Big Bank Problem As CLO NYCB Causes Gold Price SURGE
Summary
➡ Many companies are leaving their leases, causing problems for property owners. New York Community Bank (NYCB) is struggling, with its stock price dropping below $4. The bank’s problems are due to poor management of its loans and fears about commercial real estate. Meanwhile, the price of gold is rising due to economic tensions and expectations of a rate cut by the Federal Reserve.
➡ The article discusses the potential for a financial downturn due to risky financial practices and the Federal Reserve’s potential actions. It suggests that the stock market, cryptocurrencies, and gold prices may drop, and banks may need to be bailed out. The author advises readers to be prepared for these changes and to take advantage of opportunities that may arise. The article also predicts a real estate crash and suggests that banks may limit loans, making it harder to buy property.
➡ The speaker believes we’re in a time where an economic crash is likely. He encourages people to prepare for this by becoming wealthy and taking control of their money, instead of waiting for negative outcomes like job loss or bankruptcy. He suggests that this wealth can be achieved through opportunities like his real estate course. He ends by promising a new video for course participants about the mindset needed for first-time home buyers.
Transcript
The reason why I say is because we got four great stories for those that have been waiting for the Fed to lower rates. Well, I hate to break it to you, you’re going to be bummed. For those of you that have bought gold and are getting excited that gold is about to hit $2,100 as of the recording of this video. That’s going to be great. We’re going to go over that.
We’re going to talk about Wall street worries over NYCB’s bank. We’re going to talk about collateralized loan obligations that are completely failing. And this is not looking good. So without further ado, let’s dive right in. All right, here we go. This is a chart of collateralized loan obligations. This chart starts in. Give me a second. Let me get my spectacles out. May of 2022, at about a three quarter of 1% failure rate, right as they were going down, now we’ve got them defaulting in the eight and a half percent range.
We’re about to hit double digits. And Wall street is getting extremely, extremely nervous and we’re seeing bond rates go up. So first story we’re going to be talking about is the Cre clone distress rates. This is out of commercial observer. It says they are surging over 440% in twelve months. Now, first we talk about the debts that failed in 2008. They’re almost identical to this. They just put a new name on it, repackaged these, and now the new name is Clo.
Where we used to have. I’m completely. My mind is just, boo, you go live and all of a sudden all the thoughts go out of your head. We had different type of derivatives, okay? Now we have Clos. Same thing, different name, says cred IQ dove deeply into the commercial real estate collateralized loan obligation ecosystem. To better understand the rapidly growing distress rates in this space, we excluded Cre CLO deals from our monthly delinquency reports, but decided to zero in on this important sector on a standalone analysis.
Following the news of Arbor Realty Trust’s distressed level recently, I did a story on the other channel, real estate ninja. If you wouldn’t mind going over there and subscribing. That’d be great. It helps me out. Totally different stories. And they’re not all about real estate. We talked about that this last week when I went down into downtown Reno, Nevada, near some projects, not that Arbor owned, but I use them as an example.
They are having to drop rents. They are having a hard time getting people in. There is a ton of commercial real estate hitting the market, and these companies are finding it hard to hold on to the properties. They’re having to get rid of them at very low levels. And like what we just saw the other day in Canada, a canadian pension fund sold a massive building for $1 because it’s cheaper to sell it for a dollar and take the right down than the ongoing cost of keeping that building up.
Whereas another company is like, well, we’ll pick it up for a buck. Got a buck? You’re in luck. This is the ultimate Big Mac deal, right? McDonald’s deal. And what’s happening is they’re failing. We have a Los Angeles skyscraper, a large office building. Not a skyscraper, but a large office building that is going to be slated to be torn down and have a Tesla charging units put in place, because once again, it’s cheaper to demolish the building than to keep the upkeep.
Okay, this is what is causing the banking collapse that’s going on right now. And last year when I was talking about 2023, and I said, don’t worry, it’s going to flow through into 2024, it’s happening right on queue. I believe the spring of 2024 is going to have multiple banks failing. But right now, the target is NYCB. Okay, but let’s get back into the CLos. Overall distress rate for Cre CLos surged in 2023 from 1.
4% to 7. 4% and jumped even further in January to 8. 6%. This metric includes any loans that reported 30 days delinquent or worse, as well as any loan that is with the special servicer outstanding cre CLO loans amount to approximately 80 billion in loans. The vast majority of these cre CLO loans are structured with floating rate debt and three year loan terms equipped with loan extension options if certain financial hurdles are met.
So let’s talk about the three year phase. All right? A lot of commercial loans have to be readjusted around five years. These are three. So we just crossed 2024. So imagine where the mindset of the builders, the developers, the institutional investors, were three years ago. We just crossed into 2021. Okay? There was a lot of time on people’s hands, right? They’re sitting at home, they’re like, hey, let’s blow some money, let’s invest, and let’s dive in, right? And a lot of companies did.
And they started these projects similar to the one that I was down in Reno. That project was conceived three years ago. Right? Now, they’re getting ready to. They’re not fully developed yet. They’re not fully finished. That project will be completed by the end of 2024. And think about it. That project will have to be, if it’s on a three year term, it will have to be renewed. Right.
Or refinanced at much, much higher rates. Those rates in 2021 were so low. Okay, these are failing. Failing. I mean, you could pretty much go anywhere in the country right now. And do me a favor. Are any of you seeing massive, massive development when it comes to multifamily properties? You can look at just about put what town you’re in or city, you can go to anyone in the country and see that those are going to be failing because they were built, designed, and the numbers were calculated based off of much lower debt costs.
And the rents back then, remember, rents were rising back then. They are now falling all around the nation because not only people are tapped out and they don’t have the money, but really, if you think about it’s because the rents are falling, but now you have so many new units hitting online, this is the perfect storm. If you’re not getting ready for this real estate crash, I don’t know what to tell you.
Oh, last but not least 4 hours left on the real estate crash course link down below if you want for the sale. There’ll be other sales, though. So if you can’t make this one, there’ll be other ones. Oh, and just so you know, I’m getting a lot of fieldy questions. Yes, it is more expensive than in December because I said it would never be that price again. So that’s why the sale is higher this time.
All right, so it says here that credit IQ consolidated all loan level performance data for every outstanding cre loan to measure the underlying risks associated with these transitional assets. Many of these loans were originated in 2021, at the time when cap rates were low and valuations were high, along with low interest rates, and are now starting to run into maturity issues given the recent spikes in interest rates.
An example of a cre office loan, 700 Louisiana and 600 Prairie street, is a 1. 2 million square foot high, square foot high rise office property in downtown Houston. It is backed by a $232,000,000 initial loan with a fully funded committed $252,000,000. Sorry, it’s fully committed of 252,000,000. The interest only loan failed to pay off at its September 2023 maturity date and has only paid through September. The 56 story office tower was built in 1983 and renovated in 2011.
The asset was appraised for 403,000,000 at the underwriting in June of 2023. So that sounds great, right? There’s less debt on this property that it was appraised for, based on 66. 7% occupancy rate as of April of 2019. A zero point 77 debt service cover ratio or a DFCR, and 65. 8% occupancy were reported in the September 2023 financials. The largest tenant, TransCanada USA pipeline, represents 23% of the net rentable area, with a lease scheduled to expire in February of 2036.
The remaining tenants represent each 4% or less of the NRA. So here’s the point. When you’re looking at these ratios, sure, the property may appraise for more than the debt amount, but it’s only appraised based off of old metrics. The market’s changing very rapidly. And when you have certain office towers that have a large chunk of the lease, there are a lot of companies in the last two years that have pulled their leases.
They just said, we’re gone. Walk away. As a matter of fact, one of the most famous ones were blackrock that lost their. Was it black rock or Blackstone? I’m blanking out. They lost their jewel of the Nile, their headquarters building in Manhattan. They walked away, handed it back to the bank, and said, see you later. Well, a lot of companies are doing this with their leases. They’re like, well, you can’t squeeze blood out of a turnip.
So see ya. We’re out of here. You can battle this in court. And so when you see these companies that are holding onto these big properties and they have a big tenant walk away, we just saw a large tenant walk away from an office tower in Los Angeles that crippled, it was Pac Bell, and that was a story that came out about three months ago. It’s going to get worse and worse.
Now let’s move on to the next part of the story. Let’s talk about NYCB bank. Now, this is out of CNBC right now. We are seeing gold price going up for a couple different reasons. I believe there’s a lot of tensions because of what’s going on. It says right here, this is the title of the story. Wall street is worried about NYCB’s loan losses and deposit levels as the stock sinks below $4.
It says regional lender New York community Bank finds itself in an apparently worsening predicament just as the anniversary of last year’s banking turmoil nears. Now, you remember a couple of weeks ago, this stock rallied after it dropped a massive percentage rate. It actually rallied. And the reason why is because a bunch of the investors of the company went ahead and decided to buy stock. Well, just so you know, that’s one of those last ditch efforts, right, to try and gain some faith.
But the fact of the matter is their balance sheet is very sick. They’re not doing well. So when they went in and bought, tried to spur some confidence and got some outsiders to buy, too, it wasn’t enough. All right, it says. Shares of the troubled lender plunged 25% today to below $4 apiece after NYCB reinstated recent quarterly earnings lower by 2. 4 billion, formally replaced its CEO and delayed the release of a key annual report.
Delaying a report. No bueno. The most worrying development, though, is directly tied to investors’fears about commercial real estate and shortfalls, the bank reported. In a key aspect of its business, NYCB said that poor oversight led to material weakness in the way it reviewed its portfolio of loans. The disclosure is a significant concern that suggests credit costs could be higher for an extended period. I’ve been warning about this for a long time.
I believe that the only lowering of rates that’s going to happen, if it does, is a pivotal psychological, political move by the Federal Reserve to try and get you to think that the current administration has done a good job of building back better. Just curious, do you think building back better is working out? Type one, if you think it sucks, type two, I’m just curious what you think.
And I love to see everybody’s go crazy. So I think that’s the only way you’re going to see a drop, right in rates. But over the long term, you’re going to see, especially past the election, you’re going to see higher rates. And the reason why is because inflation is not going down and we have some very serious troubles ahead, okay? Especially when it pertains to what’s going on with the BriCS nations.
So it says. In a remarkable reversal of fortunes, a year after deposit runs consumed regional lenders, including Silicon Valley Bank. NYCB, one of the perceived winners from that period after acquiring a chunk of the assets of signature bank following government seizure, is now facing exponential questions of its own. And the reason why is because when NYCB picked up those assets, it made the market cap, or the size of the.
Not the market cap, but the size of the bank larger, which means assets under. Their. Assets under. Man, hold on. This live stuff is just really assets under management. Thank you. It brought it into a whole new realm of regulation. And so there’s more peering eyes on the bank. It’s like Captain Kangaroo just looking into that big old magnifying glass. I see Susie. How many loans you take out, Susie? I see Billy.
You remember that type? Three, if you remember. Point being, is that it’s a big deal. It says there’s a tough quarter happening right now. The bank’s trajectory suddenly shifted a month ago after a disastrous fourth quarter report in which it posted a surprise loss. Weird surprises. There should be no surprises, too. This banking collapse is 100% solely based on the commercial mortgage sector. Pretty soon, I believe, later in 2024, you’re going to see insurance losses piling up, and any companies that were investing in insurance companies are going to start stacking on loan losses as well.
So you’re going from commercial mortgage losses to insurance losses. It’s going to be exciting for interest rates. Days later, rating agency Moody’s cut the bank’s credit rating two notches to junk on concerns of the bank’s risk management capabilities after the departure of NYCB’s chief risk officer and chief audit executive. So when the risk auditor and the audit executive bail, you’re screwed, because they’re just probably trying not to go to jail, which probably won’t happen.
Federal Reserve will make sure. At the same time, some analysts were confronted. That was a slip of the tongue. No, analysts are confronted for being wrong. They were comforted. Analysts were comforted by the steps NYCB took to shore up its capital and noted that a promotion of former flagstar CEO Alessandro DiMilio to executive chairman boosted confidence in its management. You guys can tell the Ninja can’t read very well, can you? Good news, we don’t have to read well to be wealthy.
We just know how to be able to save, invest and make money. So that takes me to the next story. Gold. Gold’s taking off right now. Gold’s about to hit $2,100. I remember getting mocked a long time ago. I actually sort of used to it. I’m sure all of us get mocked at one time or another when we talk about gold, silver, bitcoin, getting out of debt, because that’s not the mainstream, right? So the mainstream likes to mock us crazy people.
If you’re crazy because you invest in those things and you believe in that kind of style of investing and being out of debt and then using debt for good ways to make money, not get yourself in debt and destroy your credit. Then type four because I’d be typing four like a madman right now. Gold this is out of CNBC advances the four week peak because as the US expects rate cuts now, I do not expect them and I’m going to talk about gold and bonds in a second with a great zero hedge article.
But this is the mainstream that’s talking about this. Gold started March with a positive note, with prices rising to a four week high on Friday after data showing signs of abating inflation hardened expectations of a us rate cut by June. Wasn’t that funny? Because the stories that brought gold to an all time high recently in the recent past was because they were expecting a rate cut in the beginning of 2024 and that didn’t happen.
Good news about all this is even though it didn’t happen and that’s why gold was going up and then dipped down and now it’s going up again, it’s still sitting well above $2,000 and I’m really happy with that. When everything came crashing down in 2008, we had a gold price of like $600 and it went from 600 to what, 19 and change something like that in 2010. That was a multi year great run.
We’re sitting now with, in my opinion, a base price. Not saying that gold can dip below this price, but a general base price of $2,000 before this massive, a much bigger collapse, a much bigger crisis financially and not only nationwide, but worldwide. I’m feeling pretty good about my gold position. It says here gold edged up to 2054 69 morning. It’s already past that spot. Silver rose 0. 3% to 22 73.
Data on Thursday showed an annual increase in us inflation in January was the smallest in nearly three years, keeping a June interest rate cut from the Federal Reserve on the table. Bart Malick, head of commodity strategies at TD securities, said that gold is seeing some upside and the market’s convinced that the Fed will ease monetary policy by mid year. Here’s the good news, even if I disagree with that, they’re going to ease this year.
We’re still going to see strong gold buying not only in America but of the rest of the world because the world’s going to crap in the handbasket right now. We have multiple wars on multiple fronts. We have a economic war, not only shooting wars, economic war between the Brics nations and the western powers, and we see more and more increased tensions and stress and nervousness between consumers and governments alike.
So I think this is a great time for gold. Now that’s not a financial advice. I just own gold. I have a certain percentage of my net worth in it stored. I have mine vaulted because I have a different lifestyle, a lot of people, but I do believe that if you don’t hold it, you don’t own it. But I have to take some calculated risks the way that I do my finances.
Here’s a great quote from Bart. He says in three to four months, prices will hit a record if we see poor economic data and the market is convinced that the Fed is ready to cut, he said, adding that strong central bank buying is also supporting the market currently. Let me explain something. I’ve said this before, I got to tell you again. When stock markets sell off, gold also sells off, okay? The paper price of gold sells off and you’ll see your value in dollar terms drop and you’ll be like, oh my gosh, we’ll try and go down to a coin store and take your gold coin and first off try and buy one.
When the paper price sells off and they’re just going to laugh at you, they’re going to say it’s the same price and then say, well, can I sell mine? And they’ll grab it so faster. Heddlespin so paper silver and paper gold always sell off during a big stock market correction. I also have to emphasize the same thing happens to cryptos people. Forget this. I said there’s this divergence.
There’s not a divergence. The reason why is because so many funds and so much Wall street money is built up in these derivatives in the paper markets, including crypto. And especially now with the ETF, you’re going to have a paper derivative market and those are going to sell off. So you have to be prepared for that. That’s why you always have some dry powder on the side to be able to take advantage of deals.
So this story at a zero hedge that I’m switching to, and I think it’s very important, it’s entitled gold and bondsore as fed wallers hints at a QE reverse twist. Now if you’re not getting ready for the Fed to bail out banks, I don’t know what to tell you. It’s going to happen. Here’s the thing. All throughout history, when the Fed finally moves in and starts to bail out banks, bail out institutions, all that kind of stuff, it’s too late, okay? And the fear is already set in and the numbers start dropping.
Whether it be on the stock market, crypto, any of that stuff. It’s always been like that. They wait until a confirmed crash is happening because they don’t like to move ahead because then they’ll be blamed. They want to be known as the saviors, not the reason for the crisis. Even though all of us know that inflation is directly affected by Fed monetary policy and government borrowing and spending.
Okay, the government has no monetary policy. All they do is borrow and blow money they don’t have. That’s what they’re good at, right? You got to be good at something. So that’s what we want to take advantage of. It says, shortly after disappointing IsM manufacturing report, Fed Governor Christopher Waller dropped quite a bombshell on markets for those who are paying attention. He said this, and this was said at the US Monetary Forum in New York City.
He said, first, I’d like to see the Fed agency MBS holdings go to zero mortgage backed securities. Think about that. What happens if they aren’t holding mortgage backed securities? They’re going to become volatile. So I want you to understand that agency MBS holdings have been slow to run off the portfolio at a recent monthly average of about 15 billion because the underlying mortgages have very low interest rates and the prepayments are quite small, I believe it’s important to see a continued reduction in these holdings.
That’s a really nice way of saying that. He wants all these office books. And the reason why is because they’re going to have to. When this collapses, they’re going to be buying back mortgage backed securities to save the banks, and they don’t want their asset sheet to look too inflated. Okay. Second, he says, I would like to see a shift in treasury holdings towards a larger share of shorter dated treasury securities.
The reason why, just so you know, is because if they buy short dated treasuries, they will bring down the price if they produce the. Because right now rates are going up in the bond market and treasury markets because there’s not enough buyers. If the Fed becomes the buyer of last resort and they produce that much liquidity in the market, then what that does, it drops the rates. Okay? So it’s an artificial way of dropping the rates.
Even at the same time, they’re going to have to raise rates. This is what’s going to get interesting. Says prior to the global financial crisis, we held approximately one third of our portfolio in treasury bills. Today, bills are less than 5% of our treasury holdings and less than 3% of our total securities holdings. Moving forward, more treasury bills would shift the maturity structure more towards our policy rate, the overnight federal funds rate, and allow our income and expenses to rise and fall together as the FOMC increases and cuts the target range.
Do you hear that? Increases and cuts. I did a video about a year and a half ago, two years ago, maybe three years ago, explaining how the Fed tells you what’s going to happen. They project this out in the future. And one way they do is the Fed governors speak on their own, separately, and they tell you their thoughts or their opinions. That’s not just their thought or opinion, it’s the plan.
And what will happen next? After Fed Waller just came out and told everybody this, you’re going to see another Fed governor come out and say something interesting, too, about the same, along the same lines. It’s really interesting. And then what you’ll see is another governor come out with the opposite that’s intended to distract you. Now, nobody’s going to tell you this on YouTube or social media, but I’ve noticed this in the 23 plus years that I’ve been following Federal Reserve notices and interviews and things like that.
And if you start counting up to governors that disagree and agree, it’s pretty balanced. They barely win. It’s very rarely that all governors agree and they do something right. It’s got to be like a three to two kind of thing. And so what will happen is in their interviews, they’ll come out with these little tidbits, well, I believe we should do this. And this other one person goes, yes, I believe we should do this as well.
And then one person goes, no, I don’t think we should do that. And if you count them all up, you know exactly which way they’re rolling. And I believe that this is going to be the plan. They are going to start to unload these mbs right now. They’re not going to be worth a whole lot because mortgage backed securities with interest rates lower than what they are today don’t have as much value for someone to pick up.
But that pales in the comparison of everybody seeing the Fed having to pick up mbs and building that portion of their balance sheet. On the flip side, when you see them start to pick up more treasuries and become a buyer, I want people to never forget this. We’ve seen multiple days now in 2023 where the bond Auctions went no bid like on 30 year bonds. This is not good.
And so it’s continued proof to you that you’re on the right track. If you’re getting out of debt, you’re preparing for this crash. The real estate crash is going to be magnificent and it’s a slow rolling train wreck, I’ll give you that. But for all the people that have been preparing for this now for two years, how stoked are you? Say I am. If you’re one of those people that have been getting ready for a real estate downturn to buy it up in the face of ultra low or historic low inventory, it’s hard to save face around your friends that have no concept.
I mean, I had to do this from mid 2005 to 2008. It took a long time. It was two and a half years of grueling. See, where’s your real estate crash? Like, it is crashing? I don’t know what to tell you. Most people don’t understand how this works. Real estate is crashing right now. Your banks are crashing because the commercial side and what you’re about to see, by the end of 2024, banks are going to severely limit the amount of loans they’re going to give, not only for commercial, but for residential mortgages.
And it ain’t going to matter how good of a deal you can get on a house because somebody wants to drop their price. 2030, 40%. If you can’t go get the loan, there ain’t a whole lot of people out there that have got the cash to buy real estate. And even if I’ve got the cash to buy real estate, I use loans because I want to leverage. If I’m going to let the renters pay for all that for me and I’m going to buy it.
Right. Well, the truth is, if you don’t know the cycles and you don’t know when to buy, right, and you’re never going to hit the very bottom and you’re never going to hit the very top, but you’re going to know the season. It’s almost like the end of the Bible says you’re never going to know the day or the hour, but you’re going to know the season. And I myself know that we are in the season of an economic crash and I’d rather be on the side, the team going for taking advantage of it and having good situational awareness, or SA, as we say in the fire service, than the people that are just going to sit back, lose their jobs, go bankrupt, get divorced.
That’s not the prosperity that I signed up for when I came into this world. And I say I signed up for it because it was a blessing given to me by God. Because of where I live, because of amazing men and women that fought for our country before us, shed their blood for our freedoms. And we’re seeing them taken away. We’ve got to go take them back. How do you take them back? You control the money supply.
How do you control the money supply? You become wealthy. We need millions of Americans and people around the world, normal people that are just good people that never really wanted to be messed with, but are now starting to get pissed off to get ready for this. To become wealthy. Take back the money that the bankers took from us, that stole, they robbed from our nations. Hope you guys have a great day.
There’s probably about 3 hours left on the sale for the real estate crash course. It’s $299 or 75% off. We’re no longer running the 80% off. And just so you guys know, everyone that’s in the course, I’m going to be dropping a video later today, and it’s on the mindset of the first time home buyer and what kind of mindset they have to come into do this market with.
All right, hope you guys have a great day. The economic ninja is out. .
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