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So, the Fed raised rates again. It's hard to make money as a small bank when you supplied long-dated loans (i.e. 10 and 30 yr mortgages) at < 3% when your depositors are also asking for > 4% on their deposits. It's further harder to make new loans at 7% on fresh mortgages when that becomes too expensive for people on home prices that are already out of reach. Something has to give. There will be a housing crash (in some markets more than others) and, as commercial real estate investors can get 5% by just sitting in T-Bills, they will require higher cap rates which means Sellers are going to need to reduce their asking prices, further compressing profitability.

And this doesn't even take into account that many office landlords took out 5 yr loans prior to the pandemic and, now that workers are not returning to the office, tenants are breaking leases as those loans are about to reset at much higher rates.

_Sentinel 2y ago

They say....history may not repeat but it surely does rhyme.

This same thing happened in 2006 - 2007 time frame.

light blue - Inflation Rate

dark blue - Interest Rate

orange - Dow Jones

Here are the time line of events:

JUN 2006 - Fed Paused rate hikes at approx 5.25

AUG/SEP 2007 - Fed starts Pivoting

PIVOT @ SEP 2007 - 4.75

PIVOT @ OCT 2007 - 4.5

PIVOT @ DEC 2007 - 4.25

PIVOT @ JAN 22 2008 - 3.5

PIVOT @ JAN 30 2008 - 3.00

PIVOT @ MAR 2008 - 2.25

MARCH 2008 - BEAR STEARNS FAILED (Rescued by JP Morgan)

PIVOT @ APR 2008 - 2.00

SEP 2008 - LEHMAN BROTHERS FAILED (Barclays Acquistion)

PIVOT @ OCT 08 2008 - 1.5

OCT2008 - Bitcoin paper released

PIVOT @ OCT 29 2008 - 1.00

PIVOT @ DEC - 0 to 0.25%

DEC 2008 - Bernie Madoff confession

INFLATOIN Collapses to negative zone briefly

JAN 2009 - Bitcoin Software released

Crazy thing is Inflation peaked in the 4% range unlike this time around and banks failed late in the cycle.

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