U.S. banks are a top holding in the fund.
She also is covering banks as analysts back in 2008.
That's the question. How systemic is it?
This in my mind, this is a completely different situation than what we dealt
with in 0 8 0 9 with regards to it being systemic.
So, you know, we Credit Suisse already had a competence problem from Q3 to Q4.
They lost 40 percent of their assets and you know, they had that material
weakness. And it's just not a good time because
the Silicon Valley Bank and the bank rent to be in the headlines as a bank
having trouble. And then today with our number one
shareholder saying that they're not going to give them any more capital.
They said absolutely not. You know, that is just not a vote of
confidence at a time where confidence is everything for the banks.
So while in my mind, these are two completely different situations, and the
big difference from 0 8 0 9 is just that these are not underwater assets.
The capital liquidity ratios are just fine at Credit Suisse.
You know, competence really matters. Larry Fink was talking earlier.
He says cracks, though, are starting to appear, Lauren, in the financial system
and we're gonna see a sort of slow rolling crisis.
Is that possible here? Is that what was in the thought of the
early innings of here? Yes.
With as quickly as the Fed has raised rates over the last year, it makes our
system more vulnerable to something breaking.
And so that is exactly what we're seeing.
So we're seeing now more in the regional banks that
weren't given as many provisions during Dodd-Frank and Volcker and all of that,
they're probably going to need a lot more regulation.
So I would expect that in the coming years.
But, you know, I think that,
you know, Credit Suisse is a completely different situation than what we have
going on here in the US. And if the regulators can step in, in
the EU and provide some confidence, then I think things can simmer down.
What would that you think look like? As an investor, like what would be the
signal for you? Because you're saying that capital
liquidity ratios are OK, but then it's a bit like there.
OK. So they're not right.
That's true. I would expect them to continue losing
deposits. And
for that to be a difficult situation for the European regulars to have to come in
and provide some sort of support.
But I think separately, things here in the US, it's different from 0 8 0 9.
Things aren't tied together in quite the same way.
And so I think that we can get to a place of stability much more simply than
we could 15 years ago. Lauren, if that's the case.
And we are seeing some big dips in financial assets right now in in banks.
Do I buy that dip if I see these banks going down?
Is that a buying opportunity? Or should I step away?
Yes. So and all the financials have traded
off and we've been finding some wonderful opportunities in the nonbank
financials this week. You know, it's just that confidence.
But there's still some really amazing, very strong financials just looking out.
And Westwood tends to take a three year view on on businesses.
And the banks, especially the regionals, are going to have a lot of new
regulation that's going to lower our ease.
It's going to be quite a bit of headline risk is the there's an ongoing
conversation about what needs to be done.
And so, you know, I would remain light on the banking sector, specifically the
money center banks are going to benefit every time there's new regulation, the
strong get stronger. So I would think that, you know, Bank of
America, Citigroup, Wells Fargo, JP Morgan remain very, very strong and pick
up deposits and gain share. But I would still be hesitant, hesitant
to have a large position in banks. It wasn't only Larry thing.
Ray Dalio was also talking about the things that are breaking that we're
approaching the turning point on, that the bank failures will be followed by
many more problems before this cycle and the contraction this cycle runs its
course. What do you hide out in?
I mean, it's hard to in some ways make the case for bonds because the
tremendous volatility that we've seen. But clearly, there's a rush, safe haven
into that. Where do you hide?
Yes. Well, within the equity market, you know
that there's also a second dynamic taking place where the consumers are
shifting their mix from discretionary back to more essential spending.
And so areas like health care and utilities and staples are going to be
relatively stronger. I think during this time period, you
know, energy could get a little bit of a lift.
As you know, the China reopening continues to take place and people
travel to catch up with loved ones they haven't seen in three years.
So there are similarly places within financials.
You know, insurance has definitely caught my eye.
You know, looking for great opportunities there selectively.
The alternative investment managers are going to pick up assets and people
probably have some very opportunistic deals ahead of them.
So capital markets is another good spot to look.
What about cash? I did just hide out of this.
What do you need to be invested, Lauren, in the market at the moment?
Depends on who the client is and they're very specific needs, you know, cash may
be appropriate for some. You know,
it depends. Every situation is very specific, but in
some cases. Equity markets exposure is not
appropriate. So it just is client by client.
But many clients need some equity exposure and that is
where I would invest if that's the case.