but the lion share of which

mostly goes to the banks are in the

neighborhood of 2%, 3% or 4%. So, you

know, if you have a a gross margin of 5%

and the the payments company's taking 3%

over over half of your profit margin is

being taken by these fees. So, I I uh

you know, I've never been in the

position of of running a retail chain,

but or or working in one, but I do

understand the pain, you know, and the

frustration there. Um, and I actually

did watch. So, how would requiring them

to have multiple networks not have a

consequence for them

>> for for J for for the banks for the

payment processes or

>> for the small businesses? I that that's

I guess to me it seems like it would be

incredibly negative for small businesses

to have to have more networks, right?

Like they have the ability like I've

been to you've probably been to a small

business where they say I will not

accept an American Express. I don't want

to to pay the fees that that network uh

requires for me to be able to do that.

So, they have the ability to take

Mastercard, Visa, um Discover, American

Express. So, I don't see why requiring

them to have more would be better for

them when they have the ability to take

them on.

>> I It actually Sorry, I I misspoke a

little bit. The proposed legislation

actually requires credit cards to have

two networks on them. One of which is

not Visa or or Mastercard. So you know

right now all these big banks are

partnering with Visa or or they are

partnering with Mastercard and some of

them are partnering with uh Discover

although actually I I don't know about

that but right now it basically it would

force them to be on a network that's not

Visa and Mastercard. So the idea is that

it would uh improve competition and that

the banks might not like it but that it

actually would be good for the the

merchants. And I think it probably would

be good for the merchants. And you know,

to be clear, you know, to be honest, I I

am an investor in Visa and Mastercard.

And uh but but I I I think that if this

legislation was passed, um it could hurt

Visa and Mastercard, but you know,

probably would be a net positive for for

retailers.

>> Well, certainly it is being passed on to

consumers like whether it's being done

in the sticker price of things or at the

at the point of sale. I mean I am

increasingly seeing at a rate that is

beyond just like oh one out of 10

businesses are passing on the fee. I

would say that I'm seeing almost 50% of

the businesses that I'm going to are

offering a cash discount. So I think Max

that

Visa and Mastercard have extremely high

profit margins but the simple fact is

that these very high swipe fees of 2% 3%

even 4%.

Most of that vast majority of that does

not go to Visa and Mastercard. It goes

to the banks. And what do the banks do

with that money? Some of that is profit.

Yes. Uh some of it goes on to operating

expenses. A lot of it goes onto rewards

to attract people to be on their

network. So all of the uh American

Express points, the Chase Sapphire

lounges, which are let's, you know,

let's those lounge those airports those

lounges in the airports I think are so

overrated. Uh I mean I'd rather just

like sit and chew my gum, you know. So

the reality is Max that you know some

people may say earlier in my comments

about how I think there going to be

negative consequences on this on this

10% cap and why I don't think it's going

to happen. The reality is, you know, we

we do live in a very K-shaped economy.

And if you look at the credit card

business,

um you have some parts of the country

who are use their credit cards who are

uh somewhat low income uh slightly lower

uh financial sophistication and they are

revolvers. people who are actually in

debt to the credit card companies and

they pay uh they are they are they pay

that interest every single um uh month

or or it it stacks up and that is how

the credit card companies make their

money in addition to the interchange

fees and then there's a a cohort of

customers who probably you know higher

income higher wealth maybe slight

somewhat slightly higher financial

sophistication or just they have enough

money to do it um who who pay off their

balance every single month and they are

the beneficiaries of these rewards

networks and they get, you know, their

free their free uh plane tickets, they

get their hotel book, you know, the

things that make them feel

>> they're paying for that every day

though. They've they've done studies

like rewards are not nearly as big in

Europe and that the average price for

things adjusting for cost of living like

that. We pay higher prices here because

of this.

everything you buy. Like, yes, you got

your free plane ticket, but you paid for

it with every sweet green salad that you

bought, with every bottle of of milk

that you go and buy at the supermarket,

everything you transact with, it pays

for that over time. So we we all pay

>> but the vast majority actually of of a

lot of the profit comes from a lot of it

is paid by the debtors of people who

actually are borrowing on on their

credit cards not by the swipers the

people who pay only via the interchange

fee um which you know is is not a a you

know a a real cost to them. I also think

back about sticker price. Like it's not

it's not that it's coming out of the

interchange. It's that it's it's it's

not necessarily coming out of the

interchange. Like I'm saying like that.

>> Oh, it's the annual fee. It's the annual

fee.

>> No, no. The the sticker like something

that would be $10 in a world where we

don't have all of this rewards gimmicks

happening

is $11. Here you're paying a dollar

more. The the cost of the good that we

are buying is more expensive because of

these rewards. You're not getting free

money. There's no free money.

>> Uh I I actually think it is kind it is

somewhat free money. I I do think Max

people who are not revolvers, people who

pay their credit card every time, they

are a net beneficiaries of of this

system.

No, I I I I I think they are I think I

think their rewards are um something for

the for the really smart people who are

constantly switching and playing the

games and they're always getting more

points. But if you're just doing like

the standard points, it you're not

getting out ahead. It feels nice and it

makes you spend more because you feel

like you're getting money back and it

increases the volumes, which is what

makes the whole thing happen. That makes

the whole American consumer economy

work. It It's good, but it it's not

real. It's a mirage.

>> You're going even further and saying

that the the point beneficiaries don't

even benefit. All I'm saying is that the

the people who are paying massively and

who, you know, whose resources are are

being drained are people who revolve

every single month. That, you know, I

want to stick with what's inarguable.

You you referenced Europe interchange

fees are capped in Europe. Um, they are

not capped in America on credit cards.

They are capped in in Europe. As a

result, credit card rewards are far

lower in Europe. So, they have a

different system. I earlier said Dick

Durban who is a Democrat is a co-sponsor

of this bill that President Trump is now

in favor of. Dick Durban is famed for

the Durban amendment within DoddFrank

which is uh it caps interchange fees on

debit cards. So debit over the past 15

to you know 15 years there has been a

seismic shift in the composition of

payment. Obviously cash as a percentage

is is going down. That's in a secular

decline. But in particular, debit cards

have gone down and credit cards have

gone up. Why? Because the big banks are

incentivizing the usage of credit cards.

Why? Because interchange fees on credit

cards are uncapped. But interchange fees

on debit cards have been capped by this

Durban amendment. Interestingly, Max,

there is a uh exemption for the Durban

amendment. Banks under $10 billion in uh

total assets have uncapped interchange

fees on debit cards. And this has been

quite a little profitable business for

some some of these banks. Uh some of

them I'm actually uh an investor in. So

I I'm not trying to pump the stock by by

any means, but a Pathwood Financial is a

company I know quite well. And um that

that is a business where they uh they

they make money from from interchange on

on on debit cards. They are around $6

billion in total size. If they were

twice that, they their rates would be

severely capped and they would be

nowhere near as profitable a business.

By the uh some companies of which I'm

not an investor in, but I know are also

in this in this business are uh Coastal

Community Bank, CCB, uh as well as GBFH.

And Coastal Community Bank is by the way

uh this is called BAS, banking as a

service. they uh sometimes uh you know

more derogatory referred to as rent a

bank of basically allowing

fintexs that are not banks the types of

companies that are you know invested in

by Silicon Valley and stuff but they're

not banks uh they still need to do

bank-like stuff so they just uh rent

their the license and use the license uh

but these the banks that actually are

are backing them get to benefit by by

this by this interchange fee um uh in

various ways and by the way CCB is the

bank that is for for the Robin Hood

credit card. Um, so Robin Hood was not a

bank. I think they've since applied to

be a bank. Maybe because the Trump

administration is more friendly to

banks. So maybe CCB is no longer uh the

massive beneficiary of this. I don't

know. But I know at a time they they uh

they they they definitely were

interesting, Max. So, so you say, okay,

uh, if if everything is going to go to

Europe and there's going to be, uh,

maybe a cap on interchange fees, uh, or

there's this credit card competition act

or interest rates are going to be credit

card interest rates are going to be

capped at 10%. Then that's going to be

horrible for Visa and Mastercard. Sure,

interest. Okay, maybe. But you look at

actually Visa and Mastercard's revenue

in the US versus outside of the US. Uh

for Visa, I I took a look at it and

actually their international revenue

exceeds their US revenue. They don't

break it out by profitability. So it is

possible that the US is the giant profit

center. Um but I I have a feeling that

Visa and Mastercard are making a ton of

money outside the US where the the rules

are different. And also, Max, I think

that if you look at the pricing power,

like these things, the temper, you know,

the banks are going to lobby incredibly

heavily against this 10% cap if if it

happens at all. Um, and I think if the

10% cap actually happens, it would it

would hurt like Capital One massively,

Synchry Financial massively. JP Morgan's

credit card segment, which is, you know,

a lot of its profit, um, it would hurt

that massively as well. I don't know if

that would hurt Visa and Mastercard as

much like in Europe. the fact that

interchange is capped is bad for the

banks or you know it hurts the banks so

they they make less profit but Visa and

Mastercard are still doing really well.

So I I think that the the advantage of

Visa and Mastercard is that they can

scale uh tremendously and be basically

the rails for global finance at least

for consumer spending and their costs

don't scale nearly as much whereas JP

Morgan and Barclays like they always

have to hire all these people and build

out new offices and that kind of stuff.

So um you know I generally if we have

more weakness in Visa and Mastercard I

personally uh am might view that as an

opportunity to to uh as a buying

opportunity. Uh but I you know as

nothing obviously on the show is is

investment advice. How um however you

know Max on our previous episode last

week I said we're talking about some

basically fake Chinese AI company that

has no revenue and I said I especially

am not recommending this stock. Um you

know I wouldn't say that for for Visa

and Mastercard. They are um you know

quite famous. Uh it's no secret that

they're extremely high-quality

businesses and in my view personal view

of course there's certainly worse places

uh uh to put money. Any thoughts before

I move on to other things within the 10%

cap and particular uh potential

beneficiaries?

>> Yeah, I I mean you mentioned uh foreign

a foreign stock. We just went through

this Jack, you and I, with the cap on

rates for consumer lending in China. So

we just so we just saw what can happen

to now these stocks are were like pure

plays on this consumer lending JP Morgan

as you said is a much more diversified

uh business. So perhaps you know the

precipitous drop that we saw in these

stocks going down in many cases like

well over 50% in the in the Chinese

consumer fintech companies. So depending

upon the degree to which the lender is

is relying on this, if this does happen,

it could be serious. Again, our base

case not happening. But if you just look

at at what happened in China, so

interesting that Dawn is uh perhaps um

importing this this policy from from

China and the the Communist Party there.

>> Yeah, he's he's importing it from the

east. He's importing it from the left.

Um the uh well-known Republicans uh

Bernie Sanders and AOC uh you know quite

quite left in the Democratic party I I

it's fair to say proposed a 15% cap in

2019. Uh that did not happen and now a

Republican president is is proposing a a

10% cap. So I think it just goes to show

the political landscape has changed and

the president is willing to go very far

to achieve his goals of either lowering

lowering costs which you know he would

like or at least getting um you know an

optical win and moving his weight around

uh in the press regardless of of how you

want to see it. Um, yeah. I also think

that, you know, I'm sure the Wall Street

Journal editorial page and the old

school, you know, pro business some uh

uh wing that was somewhat associated

with the Republican party, I'm sure they

absolutely pillaried and loathed that

proposal from Bernie Sanders and and AOC

in 2019. I think uh those types of

folks, you know, are in a little bit of

of a tough spot um uh at least when it

comes to to the media. So, so Max, uh, I

think that what I proposed about my

potential beneficiaries of of this, uh,

how there are companies that, you know,

make money on debit interchange below

the Durban cap, like real heads in the,

you know, who are work at the hedge

funds trading the financial stuff, like

they they know this, but I think within

the wider public is is not known at all.

Some stuff that you know is not my own

analysis but is much more widely known

in the general investing public like

I've seen on Twitter is that the buy now

pay laterers are going to benefit from

this that uh basically the PayPal of the

world the claras of the world the

affirms of the world as well as these

subprime lenders they are going to be

lending to the consumers that would have

borrowed at 20% but now they're going to

be borrowing at uh uh perhaps even even

higher rates because they no longer can

uh borrow via their credit card. Again,

this is if this policy goes through. So,

you know, I I was uh hopefully people

recognize me as being fair-minded that

despite uh you know, being being an

investor in Visa, Mastercard, like I

recognize that these polic the um

Johnson credit card competition act that

could hurt Visa and Mastercard that you

know, I I don't think that the negative

consequences would be that big. Um, I do

think Max, you know, not to be a a

mainstream uh, you know, pro business

elitist guy, but like I do think that

yeah, if credit card caps, credit card

rates were capped at 10%. People who are

currently borrowing at 15 or 20% or 25%

would not be able to access credit and

even max you know people who pay off

their their loans their credit card

balance every single month but are being

loan lent uh you know the credit card

access with APRs above 10%. um you know

even they might not be able to to access

that as well because the the credit card

uh uh lenders you know they they they

want the option to make money off

revolvers even if you know you're not

going to actually be a a revolver at

well so you know I I uh you know don't

want to agree too much with like the

American Banking Association but I do

think that that push back is generally

true and I think it would push borrowers

into the hands of the buy now no pay

laiders into the hands of the non-bank

lenders into the hands of the uh

subprime consumer lenders, the payday

lenders, which you know are are uh often

seen as uh somewhat uh uh uh engaging in

usery of of lending at APR.

>> Cash for gold. We're talking cash for

gold here.

>> Cash for gold of 40% 50% 60% APRs as

well as some effective lending that is

at interest rates of above 100% even

though it is you're never going to see

something on paper that says 100%. But a

company that, you know, makes a loan,

did they lend you $100? Uh, and it's a

oneweek loan and the cost is $5 of of

there's no, oh, there's we don't we're

not making a loan, Max. That's not a

loan. There's no interest at all. But

they for a $100 loan, they charge $5 um

of for a fee, a $5 fee. Five times 52

weeks in a year, that's effectively an

APR of uh over 250%. So I I think Max

there are a lot of these fintexs uh

whether they're publicly traded or

they're privately uh uh traded and

backed by VCs who talk about

democratization of finance and how isn't

this so great there's no interest at all

like they are charging interest it's

just they're kind of not calling it

interest and they're calling it fees and

actually max this is something that uh

happened to the Chinese fintex and it

happened it happens in Asia in China uh

dare I say I hope I I don't offend um

you know anyone but uh throughout the

Middle Eastern world where There is uh

you know Sharia finance. There's

something called Sharia compliant

finance where you know um it is it is

highly frowned upon within Islam to lend

at interest but the the economies within

that region obviously you know they they

need

>> Yeah. They they find ways they they make

loans that don't have interest. They

just have fees. And that that makes me

think of um uh uh my interview with the

former Silicon Valley Bank CEO who he he

was bringing his bank to China and he

said, "Oh, we need to do warrants like

this business this business to make to

make money banking all these technology

companies. You need to be able to take

warrants in their business." And the the

Chinese officials and bankers said,

"Wrants? Oh my god, that's so so

capitalist and so non-Chinese, so

nonsearchers. We can't do that at all."

And then the CEO just described, "Well,

they're not warrants. they just think of

them as success fees and then the the

Chinese bankers oh success fees yeah

we'll do that so you know the very

similar thing but uh sometimes things

just have to be worded in a different

way for them to become palatable and my

point is that I think if this 10% cap is

going to happen it is you know it it

will cause a huge surge in um

alternative forms of finance that the

true cost may be much much higher

>> all right Jack I got one for you you got

my brain going about Who are the people

that might win that are gonna going to

get new lenders if this goes through?

Easy Corp. EasyPW

is a publicly traded pawn shop brand

that uh trades at 15 times earnings. It

is up 75% over the last year, 356%

over the past 5 years. I mean, if you're

just playing the general K-shaped nature

of the economy seems to be doing well as

people in hard times are turning to the

oldest lenders uh in the world, pawn

shops. Um, you know, there were points

in times in America where where pawn

loans were the dominant form of consumer

finance. So, uh, we might be going back

to those old days with this type of

policy. So

>> we we might max I believe that was a

stock that was referenced in a trade

idea of Catrini's 26 ideas for 2026. A a

name that I know was named in a similar

theme was the stock Dave. I know it has

a horrible name, but it is involved in

these very short-term loans that may or

may not have on paper interest, but the

true uh APR uh can be can be quite high.

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Let's get back to the interview. All

right, Max. We've we've talked about

this. Um,

>> what about the other interest rates,

mortgage rates? That's almost as big, if

not bigger news. Yeah. So, this actually

happened and this actually has been

happening actually for several months

even going back into 2025. So, the

president did instruct early in January

the GSC's uh government sponsored

entities. So, Fanny May and Freddy Mack

to buy up to $200 billion worth of

mortgage back securities. And this is a

big big deal because if you you buy

mortgage back securities, you drive

mortgage back security spreads narrower

and then you lower mortgage rates and

that makes it very affordable. So the

historically you think of who is the uh

buyer of mortgage backs in order

mortgage back securities in order to

ease credit conditions is obviously the

the Federal Reserve and that is done

through uh Fed uh quantitative easing

and you know so the the mortgage back

securities uh the Fed bought peaked at

2.7 trillion. It's been doing

quantitative tightening so now it's at

uh a little less than 2.1 trillion. So

$200 billion of of purchases is is

definitely nothing to sneeze at. and Max

a lot of the stuff we talked about like

President Trump I you know he may may

think he has authority and his people in

a circle may allege that he has this

authority but um it's unclear whether he

does have this authority maybe he

doesn't have this authority but when it

comes to the Fanny Fanny May that is uh

in the GSC's completely controlled by

the FHFA director who is appointed by

President Trump and um Bill Pyh

is is a Trump loyalist who is very on

board and not only has Bill Py

purchasing mortgage back securities for

several months actually before President

Trump made this official announcement in

in January. He actually has been leading

uh the the attack against Fed Chair Jay

Powell, which we'll we'll get into later

on the show. So, uh President Trump can

do this and has been doing this. And uh

Max, if you you could put up uh we can

look at some some figures from from

Fanny May. Um throughout 2025,

Fanny May's retained mortgage balances

went from uh 77 billion in 2025 to 123

billion by the end of the year. And then

President Trump made the official

announcement. Likewise, Freddy Mack's

retained portfolio went from around 93

billion in February 2025 to 123 billion

by the end of the year. So now combined

they've got about $250

billion. And so their retained portfolio

cap max is each $225 billion each. So

$450 billion. So there is like a $200

billion gap where Bill Py can buy all

these mortgages and it will still be

compliant with this um with this with

this law that they have to be below this

$225 billion cap for each one or 450

billion in total. So it's completely

allowed by the law. as I understand it

is going to happen. It is happening. It

already has been happening uh throughout

let's say the the last six months of of

2025 maybe even earlier. So Max when

this policy was announced um the

mortgage basis which is the spread

between mortgage back securities and

treasuries actually rallied uh around 13

basis points. Uh and some sources are

saying that that was the biggest rally

in mortgage basis since basis since the

day that Silicon Valley bail uh uh the

Sil Silicon Valley Bank failed in 2023

close to three years ago. Um and by the

way, one of the one of the sources on on

that was Harley Bassman, who you

recently interviewed. Uh uh that was a

great interview only uh if you had done

that interview maybe maybe after it was

just slightly out of date but uh man

that that that is that is the guy to to

to know and and to to quote. I I think

Max that um you know I had observed that

interest rate volatility implied

volatility had been falling. Uh

obviously the move index which Harley

Bassman literally created and invented

has been going down. And I kind of I

always associated that with a

fundamental view. Oh, people in the

market, people like Harley Bassman who

are following mortgage volatility and

interest rate volatility and pricing it

every single day. That must be a

reflection of their view that realize

volatility is going to be lower in the

future. And of course, that is an

aspect. But now I'm just realizing, hm,

maybe Trump called Bill Py and he's been

buying mortgage back securities every

single month and uh that's why the

mortgage basis has been going down and

the the calculator for implied

volatility says that the move index is

going to go down. So, it's just always

two ways to look at it, like fundamental

view uh versus just flows.

>> Well, that's also part of the reason I

think it's like funny that people are so

bullish on the recap and release of uh

Fanny and Freddy, right? Not that the

person who runs them after they become

uh private companies again couldn't be

uh swayed by the president. It certainly

can happen, but it's not quite the

direct pick up the phone, call Bill Py,

tell him you're going to do this or

you're fired type of thing. Um that he

has right now. And certainly um until

interest rates go lower, I don't see why

he would uh give up that direct access

to somebody who can um achieve one of

his policy goals, help him achieve one

of his policy goals.

>> So, I actually haven't read these two

pieces, but I'm going to. They're on my

reading list. One is a piece by Joseph

Wang at fedgu.com about the GSC's. The

other is uh Buyback Capital, a a great

researcher on Substack. He's really in

the weeds on the GSC's. So, uh, you

know, just like to shout out other

people whose work is good, and I haven't

read these two pieces, but I'm 100% sure

that the work is good knowing knowing

the quality of of the researchers. Max,

you in 2025, a great trade for you was

being short uh the the homebuilders and

in particular, you know, several

companies in particular and that thesis

I I'll be honest, I doubted the trade,

but I was wrong and you were right that

that worked really well.

is how does this affect your view if the

president is literally buying hundreds

of billions of dollars worth of mortgage

back securities to lower mortgage rates

while he's putting pressure on the

Federal Reserve to lower interest rates

which is very you know connected with

with mortgage rates. Um is that going to

be a boost to demand and is that going

to cause a bid for these home building

and uh you know home associated stocks

which struggled so much throughout last

year? They definitely caught a bid to

the point that like I was short again.

They had gone down. They bounced back

up. I decided to get back in and and got

stopped out like just this week on my

preferred play, which as you know is

BLDR, which I like it just because it

has a bunch of beta. There's a a 3x ETF,

which the ticker is Nail. And you know,

I if you look at like BLDR compared to

nail, they're not like 100% correlated.

all the time. There's an interesting

play there where there's a new like they

consolidated a lot of companies and um

and just did a lot of rollups and they

succeeded in that for basically like a

decade. Um but Brad Jacobs launched his

own rollup company. So now you're

competing against a guy uh like Brad

Jacobs. So you know there's another

bidder now for these these companies

that had no bid. Um, so that's partially

why I like BLDR because it has this

idiosyncratic um, competition aspect to

it, but it has a lot of beta to um,

rates to people's expectations for for

housing markets to the point that um,

you know, it trades sometimes with more

volatility than the 3x home builder ETF.

So, um, it's a great trading sardine,

but yeah, it it has immediately affected

prices. I don't really know. I mean, I

will keep watching and seeing if the

housing market ticks back up and if

transactions tick back up. I don't know

what the price is. Um, look, like cash

buyers have been doing what they want to

do, right? So, uh, I don't that doesn't

really affect them. Um, you know,

certainly here in New York, like the

joke with real estate agents is like a

buyer's not serious unless there's four

people at the showing. Uh, the husband,

the wife, and then one of their parents,

uh, one of their sets of parents. So,

you know, that's

>> that's that's the cash buyer. So, like

you better show up with with mom and dad

or else somebody else is going to show

up with mom and dad and outbid you.

Doesn't matter whether you're

preapproved for what loan, there's going

to be a cash offer. And so,

these people in the market that are

borrowing that aren't in that like

wealthy group of people,

I don't know where the number is that

gets them back into the market. And I

certainly don't um I certainly don't

think with all the other things that

we're hearing about in the K-shaped

economy think that that lower half of

the K is is stepping into the housing

market anytime soon. Uh the the big news

also today was talking making it easier

for people to tap their 401ks to buy

homes. I think you can already do it to

um I think you can already do it to buy

a first home, but you have to pay

capital gains tax, but you're not paying

that like early withdrawal fee. So, I

think they're actively actively working

on some 401k related um some 401k

related thing. I don't know whether it's

going to be you're able to take the

money out with no tax, whether it's

going to be for people who are not

buying their first home or some

combination of all of that, but they are

pulling out all the stop. So, um if I

was short somebody who was inclined to

short housing, I would wait. There's

just like a lot of Wait till they till

they throw everything they possibly can

um at it before getting back in. But I'm

I'm out of that trade for now.

>> Yeah. Max, one particular part I don't

know if I like it the most or it's you

know it's just a very smart part, very

nuanced part, but is your point about

now BLDR as a rollup play has more

competition. You know, Warren Buffett

has spoke about that how spoke in about

that how, you know, in the 1980s, 1990s,

2000s, he and Charlie Mer were using all

their cash they generated to buy all

these private companies and often at

quite cheap valuations. However, with

the rise of private equity, now all of

these um you you know, Wall Street

gunslingers were going to all the

endowments, all the high net worth

individuals, all the foundations,

raising all this money and buying the

company. So there's just so much more

competition and therefore like Charlie

Mer and Warren Buffett themselves

predicted, oh yeah, what we did in the

past we're not going to be be able to do

in the future. I think I don't follow

him nearly as closely, but the now

retired Mark Leonard of Constellation

Software, also legendary for being a

tremendous uh incredibly accomplished

capital allocator, has said the same

thing that all these private equity

companies, you know, they used to be

buying uh steel mills and greeting card

companies, like now they're buying

software businesses. And now

Constellation Software has a lot of

competition even in that like lower

middle market company that, you know,

has a very small EBIDA uh number. So

yeah, when when competition increases,

historically excellent returns are less

likely to continue. So I I think that's

true. I will say, Max, I have been in my

own personal view, you know, I I don't

really have any uh you know, trading out

outlook or position on on the

homebuilders, but I do think that there

is a shortage of housing in the US and

globally that is secular. And I have a

reasonably high conviction view that the

reason home prices are high is because

they're in the US is because there

aren't enough homes, not because there's

been a credit bubble. Like I just look

at the delinquency rates of mortgages.

And you know, the best performing asset

in terms of credit quality is is a

mortgage to uh someone with with a pulse

in the in the United States. And um you

know that's just it's just the complete

opposite of uh the subprime bubble from

you know 2001 to 2020 2011.

>> Jack but I that kind of reminds me of

when Elon was like well there's

unlimited demand for Teslas. Like yeah

there's unlimited demand for for

Lamborghinis. There's unlimited demand

for three-bedroom apartments in New York

City where there's more jobs and it's

not just one great company. Like look

I'm I'm from Cincinnati. We've got

Proctor and Gamble. We've got Kroger.

There are these great companies there,

but guess what? If you leave Proctor and

Gamble, there's not another shop that is

in the consumer goods business across

the street that you got that you get to

go work for. You got to go leave some

you got to go somewhere else. New York

City, uh, Los Angeles, Chicago, places

increasingly not Chicago, but places

like this, there's competition. There's

always going to be demand for housing

there. It doesn't matter how much you

build. there's just it's just going to

make it more affordable for for people

to move in here and then suddenly we're

going to be in the shortage. So, I've

never as much as I do buy the like

housing shortage narrative somewhat. I

am just like skeptical of these goods

that in theory they have unlimited

demand. Everybody wants a house. Of

course, there's a shortage. Um and so,

you know, Yeah. and and they're going to

they Trump has said himself he has said

housing prices he doesn't want to bring

them down. He does not want to bring

down housing prices. He is not going to

do that. It is the greatest source of

wealth for the majority of older

Americans and he doesn't want to do

that. The prices need to come down. The

prices need to come down and they're not

going to. And that's I just don't

>> So why short housing? I'm actually you

you very coely over the past uh you know

150 seconds or so have

>> I'm not home prices. I am short the

builders of houses that are trying to

sell houses at a price that

the that is not the market will not

clear.

>> So you think yeah you're you're just a

secular you're just a bear on housing

volumes. You think that the Yeah.

>> Yep. Just just a volume bear. The the

prices are not going to go down. The

boomers are not going to downsize. is I

mean eventually they're going to die. Um

but it it's just not it's not happening.

And then also just the idea of like what

all of this nostalgia about when you

could buy a house on the GI bill.

Have you,

you know, especially for people who live

in urban areas, if you've never like

driven around some of these like older

suburbs or they're they're technically

within the city, like they're not

suburban, but like it's just not you can

you can buy a house in Deep Queens. Like

you can do it. It's affordable to buy a

house in Deep Queens. That's what a

house looked like in 1952

in the late 40s. People just don't want

it. They don't want that house. That's

not what they're being sold on

Instagram. It's not what they're being

sold as the aspirational idea of

homeownership. Um, and so,

you know, there's not a shortage of of

uh fixer uppers in in Queens.

>> Yeah. Yeah, I guess the question is

what's the ratio within the K Schiller

index within the entire entire thing

between uh houses for which the demand

is truly unlimited as well as uh as you

said that the fixer upper in Queens. An

interesting papermax that I actually

just randomly happened to go through

again like a week or two ago is called

No Price Like Home Global House Prices

1870 to 2012. And there is a trend that

um you know maybe some people will be

familiar with of just like from 1870 to

maybe 1950 or 60 home prices actually

were remarkably stable in real terms and

in some instances went down. And by the

way this paper goes through like the

vast majority of countries for which

there is data. So Australia, Japan, you

know most European countries, the US um

and basically the I uh I I asked Gemini

and basically I asked why is this the

case? Um, you know, I think people, you

know, maybe people with maybe a more

like left-wing view would say, "Oh,

well, it's because housing has become

commoditized by the greedy the bankers

and the greedy homebuilders." And okay,

like that that's an argument, but um

maybe maybe there's an aspect there, but

but another argument like that's at the

fundamentals according to um you know

what what I asked Gemini is the fact

that like from 1870 to 1950 there was

not a shortage of land at all. And so

basically all you had to do was move to

the other town where land was really

cheap and create a new town. Um like you

know Charlie Monger talked about how his

grandfather in the 19th century uh like

first came to Omaha and um basically

helped create the town of Omaha. Um or

maybe it was his great-grandfather. I

don't know. But but he he did say that.

And um

that uh you know obviously can't happen

in in the US anymore or really anywhere

like there there aren't uh that many

more l you know uh lands that are uh

going for for for very uh uh cheap and

oh and in particular the real secular

trend from 1870 to 1950 was

transportation. So, so the the fact that

as as everything got more connected, you

could live further and further away and

um you know, so so there was more

places, but now you know that that's not

really going to happen anymore. So,

>> we're kind of getting away from kind of

getting away from the uh housing thesis

that we were talking about. But yeah,

I'm just like structurally a bear on

housing volumes um overall because of

all

>> Well, it's good you're precise. You're a

bear on housing volumes, not housing

prices. Uh I I'd agree that I'm also not

a bear on housing prices and I'm not

predicting some you know extreme price

surge. I hope we we don't get that. I I

will say that just looking uh at the the

pace no price like home. It's

interesting. You know some Americans may

be like well in America because our

economy sucks. We're so greedy whatever

we have this housing bubble and housing

is a commodity. But in the rest of the

world it's better. This paper will

disabuse you of that notion. uh if you

know the surge in real estate prices

over the past uh 50 to 90 years um you

know is much more extreme in Australia,

in Canada, some European countries, in

China um really I think over the past 30

years the only country where that where

the only large country where uh you know

real estate prices moderated and

actually went down in real terms um I I

believe is is Japan. Uh, Max, tell us

about what President Trump has been

doing with the the defense sector.

>> Yeah, it's another sector where he has

um stuck his nose under the tent and

specifically he threatened with an

executive order to um basically withhold

contracts from some of the big defense

contractors. He even um posted

specifically about Rathon, said that

they're one of the worst companies uh to

to work with. and he threatened to um to

withhold contracts for for CEOs that

don't deliver on time. He mentioned

Boeing said something about how it take

it took 5 years for um our allies in

India to get helicopters that they

ordered and how ridiculous that was. Um

so he's not happy with the credit card

companies. He is not happy with the

defense companies. And uh the

interesting thing is as you said some of

these um

some of these credit card companies

exposed potentially to the shift uh sold

off and you view that as a buying

opportunity if you

>> the payment stocks the payment stocks

visa master to be clear.

>> Yeah. Yeah. Yeah. The payment the

payment stocks um sold off and if you

were to have tried to do that with the

defense companies you had one day. You

had one day. So he put out this

executive order on the 7th. Um and

and so uh I I believe they they sold off

that day and they're already up. They're

already up on the year. If you look at

the ETF, if you look at RTX, the parent

company of Rathon, they

>> because why, Max? Because why?

>> Well, he did announce that he wants to

raise the budget. So they're going to

have to spend the extra half a trillion

dollars somehow. Um, but it's just

interesting that just because Trump has

decided to target an industry, even

individual companies, um, you know, the

market kind of suses out, well, the

money's got to go somewhere. And, you

know, with go tying it back into credit

cards, like this is a consumer economy

that's driven by credit. Uh, I I I

really don't know um how how we're going

to upend that. So, I I just thought that

was interesting. And and one of the

other things he said was limiting CEO

pay to $5 million. Um

>> for defense companies,

>> yeah, for defense companies, I'm not

necessar I I think legislatively that

would be extremely difficult. But, you

know, these companies are paid by

government contracts. So, if we talk

about like what are the levers that he

has to pull and he's the he's the um

commander-in-chief, so the executive

branch does kind of decide these things.

uh how how the the money gets allocated.

Um you know, we're we're going to talk a

little bit about Jerome Pal and the Fed.

Um and specifically the issue he has

with the testimony he gave related to

the the over $2 billion renovation

there. You know, we're talking about the

Pentagon here that has failed, I think,

an audit for over a decade now, and

there's billions billions of dollars

missing. I don't see him um I don't see

him investigating any of the past uh you

know heads of the joint chiefs of staff

or generals or any of the the people in

the purchasing department at the u at

the Pentagon who would be responsible

for this. So, you know, kind of segueing

into that topic of of Jerome Pal and

what's been happening in this Fed drama.

um you know he came out and he said

pretty clearly that he believes that

this is a a political move because he is

not lowering interest rates. And I think

if you look at um certainly some of the

other areas of uh fraud and waste in

government um this $2.5 billion

renovation of the Federal Reserve is is

is certainly not the uh lowest hanging

fruit.

>> Yes, I I'll uh get into Pal in a sec. I

just want to share my own opinion. I I

think what the president has proposed on

defense like I I don't think it is

ridiculous and I I think what is

ridiculous is is a company making um

billions and billions and billions of

dollars of selling technology to the

government that is you know never going

to be used um

very very unlikely to be used and just

just basically you know having having a

30 to 40% profit margin off off of that.

Um, I think I I'm not a lawyer, but uh I

I I think that it that that policy is uh

he's I don't think the president is

wildly off base. I'll just that's my own

personal opinion. I think the broad

point, Max, is the president is at least

announcing policies that are a big deal

that are uh in some instances very uh

anti-free market that are going to

achieve uh his goals, which are, you

know, goals we can probably all agree

with in many instances. Um and they they

don't go with with convention. The the

question is to what extent he's going to

follow through or be able to do this. I

think Max, you know, on the the tariff

front, uh the president was a little bit

of the Charlie Brown thing, you know, um

he was he was holding the football and I

fell for it. Many investors fell for it

and the uh announced tariff rates of 30

40 in for a few days on Chinaund

and some percent on China. um you know

that that didn't happen and you know we

now we're in a mid- teen tariff rate and

the president definitely moderate his

views and so you know the basically the

you can call the president's negotiation

strategy you know um you know shoot for

the shoot for the stars land on the moon

um so maybe there will be moderation

with the president's policies as as well

in this instance uh uh we don't know do

do you have any sort of inkling max like

is is the president for real or you know

which President Trump when it comes to

credit cards when it comes to these

defense companies, other other policies,

which President Trump are we going to

see? Are we going to see the the

president who moderated tariff policy

and did uh roll over rollover and then

kind of uh you know, somewhat back down,

or are we going to see the president who

just uh sent the military and um you

know, abducted the uh the effective

leader of Venezuela?

>> I think it all depends on how they act

and how they treat Trump. I mean, I

think he just wants to be treated like

he's the president, like he's the most

important person in the world. And if

you do that and you kind of play ball,

um it it's going to work out. I mean,

look at Intel. Instead of Intel saying,

"Oh, you know, we're a private company.

We don't want to do that." They said,

"Yeah, sure." Like, we'll let's let's

take a stake in Intel and look at the

returns that Intel has had. Um you know,

that's that's just what he wants. So, if

you are going to to push back, right?

Like you talked about the Trump card,

like announcing a Trump a Trump 10%

interest rate card and then like he just

wants that to happen so that he can say

I did this and I get the wins. I don't

think he necessarily cares if they deny

everybody who applies for it,

>> right? And so it depends

>> Yeah. a Trump a Trump card with 0% 0%

rates.

>> Yeah. 0% interest rate that nobody gets

>> 0% rates that will only you will only a

thousand people can use. Yeah.

>> As I said, I think this is about the

midterms. think uh we I think it's it's

the MDI affordability playbook and

promising things as well that that you

don't necessarily have the ability to

enforce or do and um this just this just

works. And you know, that's part of the

reason like housing, we talked about

housing affordability as maybe being

like the most important thing. And he

he's going for all of these other things

that yes, they are important and and

there are plenty of people out there who

are struggling with credit card debt,

but as you said, like there's a there's

a quote unquote housing shortage, but

Trump has said, "I'm not taking prices

down. I'm not doing it. I'm not going

after the retirees and the people who

have built up all this home equity that

is all the wealth in America. I'm not

doing it because that would actually

have consequences. And so I don't think

taking away the punch bowl for the

consumer is good for what Trump wants to

have the hottest economy ever. I don't

think um you know the defense companies

are I I I am talking to two friends

right now who are both looking for jobs

and one works in data science and is

having a very hard time finding a job.

the other works in specialty metals and

alloys for aerospace and defense and

he's got seven or eight interviews.

Okay. I don't think that one of the

great parts of the economy when we're

hearing about struggle uh struggles in

the um in the labor market, I don't

think that that's where

the the buck is going to stop.

>> So, Max, you talked about pricing and

affordability pressures. The inflation

data CPI came out today actually pretty

good. So uh the inflation has averaged

0.13

over the past three months and that is

actually well below if you analyze it

well below the Fed's 2% target. So um it

appears that uh inflation is you know we

don't have enough data to say it's under

control but it appears to be heading in

the right direction and actually core

inflation which year-over-year was 2.6

six, but you know, on a three-month

basis is actually lower. Core inflation

is actually lower than headline

inflation. Um, which was interesting to

me. But yeah, Max, let's get into the uh

the much promised story of Trump and

Trump's allies going after uh Jay

Powell. Uh last week he uh that Jay

Powell announced that he was on on

Friday, I believe, shared documents. he

was subpoenaed uh that may lead to an

indictment alleging that when he

testified to Congress last year, he lied

specifically about the Federal Reserve's

renovation um that it would cost X and

it actually would cost Y and that there

were material misstatements. Um and Pres

Powell came out and said, "Look, I'm not

stepping down. I'm I'm not above the

law, but I'm I'm here to serve the

America and B the American people." And

basically that what the president is

doing and what the president's allies

are doing is a pretext. And and this is

it. Look, I'm I I have looked into but

I'm not an expert on the specific all of

the claims that Piro has made that

has made that Powell has made what was

true what was false.

It appears that but but here here's what

I do think Max is that even if what

Powell's critics say is true. I I I

don't think that is why they are going

after him. They're going after him

because President Trump thinks Jay

Powell has been too slow to cut interest

rates. He's called him Mr. Too late

Powell many many times. So I I do agree,

you know, I'm not going to come out on

either side on many issues in in on this

particular problem, but I I will agree

with Powell that it is a pretext. The

allegations against him, uh whether

they're true or not, are a pretext to

remove him, not because of the

allegations, but because President Trump

wants a super dove in there and he wants

to to lower interest rates um to to help

America, but in particular to stimulate

America maybe before this election.

That's that's my view. Yeah, Jack, I I

certainly echo your view that that's

what it seems like to me and I don't

necessarily know what the allegations

are. It is perjury related, so it's

about his testimony and what he said.

These are not allegations that uh he's

got buddies in DC who are contractors

who are doing the electrical and they're

getting overpaid and he's getting a

kickback or anything like that. You

know, he's an extremely wealthy person.

I don't think it has anything to do with

that. that would be like really serious

fraud and I would be all for uh

investigating that type of thing. You

know, this is about testimony to

Congress. Um not that perjury is is a

crime that should be taken lightly, but

um it does seem out of character for Pal

to uh perjure himself in Congress over

something um as trivial really as a

renovation. And and maybe it doesn't

sound trivial people to to talk about $2

and a half billion dollars, but um you

know, I think that these renovations

predate him. The the these renovations

predate Pal. He didn't choose for them

to happen. He didn't approve them.

They're all, you know, the budget is

approved by Congress. U so I I don't I

don't think that uh this is something uh

particularly dastardly from him. So

that's all I got. Jack, anything for

you?

Um yeah, so as I as I referenced at the

beginning, JP Morgan did release its

earnings today and um you know the I

think the the reason the stock was down

a lot of it was because of the the

credit card things that that we've

already talked about. But you know what

stuck out to me, Max was the loan

increase. Um so loans went up uh 10.8%

8% near nearly 11% year-over-year. And

loans are growing at JP Morgan faster

than they grew in 2024 uh and faster

than they grew in 2023. So, I I think

that this whole narrative of the economy

is going to slow down and we're going to

have a recession and banks are going to

pull back on credit uh not only is it

not happening, it's actually reversing.

looking at the credit losses, the uh

what what I really paid attention to

which is I think the far most important

thing for the consumer for the economy

is consumer delinquency rates on their

credit cards and um that was stable as

as it has been uh over over several

years now. Uh they did guide to a higher

net charge off rate in 2026.

Interestingly, maybe this is why the

stock was down. I don't know. Their

guidance on expenses in 2026 appeared

quite high. Uh JB Diamond, CEO on on the

earnings call said, "You just got to

trust me. You know, we we're going to

invest and we we want to stay ahead of

the competition and the last thing I

want to do is save money and pinch some

pennies here and offer lower expense

guidance and then in 10 years people ask

why did JP Morgan fall behind?" So, uh I

think if any bank CEO has earned the

trust to invest a little bit of money

and uh have some higher expenses, um it

would be Jamie Diamond. Also, Max,

looking at the credit losses, they

superficially appeared to spike at a

very high credit loss of 4.65 billion

for the quarter, which was much higher

than last year's number for the fourth

quarter of 2.6 billion. Uh, so that

appears to be an 80% year-over-year

increase. Boom. We have a credit doom

incoming, right? Well, not so fast

because actually 2.2 billion of that was

just assuming Apple's uh loans for the

Apple credit card program. Apple had

been a partner with Goldman Sachs but um

that that partnership has now ended and

JP Morgan has replaced that. So uh if

you take out that uh assumption of

basically taking the credit losses early

before they happen which is how it you

know happens for uh bank accounting and

credit accounting uh taking out the

perhaps a more accurate figure would be

2.45 billion. So actually a

year-over-year decline in credit in

credit quality. So uh overall on the

consumer side and and the consumer and

commercial bank uh things appear pretty

good. I think there were some stumbles

in the investment banking um uh both

both on the maybe the trading side um

but in particular in investment banking

on uh you know the deal didn't close in

time and so it wasn't booked in that

quarter. Um but you know I think if if

the stock market continues to do well JP

Morgan investment banking and trading uh

will do well that that's uh generally a

a rule. Uh Max I I do want to close you

know um leave some people here with just

some thoughts on uh momentum as well as

a particular sector of the market. So

earlier we talked about Visa and

Mastercard that is a segment not just

the payment stocks but I'd say

highquality financials uh so your S&Ps

your Moody's your uh CBOE's your CME

Chicago mercantile exchange like

generally non-bank uh nonasset

management financial companies that are

you know networks and generally have

very high profit margins and even though

the fact that they've existed for a long

time grow at high singledigit or low

double-digit yields. These are the type

of companies Max and obviously I'm

generalizing that you know during the uh

bubbles of of 2021 traded at 50 or even

60 70 times earnings and basically since

then the S&P has outperformed many of

these stocks and these stocks uh still

trade at a modest premium of price to

earnings. Um so now they're at 30 times

earnings relative to the market of I

don't know 23 or 20 23 let's say. uh but

I think in my view their their quality

advantages and the fact that they are

have such dominant business model might

merit that valuation. So um you know I I

certainly wouldn't uh have encouraged

people to to load up the boat and buy

MSCI when it was trading at 70 times

earnings in 2021. But if you just look

at a relative valuation um you know

those types of companies might be more

attractive and and that is just uh my my

kind of view. Um, however, Max, I I also

want to talk about the importance of

momentum because let's say let's say I

want to take a I want to go long

software stocks and I want to go long

these high quality financials. Both of

them are in a kind of a relative bare

market. And I think uh in particular,

software stocks are going down every day

in the S&P today on on Tuesday, January

13th. I believe the stock that went down

the most in the S&P was Salesforce CRM.

uh I didn't track it that closely but I

believe because uh an AI company may um

you know posted some some software and

released some software that competes

with it. So basically the dominant

narrative in the market uh and I want

your your view on this Max just the

general principle the dominant view in

the market is AI is going to crush these

software stocks and these companies that

had gross margins of 70 80% that could

uh you know just grow so much and and

make so much money. they no longer

deserve a price of sales of 20 times or

a price to earnings of 70 times and uh

every day we should sell those stocks

that we should buy AI stocks in a

particular like uh you know Korean

stocks that make memory like SKH

highinex or micron that is just what the

market is thinking so max even if let's

say let's say I have this view and I I

don't know if I have this view it's not

that well held but like that long-term

take a contrarian bet to go along with

those software names I just want to

introduce that for a long-term investor

by all means take that view. But like if

you're a a trader, either someone who is

working at a hedge fund and you're you

know an institutional investor who you

could be fired if you if you

underperform for several months or

quarters or if you're just a leverage

trader or trading by yourself and you

you have very high in your personal

portfolio very high standards for a

sharp ratio and you don't want to handle

that much draw down or handle that much

volatility like I would not advise that

at all. And I I just, you know, want to

introduce that concept um um to you,

Max, because I think in both of our

investing, you know, we kind of talked

about this and we talk about this

personally, you know, all the time.

>> Yeah. I mean, it's it's certainly

something that it's not in the list of

stocks that you you talked about, but I

own a high quality insure that has done

very very well is generally considered

to be if you look at its historical beta

is less than 0.5 and uh it was down over

5% today. um you know in the in the

insurance sector and so you know

something I and I looked I looked all

over trying to figure out why is the

stock down I couldn't I couldn't find

anything uh in terms of news in terms of

research um that that really explained

it and uh when that happens you just

kind of have to say well the momentum is

going against me here and and seriously

consider depending upon what your

purpose what is the purpose of this, is

it a trade, is it an investment? Um, and

then also, you know, is it truly as as

high quality as I think it is?

>> Yes. Uh, I I think that I, you know,

Costco is now trading at a at a much

cheaper multiple, but, you know, Costco

is a great company. Whatever. I'll take

Charlie Mer's word for it. I I never

really understood it to be honest, but

like at a 70 times multiple, you know,

you you better be growing your earnings

a heck of a lot in my view to to marry a

70 times earnings. And also Warren

Buffett is completely right about you

shouldn't pay attention to charts and

technical analysts and stuff. as a

long-term investor and I I think

generally people should be long-term

investors, but like if you're in the

game of trading, you should be aware

that like what happened on Monday is

slightly likely more likely to happen um

on Tuesday uh that than than the

opposite. And that certainly is

happening for you know memory stocks

outperforming

um software that certainly is happening

uh um for

um you know high quality financial

stocks underperforming for quality

stocks uh underperforming uh for for

silver and gold stocks doing well. So we

we'll we'll leave it we'll leave it

there. Max we have you know really

getting into the swing of things on on

here on monetary matters. our viewers uh

now will be familiar that you are

hosting monetary matters uh as well the

occasional episodes you've you've hosted

Harley Bassman talking about mortgage

volatility and and rates you talked uh

Michael Cowell talking about Venezuela

and and oil um I will be back in the

seat I I've uh interviewed Michael Power

about how Chinese AI could pop what

might be a US AI bubble people

definitely should check that out I also

interviewed uh a an experts expert on

the topic of the Chinese economy uh he

is a professor professor whose book is

the standard reference on the Chinese

economy. Um, you know, whe whether

you're an undergraduate, whether you're

in a PhD program, or whether you're, you

know, in in the corporate sector. So,

people are not going to uh uh want to

miss that. Thank you everyone for

watching. Until next time. Thanks for

listening. Looking to check out Fiscal

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