Episode summary
Chris Whalen: The GOP’s Extinction Event, Rate Hikes Ahead & Why He’s Buying More Gold
The Julia La Roche Show
· · Hosts: Julia La Roche · Guests: Chris Whalen
Summary
Chris Whalen argues the midterm results were an “extinction event” for the GOP’s Trump wing, but also a chance for mainstream Republicans and moderate Democrats to regain control of their parties. He says Democrats now own the affordability issue, while Republicans need to return to pro-business, fiscally responsible basics and stop alienating Latino voters and other blocs that had started moving their way.
On markets, Whalen says the economy is still running hot after the October jobs report showed 165,000 jobs added and unemployment at 4.1%. He expects Kevin Warsh to hike rates in December, and possibly sooner, because inflation and affordability problems are not going away. He thinks mortgage rates around 7.4% are the new normal, does not see the 10-year Treasury falling to 4%, and warns that diesel shortages and higher food prices could hit next year.
Whalen sees the recent sell-off as a possible entry point but says investors should not rush. He favors energy, is cautious on consumer stocks, and expects more stress in mortgage companies and mortgage REITs, with consolidation and exits likely. He says manufactured housing is a bright spot because it can reduce costs, and he is still adding to gold, which he believes has found a floor.
Key takeaways
- Whalen says the GOP’s losses may help mainstream Republicans reset around fiscal responsibility and pro-business politics.
- He expects Kevin Warsh to hike rates in December because the economy is still running hot and affordability has not improved.
- Whalen thinks mortgage rates near 7.4% and a 10-year Treasury below 4% are unlikely in the current deficit-driven environment.
- He expects diesel shortages and a meaningful jump in food prices next year, with Democrats now owning the affordability problem.
- Whalen sees consolidation ahead in mortgage finance, while manufactured housing looks like one of the sector’s few bright spots.
- He is still adding to gold and thinks it has likely found a floor, but he is cautious about rushing into post-sell-off stocks.
Notable quotes
“I think it's positive for mainstream Republicans just as this election was positive for mainstream Democrats”
“Economy is still running hot”
“I wouldn't hurry. I think some of these stocks could go lower, the microns and the AMDs and the rest because they were really really overvalued”
“I think first and foremost it is a short-term reaction”
How the episode opens
So if you're Kevin Walsh, the question is how much do you have to raise interest rates if you want to slow this economy down? The answer is a lot. The thing though is Julia again, nothing has changed in the sense of affordability. And the Democrats now own that issue. They're in charge. They're the ones who are going to have to address it.
Hey everyone, welcome to a special instudio episode of the rap with Chris Whan where we are joined by Chris in person to break down what's happening on Wall Street, Washington DC, and everywhere in between. Chris, — Nice to see you, Julia.
It's always so fun. — Oh, it's great being in New York, but so much more fun doing this in person. — Hey, hanging in Matt's studio. — Exactly. Oh, we love Matt's studio. And what a week it's been. Um because we had the midterms, we saw stocks rally initially and then we had that huge selloff. I feel like everyone's going to remember remember the 5th of November, right?
Yeah. I I was in a meeting yesterday and everybody was staring at their phone all afternoon. — Yeah. — What are you doing?
So let's kind of start with the big picture. Your read post midterms. What's been top of mind for you?
I at first was shocked like everyone else, but um I think net net is a good thing for the Republican party to kind of bring the era of Trump to an end early. Um clearly he's a lame duck. He's not going to be happy.
But many of the policies that he pursued that got him in trouble and caused the Republicans to lose this election so badly are pretty much at an end.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- fed rate hikes
- mortgage rates
- gold outlook
- diesel and food inflation
- mortgage industry consolidation
Companies and tickers mentioned
- Flagstar Financial Services
Watch the episode
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
More from The Julia La Roche Show
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Larry McDonald: A Lehman-Style Warning, a Fed That Can’t Hike & Gold and Silver Set to Run -
Jim Bianco: I Was Bearish on Bonds for 6 Years — Here’s Why I Changed My Mind -
Chris Whalen: Warsh’s Credibility Is Eroding, Private Credit Beats Regulators, Mortgage Pain Ahead -
Danielle DiMartino Booth: Warsh Could Slam the Economy Into Recession -
Axel Merk: I Sat Down With Kevin Warsh — What the Fed Is Really Up To and Where Gold Goes Next -
Chris Whalen: Fannie & Freddie Stuck, Foreclosures Rising, Credit Problems Coming
The Julia La Roche Show, this episode and its artwork belong to Julia La Roche. Octagon is not affiliated with the show; this page is an independent summary.
