Powell Faces the Senate Circus
The big news of the day, as expected, comes straight from Washington, D.C., where poor Jerome Powell is once again being put through the wringer by the brilliant, humane, and conscientious legislators of the U.S. Senate. Powell’s testimony was exactly what we’ve come to expect—half political theater, half economic reiteration.
He stuck to his script, reminding everyone that the Fed is in no rush to cut rates. The economy is doing just fine. Inflation is still a little sticky, but there’s no urgency to lower rates when things aren’t broken. Now, Powell did take a moment to remind Congress that maybe—just maybe—they should consider putting the U.S. budget on something that resembles a sustainable path. Borrowing $2 trillion a year to finance endless political agendas might not be the best long-term strategy. Just a thought.
The Death of the CFPB? No Tears Here
When Elizabeth Warren took her turn grilling Powell, she zeroed in on the potential demise of the Consumer Financial Protection Bureau. Powell, wisely, stayed out of it, noting that it wasn’t his decision. Warren, of course, hammered home that the CFPB is the only watchdog overseeing consumer complaints for banks with over $10 billion in assets. But let’s be real—the CFPB has been a mess from the start. It was handed an enormous amount of power with little direction. The banks hated it. Fintechs hated it. Congress barely understood it. And now, if it disappears, no one on Wall Street is shedding a single tear.
Tariffs, Musk, and Debanking—Powell Stays Unfazed
Powell dodged any firm stance on tariffs, saying it’s too early to tell their economic impact. Smart move. Instead of predicting, he’s reacting, which is exactly what I’ve been saying for years. If he keeps reading my columns, he might finally get this whole central banking thing figured out.
Elon Musk’s criticisms of the Fed? Powell barely batted an eye. When pressed, he shot back that his staff is overworked, not overstaffed, making it clear he’s not going to be pushed around by Musk or anyone else. Same goes for the usual song and dance about “debanking” conservatives. It’s been mostly debunked, but you can bet we’ll hear about it again every time a banking hearing rolls around.
Market Reaction: A Whole Lot of Nothing
The markets barely flinched in response to Powell’s testimony. The NASDAQ gave up its daily gains, bonds stayed choppy, and the jobs report from last week—despite being another “huge nothing burger with bacon”—confirmed what we already knew: The economy is strong. Unemployment remains at 4%, consumer spending is solid, and layoffs aren’t on the horizon. People are still traveling, dining out, and shopping. Sure, consumer confidence is down, but that’s more about inflation perception than actual economic hardship. The reality? Business is still booming.
Mortgage REITs, BDCs, and Credit Markets: The Real Story
Now, onto what really matters—our yield stocks. A few key updates from the past week:
Ladder Capital (LADR), the most conservative of the commercial mortgage REITs, had another solid quarter. Distributable earnings easily covered the dividend, and their credit profile remains ridiculously strong. They’re sticking to middle-market lending—smart move—while many marginal players will struggle as refinancing demand increases. With $2.1 billion in liquidity, Ladder is in prime position to capitalize.
Rithm Capital (RITM) continues to fire on all cylinders. Sixty cents per share in distributable cash—way above the dividend. Their mortgage brokerage business is thriving, and they’ve got cash to deploy. There’s even chatter about spinning off parts of the business to unlock more value. Residential mortgages are a screaming buy right now, and Rithm is in the driver’s seat.
Ares Capital (ARCC), the biggest BDC in the game, posted another strong quarter. Cash flow covers the dividend with room to spare. They have 550 portfolio companies and 69% of loans are floating rate—the lowest in the industry, which is a good thing in a declining rate environment. More importantly, they’re not beholden to just one or two private equity firms. They have 248 separate PE sponsors, and 88% of their loans are senior secured. In short, this is a fortress of a credit business, run by people who understand credit better than just about anyone.
KKR Real Estate Finance Trust (KREF) reported solid earnings as well. Dividend is covered, credit is improving, and they’re seeing “green shoots” in office and life sciences—two areas where they hold large portfolios. Being associated with KKR gives them an edge that few can match. When an office building defaults, they simply shift it over to KKR’s real estate arm, manage it, and sell it for a profit later. That’s a winning formula.
Redwood Trust (RWT): The Sleeper Play
One last note—if you’re looking to put money to work, Redwood Trust (RWT) at $6.60 is an absolute steal. Huge discount to tangible book value, strong business fundamentals, and a 10% dividend. Earnings come out Thursday, so you may want to wait for the report, but at these levels, this stock is practically giving away free money.
Wrapping It Up
So, all in all, it’s been a strong week for our portfolio. Stocks are behaving well, the portfolio yield sits around 9%, and we’re positioned to capitalize on opportunities in a market that remains confusing to most but profitable to those who understand it.
And perhaps most importantly, baseball is back. Pitchers and catchers report this week, and the Orioles will be in Sarasota on Thursday. Everything else—the NBA, hockey, whatever—pales in comparison. We’ve got baseball through October, and I couldn’t be happier. Thanks for tuning in, folks. We’ll talk again next week. Until then, keep collecting those dividends and making smart moves in a tricky market.