00:00Global stock markets have fallen, driven by a sell-off in bank shares amid fears over bad loans by regional U.S. lenders.
00:09Alarm was raised after two American banks, Western Alliance Bank and Zions Bank, revealed they were exposed to alleged fraud by borrowers.
00:18When you see one cockroach, there are probably more, so warns JPMorgan boss Jamie Dimon, as concerns bled into European and Asian markets.
00:27Let's get straight to some analysis now with Matt Maley, Chief Markets Strategist at the Investment Advisors, Miller Tabak & Company.
00:36Thank you, Matt, for joining us. Really good to see you.
00:38So, Western Alliance Bank, Zions Bank Corp., not many of us over this side of the pond will have heard of these banks.
00:45I mean, how are these problems feeding into the wider market, and why is this impacting stock markets over here and in Asia,
00:51hitting the shares of big banks like Barclays and Deutsche Bank?
00:54Well, I mean, there's a couple of different reasons.
00:58First of all, you know, it wasn't that long ago, just, you know, not even two and a half years ago,
01:02that we had, you know, a regional banking crisis with, you know, a mini run on the banks here in the U.S.
01:09And so that's, you know, kind of clear in people's minds.
01:13And then, of course, it also wasn't all that long ago, 15 years ago, when we had the great financial crisis.
01:17So this is something that people do remember.
01:21You know, I guess the one thing is that the issue of, especially in the private credit market,
01:27people have been talking about this, that it could be a concern at some point.
01:31They've been talking about it for months, but it's kind of been behind the scenes.
01:34This, plus Jamie Diamond's comments about cockroaches and such, has brought it more to the forefront and got people concerned about it.
01:44So, and I guess the other thing I would say is that people are asking a lot of questions,
01:49and it won't be fixed by a tweet from President Trump,
01:52like some of the other issues surrounding the U.S.-China tariff issue has in the last couple of weeks.
01:58So there's definitely a little bit more fear in the marketplace right now.
02:02Okay, well, we'll get to some of those points you just raised.
02:04But other regional lenders, though, are they in trouble?
02:07And are there wider concerns about the broad economy, perhaps linked to the tariff war?
02:14Well, I mean, again, that's the bigger concern, especially when you have a stock market that's as expensive as it is today
02:20and a lot of people talking about bubbles.
02:22I mean, I guess my point is that a lot of people are thinking that these are just one-off issues.
02:28But, you know, first it was a one-off issue with tricolor, and then a one-off issue with first brands.
02:34And now this and a couple of others, people are starting to question, is this really something bigger?
02:41And if it is, that's something that could really have a negative impact on the economy,
02:48especially with the employment picture starting to show weakness in recent months.
02:54So, again, one of the biggest things is that the market is so, the stock market is so stretched,
03:02and, you know, a lot of people are talking about bubbles, that things like this make people a lot more nervous.
03:08Well, yes, and just to pick up on one of your points, there are worries about this car loan company,
03:13tricolor, and the car parts maker first brands both failing.
03:17You talked about the private credit market.
03:19What is that?
03:20And is there concern about the quality of deals?
03:23And just to pick up on what you said about Jamie Dimon, is he right about a bubble?
03:28Well, I mean, well, he is not the only one, of course, who's been talking about bubbles.
03:32And he's worried about things getting, you know, worse than most people are looking for.
03:37Now, he has been cautious for a couple of years now, and things have gone on just fine.
03:42But at the same time, you know, private credit, the problem with private credit is you just,
03:48you don't have a good idea.
03:50They talk to him about, you know, they say mark to market, but, you know,
03:54and those regular corporate bonds are marked every single day.
03:59You know, and it's like what they're using now is the term mark to myth,
04:04because nobody knows for sure what these things are really worth,
04:06and that makes people much more nervous.
04:09You know, and especially, I mean, one of the things that I follow is the CDS market,
04:14the credit default swaps.
04:15And what that does is that measures, you know, how much people are willing to pay insurance,
04:20in other words, what they'll pay for insurance against default, against corporate bonds.
04:24And for some of these banks, they're starting to rise.
04:27So, you know, that's the only thing we can look at, because, again,
04:31we don't have a good idea of where these things are really trading.
04:34So, again, that uncertainty raises fear in the marketplace.
04:40And you look at the way these regional banks are bouncing back today.
04:44Yes, they're bouncing back, but not in a major way.
04:47So, again, people are, the uncertainty or the unknown,
04:51the fear of the unknown is what people are, you know, creating this problem with the markets.
04:57Well, indeed, Matt, really grateful for your insights today.
05:00Matt Maley, Chief Market Strategist at Miller Tabac & Company.
05:03Thanks so much.
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