Aaron Back

speaker

279 appearances 6 recordings 1 series first heard Jul 2018 last heard Jul 2019

Aaron Back’s voice in public audio — every appearance, attributed to the second.

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WSJ Your Money Briefing · Bank Stocks Might Not Be as Cheap as They Appear · 9 Jul 2019 podcast

We're charging it off.

So net charge-offs have been at historic lows for the last couple of years.

I mean, really quite low, around 0.5% of total loans.

Very low.

Well, consider that unemployment is at the lowest level since the 1960s.

Businesses just got a big tax cut.

The economy is booming.

So you would expect it to be low.

Question is, what happens when the economy turns around?

Net charge-offs are going to go up.

How much?

So analysts have only penciled in a very slight increase in net charge-offs to 0.7% of loans.

My argument is it could easily be worse.

Yes.

So the banks look cheap, but the question is, what are you comparing them to?

You're comparing them to analyst estimates of what's going to happen in a couple of years.

If the economy is worse than these analysts think in a couple of years, suddenly the bank stocks don't look so cheap.

Correct.

So the bond markets are basically saying we think a recession is coming soon.

The stock market is not saying that.

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