Real Estate Pain Is Now Beginning For US Banks | The Economic Ninja

Hey, everybody, economic ninja here. I hope you’re doing great. We’re going to talk about regional banks. U. S. Regional banks. Massive pain coming this spring. By the end of March, early mid April, you are going to see fireworks fly because real estate is crushing the banking sector. Now, I know we’re going to talk about commercial real estate, but you have to realize everybody’s in the hurt locker, whether it be commercial mortgage backed securities or mortgage backed securities.

Why? Because loans are stopping. Even if the Fed lowers rates a little bit, let’s say they drop 325 basis point drops, you’re still going to see mortgages in the fives. That’s too expensive. When you add the cost of food, gasoline, insurance on your home, car insurance, taxes, all that crap, it spells doom for the real estate sector. All right, so get ready for what is coming now. This story is out of Reuters.

We’re going to talk about New York community Bank. But remember, where there’s smoke, there’s fire. New York community bank is only in the spotlight because it moved past $100 billion in assets, which means there’s now stricter controls. But I want you to understand, the FDIC and the treasury has already stated that the small banks, the regional banks, under 100 billion, are in serious distress to the point where they can’t even afford the FDIC insurance.

So the Fed, the Treasury, the FDIC is going well, big banks, you’ve got to do it. And the big banks are freaking out. Okay? So as this story evolves, and it’s going to be all over YouTube in a couple of months, you have to realize these are baby steps to this big crisis. All right? And I want you to be prepared and not scared. All right? Check this out.

Focus real estate pain for us. Regional banks is piling up, says investors. It says New York community Bancorp’s exposure to commercial real estate has intensified investor scrutiny around regional banks, with some expecting more pain for those with office and multifamily property loans. Let me stop real quick, because the story is probably going to talk about this. But I never read a story before. I read it with you just recently.

This stock has plummeted like 60 something percent, and just recently it rallied a little bit. And the reason why is because a bunch of the investors bought stock. That’s actually not a reason to rally, because they’re trying to save their own butts, because they know what just happened to Silicon Valley bank and all these other banks. After the FDIC walked in and forced them into receivership, the stockholders had nothing.

So they’re trying to save face. It’d be really interesting to find out who is selling this stock while all this was happening. It says the fears about the health of the smaller banks have escalated again a year after the collapse of Silicon Valley bank in spring of 2023, which triggered a regional banking crisis. That’s what this bank is about to do. It is going to trigger another banking crisis, it says.

NYCB’s recent earnings release, which sparked a dive of about 60% of its shares, has particularly focused investors on combing through the portfolios of regional banks, as small banks account for nearly 70% of all the commercial real estate loans outstanding. According to the research from Apollo, as long as interest rates stay high, it’s hard for the banks to avoid problems with. You know, it’s funny, I have a subscriber.

I have very successful, successful, successful. I’m not very successful at speaking. I have very successful subscribers, and one of them is on a banking board, a bank that’s down in Oklahoma. Awesome guy. And he says, what do I do to help the bank? And we ended up talking, giving him some ideas. And his bank went out and actually invested in gold and actually pulled some of their money out and put it into gold because they cared so much.

Now, this is a small bank, small bank, but they care about their depositors and they understand that they are under sort of scrutiny, not only their shareholders, their depositors, but also the big banks want to swallow up these small banks, so they go out and invest in gold. I think that was amazing. An amazing move. I can’t wait for more small banks that are watching this channel to start shoring up their funds and not going out and making these crazy investments.

Right now, commercial real estate is destroying bank balance sheets a couple of different ways. If you’re holding the maturity like your bonds, you’re in trouble with those, right? Until you sell. The problem is your value, your balance sheet is worth less on top of that. If you have commercial real estate and it’s non performing, even if it’s multifamily properties, this is bad. It does not bode well for the banks for the balance sheet, for them to borrow more money to stay competitive.

Okay. That’s why this is really exciting for me, and hopefully it’s exciting for you, because as you see all these dominoes drop and you’re just getting ready, you’re getting ready to pounce. Now, they say here, as long as interest rates say high, it’s hard for the banks to avoid problems with commercial real estate loans, said short seller William Martin of Raging Capital Ventures, who decided to place a bet against NYCB after the bank’s disastrous January 30 earnings release.

Just so you guys know, I’m not shorting that stock personally. It’s one thing to go and make money, it’s another thing to go make videos about this stuff and then go profit off it. So I’m not involved in any short selling or anything like that. Martin, who shorted Silicon Valley bank last year before its collapse, said he shorted NYCB because he thought its earnings power would be diminished and that it might have to raise capital.

NYCB said on Wednesday that a capital increase is an option. I completely agree with that. I believe they are going to have to do this, but that it has no plan to do this right at the moment because they don’t want you to panic. The bank declined to comment on the short seller’s view. The regional bank of course they did. The regional banks are more doubtedly, more exposed to rates, said Dan Zerwind, co founder and CEO of distress debt investment firm Arena Investors, who is avoiding real estate for the next year or two.

Just like me. It’s what I teach my students on the real estate crash course. The KBW regional banking index is down around 11% just since this January 30 earnings call. Okay, that’s a lot for that index. The bank index, the cre market, has been hit by the repercussions of the Covid-19 panic. It’s actually not true. It’s because of the raising of rates, okay? And the reason why they brought rates up is because the velocity of money was moving, because they printed a bunch of money.

And so they’re like, oh, let’s quell this. Well, they do that every seven to ten years. This is cycles. They did it in 2014, 2015, all the way up till 2018 when they stopped. They did it in 2004 to 2005. This is nothing new. However, this time is different. It’s worse because of the velocity at which they brought rates up. Now, this is the thing that you all have to understand.

It’s a big deal. They’re probably going to drop rates just a little bit. I warned about this in the beginning of November. Then 30 days later the Fed actually announced it. But they didn’t announce it. They did the first phase. I’ve done tons of videos on this, how they bait you. They bluff you. They say we’re going to pencil in rates. What that did is that brought bonds down.

And I believe based off of evidence data coming out of inflation, they’re going to go, you know what we don’t need to lower rates because the bond market just did it. See, the bond market went ahead of the Fed and front run their plans and went high even after the Fed stopped raising rates. Now we’re seeing that action. To the downside, here’s the problem. Inflation is not over.

Inflation keeps going. And since there are fewer and fewer countries, the BrICs mainly dealing with the dollar, we have a problem. And so we have to be able to give these countries a rate of return. So the Fed knows that if they drop rates, there’s going to be a dumping of dollars and they don’t want that. Okay, so it’s a big deal. So even if you see a little dip, whether it be the bond market bringing down rates or the Fed does 325 basis points to 75 basis points, it isn’t enough to take down the real estate.

It may do a short little pump, and that’s only on a few homes being sold. That’s nothing. That’s not the market you want to be investing in. That’s not what I did when I sold my house in five. I waited for that big tanking at even five, six and seven. You saw small markets popping little bits. I’m not phased by that. Absolutely not phased. It’s like the grouper that’s just sitting there waiting, and there’s a little fish just waiting.

He doesn’t just get all excited, go freaking out trying to catch that fish. He waits for that fish to come to him, and what happens is, as he opens his mouth, he’s inhaling and he sucks that fish in. That’s what you need to be. You need to be the grouper of real estate. Honestly, where do I come of this crap? I hope you guys got something out of this.

The economic ninja is I can’t say what I’m about to do next. I got to go. Bye. .

See more of The Economic Ninja on their Public Channel and the MPN The Economic Ninja channel.