Ed

That is good.

Now for the tricky part where listeners should either pay attention or just tune me out altogether.

One or the other.

Take your pick.

So back when interest rates were really low, before 2022 and there was inflation and rates got higher,

Any asset a bank bought then has a really low yield on it.

If you bought a mortgage or even a business loan or 20-year treasury, you bought it at a yield of just a couple of percent.

When interest rates go up, the price of all those assets has to reprice to the new interest rate, which means the value of those assets goes down.

So if you buy a mortgage bond with a yield of 2%,

And rates go to 4%.

The market value of that asset has to go down to make its yield 4% too.

Okay.

The sound of your listeners going to sleep, I can hear it now.

So this was a very bad occasion for certain banks.

It hurt a lot of banks.

This was at the root of what happened to Silicon Valley Bank last year, et cetera.

But what's happening now is that assets that were purchased

back when rates were really low, are rolling off of banks' balance sheets.

So you lose a loan you made in 2020, you replace it with a loan you're making in 2025, you're getting rid of something that yields 3% and replacing it with something that yields 7%.

And that was going on last year, and it's going to go on even more this year.