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Tag: Mortgage Banks/Real Estate Credit

  • Mortgage rates' dip to 7% could be brief if jobs market stays strong, Fannie Mae economist says

    Mortgage rates' dip to 7% could be brief if jobs market stays strong, Fannie Mae economist says

    November’s sharp pullback in 30-year fixed mortgage rates may not last if the labor market remains strong, said Mark Palim, deputy chief economist at Fannie Mae.

    Palim was speaking to the robust jobs report released on Friday, showing the U.S. added 199,000 jobs in November and that wages rose, albeit with the figures somewhat inflated by the return of striking workers from the auto industry and from Hollywood.

    Homebuyers can benefit from a robust labor market and the near 80 basis point decline in mortgage rates since the end of October, Palim said. But if the “labor markets remain this strong, we believe the pace of mortgage rate declines will likely not continue in the near term or may partially reverse,” he said in a statement.

    The benchmark 30-year fixed mortgage rate was edging down to 7.05% on Friday, after surging to nearly 8% in October, according to Mortgage Daily News.

    Optimism around the potential for falling mortgage costs to thaw home sales helped lift shares of Toll Brothers Inc.,
    TOL,
    +1.86%
    and a slew of other homebuilders tracked by the SPDR S&P Homebuilders ETF, 
    XH,
    to record highs earlier this week, even while investors in some homebuilder bonds have been sellers in recent weeks.

    Yields on 10-year
    BX:TMUBMUSD10Y
    and 30-year Treasury notes
    BX:TMUBMUSD30Y
    were up sharply Friday, to about 4.23% and 4.32%, respectively, but still below the highs of about 5% in October. The surge in long-term borrowing costs was stoked by tough talk by Federal Reserve officials about the need to keep rates higher for longer to bring inflation down to a 2% annual target.

    Read: Solid job growth, sharp wage gains sends Treasury yields up by the most in months

    U.S. stocks were up Friday afternoon, shaking off earlier weakness following the jobs report. The Dow Jones Industrial Average
    DJIA
    was 0.2% higher, further narrowing the gap between its last record close set two years ago, the S&P 500 index
    SPX
    and the Nasdaq Composite Index
    COMP
    also were up 0.2%, according to FactSet data.

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  • Here’s how much money you need to buy a $400,000 home with 8% mortgage rates

    Here’s how much money you need to buy a $400,000 home with 8% mortgage rates

    U.S. home buyers face a tough real-estate market, with the 30-year mortgage near 8%. 

    Exactly how tough is it to buy a house these days? MarketWatch worked with Redfin to find out how much a home buyer needs to earn to buy a median-priced house in September 2023 with the 30-year fixed-rate mortgage at 8%.

    It’s not a pretty picture. Mortgage rates have more than doubled since the pandemic, when the U.S. Federal Reserve kept interest rates low to promote economic activity amid mass closures to prevent the spread of the coronavirus. 

    The Fed’s aggressive and quick hiking of rates since then has made it much more expensive to buy a house, particularly with a mortgage. Higher rates have also spooked homeowners who might have been considering a move, which in turn has resulted in very low inventory and pushed up home prices. Even all-cash buyers cannot catch a break in this environment, because there are few listings.

    A median-priced home, meaning a house right in the middle of the price ladder, was roughly $412,000 in September 2023, according to real-estate brokerage Redfin
    RDFN,
    -2.33%    .
    The 30-year rate varied between 7.63% according to Freddie Mac and 8.03% according to Mortgage News Daily.

    “It’s important to note that reported rate numbers are averages at best and don’t apply across the board,” Andy Walden, vice president of enterprise research at Intercontinental Exchange, said.

    “Actual offerings will vary by lender and are dependent on the loan type and creditworthiness of the individual borrower,” he added.

    With that in mind, here’s a look at exactly how various mortgage rates affect your monthly housing payment.

    Buying a median-priced home at 8% rates

    Mortgage News Daily on October 19 noted that some lenders were quoting a rate of 8.03%.

    That means that if a home buyer is paying for a median-priced $412,000 home with a 30-year mortgage at 8% after putting 20% down, they would have to pay roughly $3,019 per month, which includes not just their principal and interest, but taxes and insurance as well, according to Redfin.

    To afford that on a monthly basis, a prospective buyer would need to make $120,773. Redfin considers a monthly payment as “affordable” if the buyer is spending no more than 30% of their income on housing.

    Buying a median-priced home at 7% rates

    In October, Fannie Mae said that it expected the 30-year mortgage to fall to 7.1% in the first quarter of 2024, and go lower after that, ending the year at 6.7%.

    If a home buyer is paying for the $412,000 home with a 30-year mortgage at 7% after putting 20% down, they would have to pay roughly $2,794 per month, which includes not just their principal and interest, but taxes and insurance as well, Redfin said.

    To afford that on a monthly basis, a prospective buyer would need to make at least $111,747 a year. 

    Buying a median-priced home at 6% rates

    The Mortgage Bankers Association, an industry group, expects the 30-year to fall to 6.1% by the end of 2024.

    If a home buyer is paying for the $412,000 home with a 30-year mortgage at 6% after putting 20% down, they would have to pay roughly $2,577 per month, which includes not just their principal, interest, taxes, and insurance, Redfin said.

    To afford that on a monthly basis, a prospective buyer would need to make at least $103,078 a year. 

    Real-estate is much more expensive today than before the pandemic

    Rising rates have made buying a home a much more expensive process than before the coronavirus pandemic.

    A home buyer buying a median-priced home today has to earn 50% more than they would have if they wanted to buy a median-priced home at the start of the pandemic, Redfin said in a blog post.

    “Buyers — particularly first-timers — who are committed to getting into a home now should think outside the box,” Chen Zhao, economics research lead at Redfin, said in the post. 

    “Consider a condo or townhouse, which are less expensive than a single-family home, and/or consider moving to a more affordable part of the country, or a more affordable suburb,” she added.

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  • Homes are expensive right now, but these mortgage bonds look cheap

    Homes are expensive right now, but these mortgage bonds look cheap

    U.S. homes may be wildly unaffordable for first-time buyers, but mortgage bonds backed by those same properties could be dirt cheap.

    Shocks from the Federal Reserve’s dramatic rate increases have walloped the $8.9 trillion agency mortgage-bond market, the main artery of U.S. housing finance for almost the past two decades.

    Spreads, or compensation for investors, have hit historically wide levels, even through the sector is underpinned by home loans that adhere to the stricter government standards set in the wake of the subprime-mortgage crisis.

    Bond prices also have tumbled, sinking from a peak above 106 cents on the dollar to below 98, despite guarantees that mean investors will be fully repaid at 100 cents on the dollar.

    From $106 to $98 cents, agency mortgage-bond prices are falling.


    Bloomberg, Goldman Sachs Global Investment Research

    “It’s really, really struggled,” Nick Childs, portfolio manager at Janus Henderson Investors, said of the agency mortgage-bond market during a Thursday talk on the firm’s fixed-income outlook.

    Yet Childs and other investors also see big opportunities brewing. While mortgage bonds have gotten cheaper with the sector’s two anchor investors on the sidelines, the stalled housing market should breed scarcity in the bonds, which could help lift the sector out of a roughly two-year slump.

    Prices have tumbled since rate shocks hit, but also since the Fed continued winding down its large footprint in the sector by letting bonds it accumulated to help shore up the economy roll off its balance sheet.

    Banks awash in underwater securities have pulled back too. The repricing of similar bonds helped hasten the collapse of Silicon Valley Bank in March.

    “Banks have been not only absent, but selling,” said Childs, who helps oversee the Janus Henderson Mortgage-Backed Securities exchange-traded fund
    JMBS,
    an actively managed $2 billion fund focused on highly rated securities with minimal credit risk.

    “But we’re moving into an environment where supply continues to dwindle,” he said, given anemic refinancing activity and the dearth of new home loans being originated since 30-year fixed mortgage rates topped 7%.

    The bulk of all U.S. mortgage bonds created in the past two decades have come from housing giants Freddie Mac
    FMCC,
    +0.66%    ,
    Fannie Mae
    FNMA,
    +1.09%
    and Ginnie Mae, with government guarantees, making the sector akin to the $25 trillion Treasury market. But unlike investors in Treasurys, investors in mortgage bonds also earn a spread, or extra compensation above the risk-free rate, to help offset its biggest risk: early repayments.

    While homeowners typically take out 30-year loans, most also refinanced during the pandemic rush to lock in ultralow rates, instead of continuing to make three decades of payments on more expensive mortgages. If someone refinances, sells or defaults on a home, it leads to repayment uncertainty for bond investors.

    “To put this another way, the biggest risk to mortgages is now off the table, yet spreads are at or near historic wides,” said Sam Dunlap, chief investment officer, Angel Oak Capital Advisors, in a new client note.

    That spread is now far above the long-term average, topping levels offered by relatively low-risk investment-grade corporate bonds.

    Agency mortgage bonds are offering far more spread that investment-grade corporate bonds. But these mortgage bonds will fully repay if borrowers default.


    Janus Henderson Investors

    Agency mortgage bonds typically are included in low-risk bond funds and can be found in exchange-traded funds. While they have been hard hit by the sharp selloff in long-dated Treasury bonds
    BX:TMUBMUSD10Y

    BX:TMUBMUSD30Y,
    there has also been hope that the worst of the storm could be nearly over.

    Goldman Sachs credit analysts recently said they favored the sector but warned in a weekly client note that it still faces “high rate volatility and a dearth of institutional demand.”

    As evidence of the U.S. bond selloff, the popular iShares 20+ Year Treasury Bond ETF
    TLT
    recently sank to its lowest level in more than a decade. It also was on pace for a negative 10% total return on the year so far, according to FactSet. Janus Henderson’s JMBS ETF was on pace for a negative 2.7% total return on the year through Friday.

    “Frankly, why they fit portfolios so well is that because the government backs agency mortgages, there is no credit risk,” Childs said. “So if a borrower defaults, you get par back on that. It just comes through as a typical payment.”

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  • Subprime car-loan rates are hitting 17%-22%. Should investors be worried?

    Subprime car-loan rates are hitting 17%-22%. Should investors be worried?

    Many borrowers with subprime credit have been paying 17% to 22% rates on new auto loans this year as the Federal Reserve’s inflation fight takes a toll on lower-income households.

    That borrowing range reflects the average cost, or annual percentage rate, for a loan in recent subprime auto bond deals, according to Fitch Ratings, an increase from last year’s average APR of closer to 14%.

    Higher borrowing costs can mean households need to put more of their income into monthly auto payments, ramping up the risks of late payments, defaults and car repossessions. Those risks, however, have yet to make investors flinch.

    The subprime auto sector already has cleared almost $30 billion of new bond deals this year, according to Finsight, a pace that’s slightly below volumes from the past two years, but still above historical levels since 2008.

    The subprime auto bond market is revved up, even as borrowing rate soar


    Finsight

    “I do believe there has to be a reckoning if rates stay higher for longer,” said Tracy Chen, a portfolio manager on Brandywine Global Asset Management’s global fixed income team.

    Figuring out when the tumult might hit has proven difficult. Instead of slowing, the economy has shown resilience despite the Fed lifting its policy rate to a 22-year high of 5.25% to 5.5%. The central bank also indicated it might need to keep rates higher for some time to fight inflation. Longer-duration bond yields, as a result, have pushed higher, but still hover below 5%.

    Subprime standoff

    Inflation eats away at paychecks, especially those of lower-wage workers, a problem the Fed hopes to solve by keeping borrowing rates elevated. A gauge of inflation out Thursday showed consumer prices were steady at a 3.7% yearly rate in September, above the Fed’s 2% target.

    “This recession has been on everyone’s mind for the past three years,” Chen said. While she thinks the economy will likely contract in the middle of 2024, a lot of damage could be done before that. “The longer rates stay here, the harder the landing.”

    For now, the Fed is widely expected to hold rates steady at its next meeting in November. “Fed policy makers are now shifting their focus from ‘how high’ to raise the policy rate to ‘how long’ to maintain it at restrictive levels,” said EY Chief Economist Gregory Daco, in emailed comments.

    Stocks were flat to slightly higher in choppy trade at midday Thursday after the inflation report came in hotter than forecast, with the Dow Jones Industrial Average
    DJIA
    near unchanged and the S&P 500 index
    SPX
    up 0.2%.

    Past recessions and the burden of higher interest costs typically hit lower-wage workers harder, making subprime credit a canary in the coal mine for the rest of financial markets. Even so, investors in subprime auto bonds have yet to demand significantly more spread, or compensation, to offset potentially higher defaults among these borrowers.

    Related: Subprime auto defaults on path toward 2008 crisis levels, say portfolio managers

    Take the AAA rated 2-year slice of a new bond deal issued in mid-October by one of the subprime auto sector’s biggest players. It priced at a spread of 115 basis points above relevant risk-free rate, up from a spread of 90 basis points on a similar bond issued in August, according to Finsight, which tracks bond data.

    When factoring in Treasury rates, the yield on the bonds bumped up to about 6% and 5.7%, respectively. The shot at higher returns and low delinquencies in subprime auto bonds have likely helped with investor confidence. The rate of subprime auto loans at least 60-day past due in bond deals was about 5% in September, according to Intex, up from historic lows around 2.5% two years ago.

    “I think people still feel confident,” Chen said of subprime auto bonds. When putting a recent bond out on a Wall Street list to gauge its market value, she said bids come in right away.

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  • Paid off your mortgage? Be careful — you’re at risk of title theft.

    Paid off your mortgage? Be careful — you’re at risk of title theft.

    Homeowners may be thrilled when they finally pay off their mortgage, but the accomplishment comes with risks. 

    Retirement Tip of the Week: Be vigilant in protecting your identity and assets, and be aware of how you could fall victim to various scams or theft associated with your home.

    With title theft, thieves transfer a house deed from the rightful owner to another person’s name by using the owner’s personal information. Title theft could also take the form of using equity in a home, such as by opening a home equity line of credit, known as a HELOC, according to Quicken Loans. When a house is unoccupied, thieves could go so far as to sell or rent out the property. 

    Title theft isn’t particularly common, but it does happen, and it’s another reason people should protect their identity and other sensitive information. Older Americans could be at higher risk, especially if they have a lot of equity in their home. About 11,500 people reported losing more than $350 million to real-estate scams in 2021, although that figure includes fraud pertaining to real-estate advertisements and rental agreements, according to the FBI. 

    Homeowners should keep on top of their documents and may even want to occasionally confirm their information with their county deeds office, the FBI said. Any mail from a mortgage lender should be checked to make sure it doesn’t pertain to your specific property.

    If you are a victim of title theft, open an identity-theft case with the Federal Trade Commission, alert creditors about the fraud and look over your title insurance, which protects homeowners’ rights and which mortgage companies often require home buyers to have, Quicken Loans said. 

    There are companies that offer title-protection services, although critics say it’s not the same as title insurance and only alerts a homeowner of a problem after it has occurred. 

    “Do you need this service to protect your home from property thieves? The answer is no,” the Maryland Attorney General’s office said in a consumer alert about title-protection services. “Title fraud is very rare, and hardly ever successful. If someone ever tries to transfer your deed without your permission or knowledge, like these title lock companies suggest could happen, the transfer is fraudulent and void from the outset.” 

    Instead, homeowners should monitor their identity and keep an eye on their credit scores, the office said.

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  • How the U.S. housing market got stuck in the ’80s

    How the U.S. housing market got stuck in the ’80s

    The Federal Reserve’s inflation fight has been particularly brutal for anyone not already a U.S. homeowner before interest rates and mortgage rates rose to 15-year highs.

    With mortgage rates around 7.2% to kick off the post–Labor Day period, the difference between the rates on a new 30-year home loan and on all outstanding U.S. mortgage debt (see chart) has not been so wide since the 1980s.

    It’s the 1980s again in the U.S. housing market.


    Glenmede, FactSet

    “Generally, climbing interest rates curb demand and cause housing prices to fall,” Glenmede’s investment strategy team wrote, in a Tuesday client note, but not this time.

    Instead, U.S. homes remain in critically low supply after more than a decade of underbuilding, and with most homeowners who already refinanced at low pre-pandemic rates being “reluctant to leave their homes,” wrote Jason Pride, chief of investment strategy and research, and his Glenmede team.

    Also, while homes prices have come off their prepandemic highs, they still were fetching $416,000 in the second quarter, based on median sales prices, above $358,700 in the fourth quarter of 2020, according to U.S. Census and HUD data.

    “Until the supply gap is filled by new construction, home prices and building activity are unlikely to decline as meaningfully as they normally would given the headwind from rising rates,” the Glenmede team said.

    Read: Housing affordability is now at its worst level since 1984, Black Knight says

    The Glenmede team, however, does expect more pressure on consumers in the coming months, particularly as student-loan payments resume in October and if the Fed keeps interest rates high for a while, as increasingly expected. The benchmark 10-year Treasury yield
    BX:TMUBMUSD10Y,
    which underpins the U.S. economy, was back on the climb at 4.26% Tuesday.

    Meanwhile, shares of home-vacation rental platform Airbnb Inc.
    ABNB,
    +7.23%
    rose 7.2% on Tuesday, after the Labor Day weekend, and 66.4% higher on the year so far, according to FactSet.

    Don’t miss: New York City cracks down on Airbnb and other short-term-rental listings

    Shares of Invitation Homes Inc.
    INVH,
    -0.91%    ,
    which grew out of the last decade’s home-loan foreclosure crisis to become a single-family-rental giant, were up 14.3% on the year, according to FactSet.

    Dallas Tanner, CEO of Invitation Homes, said he expected “the rising costs and the burden of homeownership” to continue to benefit his company, in a July earnings call. The company recently bought a portfolio of about 1,900 homes and has been snapping up newly constructed homes. Companies can borrow on Wall Street at much lower rates than individuals.

    Stocks closed lower Tuesday, with the Dow Jones Industrial Average
    DJIA
    off 0.5%, and the S&P 500 index
    SPX
    0.4% lower and the Nasdaq Composite Index
    COMP
    down 0.1%, according to FactSet.

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  • Chinese property developer stocks jump on easing mortgage policy

    Chinese property developer stocks jump on easing mortgage policy

    Shares of Chinese property developers rose sharply Monday, as more major Chinese cities said over the weekend that they would ease mortgage policies in a bid to shore up the real-estate sector.

    The Hang Seng Mainland Properties Index rose 8.2%. Hong Kong-listed Longfor Group Holdings
    960,
    +8.11%
    climbed 10% and Seazen Group
    1030,
    +18.30%
    jumped 17%. Shanghai-Listed Gemdale
    600383,
    +1.63%
    added 4.1% and China Vanke
    000002,
    -0.07%
    gained 1.4%.

    Major Chinese cities across the country, including Beijing and Shanghai, lowered mortgage requirements for some home buyers late last week, lowering the bar for home purchases.

    “This nationwide policy measure marks a significant step in stimulating the property sector, as top policymakers become increasingly worried about the collapse of the property sector, the downward spiral, and a rising number of credit risk events among major developers and financial institutions since mid-August,” Nomura analysts said in a note.

    Separately, news reports over the weekend saying that property giant Country Garden Holdings
    2007,
    +14.61%
    received creditor approval to extend a bond also lifted the mood and supported the company’s shares. Country Garden shares were last up 9.0% at 0.97 Hong Kong dollars (12 U.S. cents).

    Year to date, Country Garden’s stock has slumped 64% after the company posted its worst loss since going public 16 years ago and missed $22.5 million in interest payments on its dollar bonds in August.

    Despite Chinese authorities’ supportive policies and Country Garden’s bond extension, some analysts warned that the extension could just be a near-term reprieve.

    “With the lack of an eventual resolution [for Country Garden],” headwinds linger for the Chinese property sector, IG Asia analysts said in a note.

    “Persistent earnings weakness will no doubt drive the sector’s leverage higher,” said S&P Global Ratings credit ratings analyst Oscar Chung.

    S&P believes industry leaders and real-estate companies with a diverse business mix such as rental and service incomes can better withstand declining development margins.

    Write to Bingyan Wang at bingyan.wang@wsj.com

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  • China Rolls Out New Mortgage Rules to Boost Home Sales, Xinhua Says

    China Rolls Out New Mortgage Rules to Boost Home Sales, Xinhua Says

    Chinese regulators eased the nation’s mortgage requirements to let more home buyers enjoy favorable mortgage conditions that were previously limited to first-time home purchasers, the state-run Xinhua News Agency said on Friday.

    China’s central bank, the Ministry of Housing and Urban-Rural Development and the National Financial Regulatory Administration jointly eased the requirements for home buyers who have already purchased homes to boost property sales as the real-estate slump continued, according to Xinhua.

    Home buyers who don’t have family members with houses registered under their names can enjoy favorable terms that were previously limited to people buying their first homes, according to Xinhua.

    First-home buyers are normally given cheaper mortgage rates than other buyers who have at least one apartment. First-home buyers are also required to make smaller down payments, as low as 20% of the total property value.

    Write to Singapore editors at singaporeeditors@dowjones.com
    

    

    


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  • 
		
		
    
			
    Home buyers flee the housing market as mortgage rates surge to the highest level since 2000
    
			
    Home buyers flee the housing market as mortgage rates surge to the highest level since 2000
    
			
    

    

    The numbers: Mortgage rates rose for the fourth week in a row to the highest level since 2000, as the economy continues to show strength.
    

    Rates surged as the U.S. economy continued to show signs of resilience,  which signal to the market that the U.S. Federal Reserve may not be done with rate increases.
    

    

    The 30-year was averaging at 7.31%, which in part dampened demand for home-purchase mortgages to the lowest level since April 1995. 
    

    Demand for both purchases and refinancing fell. That overall pushed down the market composite index, a measure of mortgage application volume, the Mortgage Bankers Association (M.B.A.) said on Wednesday. 
    

    The market index fell 4.2% to 184.8 for the week that ended Aug. 18, relative to a week earlier. A year ago, the index stood at 270.1.
    

    Key details: High mortgage rates are weighing on home buyers’ budgets due to an increase in borrowing costs. Many buyers fled the market as a result of rates rising over the last week. The purchase index, which measures mortgage applications for the purchase of a home, fell 5% from last week.
    

    Rates hold little allure for homeowners hoping to refinance. The refinance index fell 2.8%.
    

    Rates rose across the board.
    

    The average contract rate for the 30-year mortgage for homes sold for $726,200 or less was 7.31% for the week ending August 18. That’s up from 7.16% the week before, the M.B.A. said. The 30-year is at the highest level since December 2000.
    

    The rate for jumbo loans, or the 30-year mortgage for homes sold for over $726,200, was 7.27%, up from 7.11% the previous week.
    

    The average rate for a 30-year mortgage backed by the Federal Housing Administration rose to 7.09% from 6.93%.
    

    The 15-year rose to 6.72%, up from last week’s 6.57%. 
    

    The rate for adjustable-rate mortgages rose to 6.5% from last week’s 6.2%. The share of adjustable-rate mortgages rose to 7.6%, the highest level in five months.
    

    The big picture: The housing market continues to be hammered by good economic news, which is pushing rates up and depressing home sales. Higher rates also discourage homeowners from selling, as their purchasing power erodes when they look for homes to buy. 
    

    As a result, both home-buying demand and supply of home listings continues to fall, bringing the market to a standstill. Until the economy shows signs of slowing, it’s likely that the housing market will remain in the doldrums.
    

    What the M.B.A. said:  “Applications for home purchase mortgages dropped to their lowest level since April 1995, as home buyers withdrew from the market due to the elevated rate environment and the erosion of purchasing power,” Joel Kan, deputy chief economist and vice president at the M.B.A., said in a statement.
    

    Kan added that there was an uptick in people using adjustable-rate mortgages. “Some home buyers are looking to lower their monthly payments by accepting some interest rate risk after the initial fixed period,” he said.
    

    Market reaction: The yield on the 10-year Treasury note
    
        BX:TMUBMUSD10Y
    
       was above 4.3% in early morning trading Wednesday.
    

    

    


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  • 
		
		
    
			
    Home builders turn bullish for the first time in nearly a year amid strong housing demand
    
			
    Home builders turn bullish for the first time in nearly a year amid strong housing demand
    
			
    

    

    The numbers: For the first time in nearly a year, home builders are upbeat about the housing market outlook.
    

    The shortage of previously-owned sales is helping to buoy builders’ confidence. 
    

    

    With mortgage rates above 6%, many homeowners find little incentive to sell—nearly 92% have an outstanding mortgage with a rate below 6%, according to a recent survey conducted by Redfin 
    
        RDFN,
    
        -0.37%    ,
    
       a brokerage and real estate listings company. And 23.5% of homeowners have a mortgage rate of less than 3%. Consequently, the number of new home listings has dropped by 22%, as compared with the same period a year ago, according to a Realtor.com housing trends report.
    

    In turn, home builders are feeling good about their business. The National Association of Home Builders’ (NAHB) monthly confidence index rose 5 points to 55 in June, the trade group said Monday.
    

    This is the sixth month in a row that sentiment has improved among builders. It is also the first time in 11 months that builder confidence has moved into positive territory of above 50.
    

    The June reading of 55 was the strongest since July 2022. A year ago, the index stood at 67.
    

    Key details: Builders were starting to pull back on sales incentives. The share of builders cutting prices to boost sales has dropped to 25% in June, from a peak of 36% in November 2022.
    

    The typical builder was cutting prices by 7% in June, the NAHB said.
    

    The three gauges that underpin the overall builder-confidence index were up.
    

      

    • 
      A reading on current sales conditions rose by 5 points. 
      

      • 

    • 
      A measure on future sales gained 6 points.
      

      • 

    • 
      A gauge of traffic of prospective buyers rose by 4 points. 
      

      • 

    

    Big picture: Due to pandemic-era monetary policies that depressed mortgage rates, the home buyers, real-estate agents, mortgage brokers and the rest of the industry are stuck trying to find solutions to a major supply crunch of homes.
    

    Builders seem to be one of the few participants who have benefited from the supply crunch, given the nature of their business of new construction. The homebuilder ETF,
    
        XHB,
    
        -0.38%    ,
    
       is up 25% year-to-date. 
    

    What the NAHB said: “A bottom is forming for single-family home building as builder sentiment continues to gradually rise from the beginning of the year,” Robert Dietz, chief economist at the NAHB, wrote.
    

    And with the “Federal Reserve nearing the end of its tightening cycle,” the statement read, it’s “good news for future market conditions in terms of mortgage rates and the cost of financing for builder and developer loans.”
    

    Markets were closed on Monday in observance of the Juneteenth holiday.
    

    Realtor.com is operated by News Corp subsidiary Move Inc., and MarketWatch is a unit of Dow Jones, also a subsidiary of News Corp.
    

    

    


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  • 
		
		
    
			
    RBA Announces Further Rate Increase, Sees More on Horizon
    
			
    RBA Announces Further Rate Increase, Sees More on Horizon
    
			
    

    

    By James Glynn
    

    SYDNEY–The Reserve Bank of Australia announced its 12th rise in interest rates in just over a year on Tuesday, ratcheting up stress levels on an already massively burdened mortgage sector while warning that further increases are likely if inflation remains problematic.
    

    

    The increase in the official cash rate by 25 basis points to 4.10% took it to its highest level since early 2012. The move followed warnings from RBA Gov. Philip Lowe last week that rising wages and the absence of productivity growth could trigger further increases.
    

    Australia’s Fair Work Commission on Friday announced a 5.75% increase in the minimum wage, arguing that it wouldn’t add to inflation. Still, bets in money markets on further interest-rate increases jumped after the announcement.
    

    The rate increase will also be viewed widely as an implicit rejection of the federal government’s annual budget announced a month ago, which many economists argued would add to inflation because of generous cost-of-living offsets paid directly to households.
    

    “Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable time frame, but that will depend upon how the economy and inflation evolve,” Mr. Lowe said in a statement announcing the interest-rate increase.
    

    Consumer prices were 7% higher in the first quarter from a year earlier, which Mr. Lowe said is too high. Recent monthly inflation data has shown price pressures remain stubborn.
    

    Mr. Lowe has warned that weak productivity growth means that any wage increases will directly boost inflation. Updated figures on the country’s productivity performance will be published Wednesday, potentially setting the stage for further hikes if there is no evidence of meaningful improvement.
    

    Overall mortgage costs as a share of income are at their highest level since 1984, says Ben Phillips, associate professor at the Australian National University’s Centre for Social Research and Methods.
    

    Since the RBA started raising interest rates, mortgage costs have increased substantially, with the average share of disposable income going to repayments increasing to 24.7% from 17%, Mr. Phillips said.
    

    The tightening of the policy screws comes as close to one million households in Australia are transitioning from ultralow fixed mortgage interest rates to much higher variable rates, putting a huge strain on household budgets amid the biggest jump in the cost of living in three decades.
    

    “Recent labor market and inflation data made another rate hike inevitable,” said Callam Pickering, APAC economist at global job site Indeed.
    

    “While higher rates are certainly unwelcome, persistently high inflation is simply too dangerous for jobs and income and the overall Australian economy,” he said.
    

    Write to James Glynn at james.glynn@wsj.com
    

    

    


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    20 AI stocks expected to post the highest compound annual sales growth through 2025
    
			
    20 AI stocks expected to post the highest compound annual sales growth through 2025
    
			
    

    

    Things move quickly in the world of artificial intelligence. It is easy to sit back and complain about developments that could be disruptive, but sometimes investors are best served by putting emotions aside and observing new developments and how they affect markets. Could AI developments and related trends make you a lot of money?
    

    Below is a new screen showing a group of AI-oriented companies expected to increase their sales most rapidly through 2025, based on consensus estimates among analysts polled by FactSet. Then we show expected revenue growth rates for the largest AI-oriented companies in the screen. 
    

    

    Over the long haul, many businesses might perform more efficiently by employing AI. Maybe this technology can create an economic revolution similar to the one that moved the majority of the working population away from agricultural labor during the 19th and 20th centuries.
    

    Back in February, we screened 96 stocks held by five exchange-traded funds focused on AI and related industries and listed the 20 that analysts thought would rise the most over the following 12 months.
    

    Three months is a long time for AI, and the shakeout hasn’t even started. 
    

    Read: Congress and tech seem open to regulating AI efforts, but that doesn’t mean it will happen
    

    There is no way to predict how politicians will react to perceived or real threats of AI and machine learning. And the largest U.S. tech players are doing everything they can to employ the new technology and remain dominant. But that doesn’t mean they will grow more quickly than smaller AI-focused players.
    

    A new AI stock screen
    

    Once again we will begin a screen with these five ETFs:
    

      

    • 
      The Global X Robotics & Artificial Intelligence ETF
      
        BOTZ,
      
        +0.97%
      
       BOTZ was established 2016 and has $1.8 billion in assets under management. The fund tracks an index of companies listed in developed markets that are expected to benefit from the increased utilization of robotics and AI. There are 44 stocks in the BOTZ portfolio, which is weighted by market capitalization and rebalanced once a year. Its largest holding is Intuitive Surgical Inc.
      
        ISRG,
      
        +0.53%      ,
      
       which makes up 10% of the portfolio, followed by Nvidia Corp.
      
        NVDA,
      
        +3.30%
      
       at 9.4%. 
      

      • 

    • 
      The iShares Robotics and Artificial Intelligence Multisector ETF
      
        IRBO,
      
        +1.64%
      
       holds 116 stocks that are equal-weighted, as it tracks a global index of companies that derive at east 50% of revenue from robotics or AI, or have significant exposure to related industries. This ETF was launched in 2018 and has $304 million in assets.
      

      • 

    • 
      The $246 million First Trust Nasdaq Artificial Intelligence & Robotics ETF
      
        ROBT,
      
        +1.83%
      
       has 107 stocks in its portfolio, with a modified weighting based on how directly companies are involved in AI or robotics. It was established in 2018.
      

      • 

    • 
      The Robo Global Artificial Intelligence ETF
      
        THNQ,
      
        +1.81%
      
       has $26 million in assets and was established in 2020. I holds 69 stocks and isn’t concentrated. It uses a scoring system to weight its holdings by percentage of revenue derived from AI, with holdings also subject to minimum market capitalization and liquidity requirements.
      

      • 

    • 
      The newest ETF on this list is the WisdomTree Artificial Intelligence and Innovation Fund
      
        WTAI,
      
        +2.42%      ,
      
       which was established in December and has $13 million in assets and holds 73 stocks in an equal-weighted portfolio. According to FactSet, stocks are handpicked and selected companies “generate at least 50% of their revenue from AI and innovation activities, including those related to software, semiconductors, hardware technology, machine learning and innovative products.”
      

      • 

    

    Altogether and removing duplicates, the five ETFs hold 270 stocks of companies in 23 countries. We first narrowed the list to 197 covered by at least nine analysts and for which consensus sales estimates are available through calendar 2025. We used calendar-year estimates because some companies have fiscal years that don’t match the calendar. 
    

    Here are the 20 screened AI-related companies expected by analysts to have the highest compound annual growth rates (CAGR) for sales from 2023 through 2025. Sales estimates are in millions of U.S. dollars. The list also shows which of the above five ETFs holds each stocks.
    

    

    

      Company
    
    		

      Ticker
    
    		

      Estimated sales – 2023 ($mil)
    
    		

      Estimated sales – 2024 ($mil)
    
    		

      Estimated sales – 2025 ($mil)
    
    		

      Two-year estimated sales CAGR through 2025
    
    		

      Held by
    
    		

    

    

      BioXcel Therapeutics Inc.
    
    		

        BTAI,
    
        -2.47%    
          		

      $5
    
    		

      $39
    
    		

      $121
    
    		

      411.5%
    
    		

      WTAI
    
    		

    

    

      Luminar Technologies Inc. Class A
    
    		

        LAZR,
    
        +8.82%    
          		

      $86
    
    		

      $266
    
    		

      $588
    
    		

      161.0%
    
    		

      ROBT, WTAI
    
    		

    

    

      BlackBerry Ltd.
    
    		

        BB,
    
        +6.01%    
          		

      $685
    
    		

      $769
    
    		

      $1,925
    
    		

      67.6%
    
    		

      ROBT
    
    		

    

    

      Credo Technology Group Holding Ltd.
    
    		

        CRDO,
    
        +10.29%    
          		

      $183
    
    		

      $259
    
    		

      $363
    
    		

      40.9%
    
    		

      IRBO
    
    		

    

    

      SentinelOne Inc. Class A
    
    		

        S,
    
        +1.05%    
          		

      $619
    
    		

      $881
    
    		

      $1,176
    
    		

      37.9%
    
    		

      WTAI
    
    		

    

    

      Wolfspeed Inc.
    
    		

        WOLF,
    
        +5.02%    
          		

      $982
    
    		

      $1,323
    
    		

      $1,860
    
    		

      37.6%
    
    		

      WTAI
    
    		

    

    

      SK hynix Inc.
    
    		

        000660,
    
        +1.66%    
          		

      $18,319
    
    		

      $27,899
    
    		

      $34,542
    
    		

      37.3%
    
    		

      WTAI
    
    		

    

    

      Mobileye Global Inc. Class A
    
    		

        MBLY,
    
        +1.67%    
          		

      $2,109
    
    		

      $2,782
    
    		

      $3,920
    
    		

      36.3%
    
    		

      ROBT, WTAI
    
    		

    

    

      Snowflake Inc. Class A
    
    		

        SNOW,
    
        +1.42%    
          		

      $2,811
    
    		

      $3,863
    
    		

      $5,139
    
    		

      35.2%
    
    		

      IRBO, THNQ, WTAI
    
    		

    

    

      Lemonade Inc.
    
    		

        LMND,
    
        +8.08%    
          		

      $395
    
    		

      $471
    
    		

      $712
    
    		

      34.2%
    
    		

      THNQ, WTAI
    
    		

    

    

      Nio Inc. ADR Class A
    
    		

        NIO,
    
        +1.39%    
          		

      $11,874
    
    		

      $16,733
    
    		

      $21,304
    
    		

      33.9%
    
    		

      ROBT
    
    		

    

    

      Stem Inc.
    
    		

        STEM,
    
        +4.88%    
          		

      $607
    
    		

      $833
    
    		

      $1,055
    
    		

      31.8%
    
    		

      WTAI
    
    		

    

    

      Upstart Holdings Inc.
    
    		

        UPST,
    
        +10.37%    
          		

      $547
    
    		

      $768
    
    		

      $938
    
    		

      31.0%
    
    		

      BOTZ, WTAI
    
    		

    

    

      Cloudflare Inc. Class A
    
    		

        NET,
    
        +5.84%    
          		

      $1,284
    
    		

      $1,669
    
    		

      $2,194
    
    		

      30.7%
    
    		

      THNQ
    
    		

    

    

      Samsara Inc. Class A
    
    		

        IOT,
    
        +1.42%    
          		

      $830
    
    		

      $1,062
    
    		

      $1,364
    
    		

      28.2%
    
    		

      THNQ
    
    		

    

    

      Ambarella Inc.
    
    		

        AMBA,
    
        +3.45%    
          		

      $287
    
    		

      $355
    
    		

      $472
    
    		

      28.2%
    
    		

      IRBO, ROBT, THNQ, WTAI
    
    		

    

    

      iflytek Co. Ltd. Class A
    
    		

        002230,
    
        -1.34%    
          		

      $3,561
    
    		

      $4,582
    
    		

      $5,851
    
    		

      28.2%
    
    		

      THNQ
    
    		

    

    

      Tesla Inc.
    
    		

        TSLA,
    
        +4.41%    
          		

      $99,558
    
    		

      $128,412
    
    		

      $161,061
    
    		

      27.2%
    
    		

      ROBT, THNQ, WTAI
    
    		

    

    

      CrowdStrike Holdings Inc. Class A
    
    		

        CRWD,
    
        +2.40%    
          		

      $2,935
    
    		

      $3,793
    
    		

      $4,739
    
    		

      27.1%
    
    		

      THNQ, WTAI
    
    		

    

    

      PB Fintech Ltd.
    
    		

        543390,
    
        +1.39%    
          		

      $358
    
    		

      $462
    
    		

      $573
    
    		

      26.5%
    
    		

      IRBO
    
    		

    

    

      Source: FactSet
    
    		

    

    

    Click the tickers for more about each company or ETF. 
    

    Click here for Tomi Kilgore’s detailed guide to the wealth of information for free on the MarketWatch quote pages.
    

    We have screened for expected revenue growth, rather than for earnings or cash flow, because in a newer tech-oriented business area, investors are most likely to consider the top line as companies sacrifice profits to build market share.
    

    It is important to do your own research if you consider purchasing any individual stock, to form your own opinion about a company’s ability to remain competitive over the long term. Starting from the top of the list, BioXcel Therapeutics Inc.
    
        BTAI,
    
        -2.47%
    
       is expected to show exponential sales growth, but that is from a low expected baseline this year.
    

    What about the largest AI-related companies held by these ETFs?
    

    Here are the largest 20 companies in the screen by market capitalization, ranked by expected sales CAGR from 2022 through 2025. Once again the sales estimates are in millions of U.S. dollars, but the market caps are in billions. 
    

    

    

      Company
    
    		

      Ticker
    
    		

      Estimated sales – 2023 ($mil)
    
    		

      Estimated sales – 2024 ($mil)
    
    		

      Estimated sales – 2025 $mil)
    
    		

      Two-year estimated sales CAGR through 2025
    
    		

      Market Cap ($bil)
    
    		

      Held by
    
    		

    

    

      Tesla Inc.
    
    		

        TSLA,
    
        +4.41%    
          		

      $99,558
    
    		

      $128,412
    
    		

      $161,061
    
    		

      27.2%
    
    		

      $528
    
    		

      ROBT, THNQ, WTAI
    
    		

    

    

      Nvidia Corp.
    
    		

        NVDA,
    
        +3.30%    
          		

      $29,839
    
    		

      $36,877
    
    		

      $46,154
    
    		

      24.4%
    
    		

      $722
    
    		

      BOTZ, IRBO, ROBT, THNQ, WTAI
    
    		

    

    

      Taiwan Semiconductor Manufacturing Co. Ltd. ADR
    
    		

        TSM,
    
        +5.83%    
          		

      $71,434
    
    		

      $86,284
    
    		

      $101,112
    
    		

      19.0%
    
    		

      $445
    
    		

      ROBT, WTAI
    
    		

    

    

      Advanced Micro Devices Inc.
    
    		

        AMD,
    
        +2.23%    
          		

      $22,976
    
    		

      $26,823
    
    		

      $30,359
    
    		

      15.0%
    
    		

      $163
    
    		

      IRBO, ROBT, THNQ, WTAI
    
    		

    

    

      ASML Holding NV ADR
    
    		

        ASML,
    
        +2.83%    
          		

      $28,974
    
    		

      $32,374
    
    		

      $37,796
    
    		

      14.2%
    
    		

      $263
    
    		

      THNQ, WTAI
    
    		

    

    

      Microsoft Corp.
    
    		

        MSFT,
    
        +0.95%    
          		

      $223,438
    
    		

      $251,028
    
    		

      $282,397
    
    		

      12.4%
    
    		

      $2,318
    
    		

      IRBO, ROBT, THNQ, WTAI
    
    		

    

    

      Samsung Electronics Co. Ltd.
    
    		

        005930,
    
        -0.61%    
          		

      $200,595
    
    		

      $227,286
    
    		

      $252,129
    
    		

      12.1%
    
    		

      $292
    
    		

      IRBO, WTAI
    
    		

    

    

      Amazon.com Inc.
    
    		

        AMZN,
    
        +1.85%    
          		

      $559,438
    
    		

      $626,549
    
    		

      $702,395
    
    		

      12.1%
    
    		

      $1,164
    
    		

      IRBO, ROBT, THNQ, WTAI
    
    		

    

    

      Adobe Inc.
    
    		

        ADBE,
    
        +3.34%    
          		

      $19,470
    
    		

      $21,784
    
    		

      $24,276
    
    		

      11.7%
    
    		

      $158
    
    		

      IRBO, THNQ
    
    		

    

    

      Netflix Inc.
    
    		

        NFLX,
    
        +1.86%    
          		

      $33,915
    
    		

      $38,067
    
    		

      $42,275
    
    		

      11.6%
    
    		

      $148
    
    		

      IRBO, THNQ
    
    		

    

    

      Tencent Holdings Ltd.
    
    		

        700,
    
        -0.58%    
          		

      $88,727
    
    		

      $99,212
    
    		

      $110,556
    
    		

      11.6%
    
    		

      $422
    
    		

      IRBO, ROBT
    
    		

    

    

      Salesforce Inc.
    
    		

        CRM,
    
        +2.37%    
          		

      $34,392
    
    		

      $38,273
    
    		

      $42,786
    
    		

      11.5%
    
    		

      $205
    
    		

      IRBO, THNQ
    
    		

    

    

      Alphabet Inc. Class A
    
    		

        GOOGL,
    
        +1.11%    
          		

      $299,810
    
    		

      $333,077
    
    		

      $369,195
    
    		

      11.0%
    
    		

      $710
    
    		

      IRBO, ROBT, THNQ, WTAI
    
    		

    

    

      Intel Corp.
    
    		

        INTC,
    
        -1.20%    
          		

      $51,060
    
    		

      $57,799
    
    		

      $62,675
    
    		

      10.8%
    
    		

      $122
    
    		

      IRBO, ROBT
    
    		

    

    

      Meta Platforms Inc. Class A
    
    		

        META,
    
        +1.53%    
          		

      $125,901
    
    		

      $139,545
    
    		

      $154,259
    
    		

      10.7%
    
    		

      $528
    
    		

      IRBO, WTAI
    
    		

    

    

      Alibaba Group Holding Ltd. ADR
    
    		

        BABA,
    
        +2.17%    
          		

      $134,140
    
    		

      $148,206
    
    		

      $162,199
    
    		

      10.0%
    
    		

      $235
    
    		

      ROBT, THNQ
    
    		

    

    

      Texas Instruments Inc.
    
    		

        TXN,
    
        +1.20%    
          		

      $17,941
    
    		

      $19,433
    
    		

      $20,799
    
    		

      7.7%
    
    		

      $148
    
    		

      IRBO
    
    		

    

    

      Apple Inc.
    
    		

        AAPL,
    
        +0.36%    
          		

      $390,845
    
    		

      $416,761
    
    		

      $445,956
    
    		

      6.8%
    
    		

      $2,706
    
    		

      IRBO, WTAI
    
    		

    

    

      Siemens Aktiengesellschaft
    
    		

        SIE,
    
        +2.55%    
          		

      $84,681
    
    		

      $89,145
    
    		

      $93,925
    
    		

      5.3%
    
    		

      $130
    
    		

      ROBT
    
    		

    

    

      Johnson & Johnson
    
    		

        JNJ,
    
        -0.20%    
          		

      $98,761
    
    		

      $100,990
    
    		

      $103,870
    
    		

      2.6%
    
    		

      $414
    
    		

      ROBT
    
    		

    

    

      Source: FactSet
    
    		

    

    

    Tech-stock picks that are small and focused: This fund invests in unsung innovators. Here are 2 top choices.
    

    

    


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  • 
		
		
    
			
    Tech-stock picks that are small and focused: This fund invests in unsung innovators. Here are 2 top choices.
    
			
    Tech-stock picks that are small and focused: This fund invests in unsung innovators. Here are 2 top choices.
    
			
    

    When investors think of technology stocks, they might automatically gravitate toward “the next big thing,” or to the giant companies that dominate the S&P 500
    
        SPX,
    
        -0.40%    .
    
       But Robert Stimson, chief investment officer of Oak Associates Funds, makes a case for diversification through exposure to smaller innovators which he believes are “overlooked in this environment.”
    

    

    The River Oak Discovery Fund
    
        RIVSX,
    
        +0.98%
    
       invests in tech-oriented companies with market capitalizations of $5 billion or less, with an average of about $2 billion. It has a five-star rating, the highest, from Morningstar, despite having what the investment information firm considers “above average” annual expenses of 1.19% of assets under management. The fund is ranked in the 6th percentile among 546 funds in Morningstar’s “Small Blend” category for five-year performance and in the 13th percentile among 374 funds for 10-year performance. The performance comparisons are net of expenses.
    

    The Black Oak Emerging Technologies Fund
    
        BOGSX,
    
        +1.54%
    
       has more of a midcap focus, with some small-cap stocks and follows a similar strategy to that of RIVSX. But with no restriction on the size of companies this fund invests in, “we don’t have to sell stocks,” Stimpson said. So long-term holdings of this fund include Apple Inc.
    
        AAPL,
    
        -0.05%
    
       and Salesforce.com Inc.
    
        CRM,
    
        +0.69%    .
    
       This fund is rated three stars within Morningstar’s “Technology” category and has a lower expense ratio of 1.03%. 
    

    Both funds are concentrated. The River Oak Discovery Fund held 34 stocks and the Black Oak Emerging Technologies Fund held 35 stocks as of March 31. Lists of both funds’ largest holdings are below.
    

    During an Interview, Stimpson, who co-manages both funds, said that when investing in the small-cap technology space, he and colleagues identify companies that are “focused on niches.
    

    “I want a company that knows who they are, what they do and do it well, rather than a small company trying to growing into the next Microsoft, Google or Salesforce,” he said.
    

    More about giant companies dominating stock indexes: This twist on a traditional S&P 500 stock fund can lower your risk and still beat the market overall 
    

    Stimpson said Oak Associates pays close attention to what corporate management teams say during earnings calls and in presentations, preferring comments related to improving sales and operations with a market niche, rather than expressions of grand visions for exponential growth. 
    

    That type of narrow focus can support higher valuations over time, Stimpson said. “They have better execution, a better ability to fend-off competition and they are quality acquisition candidates.” 
    

    

    

    
        “ “I caution everyone that until there is revenue, earnings and a product, the hype can be more dangerous than an opportunity.” ”
      
    

            
    
          — Robert Stimpson, chief investment officer at Oak Funds, when discussing AI and ChatGPT.
    
        
    

    

    All of those factors can be important to investors, considering how easily tech giants such as Microsoft Corp.
    
        MSFT,
    
        +1.00%
    
       or Google holding company Alphabet Inc.
    
        GOOGL,
    
        +2.89%
    

            GOOG,
    
        +2.88%
    
       can begin to compete with smaller innovative companies because they can afford to make such large investments, he said.
    

    Simpson went further, saying that when running screens for “quality” metrics, such as improving free cash flow yields, the Oak Associates team also looks for “shareholder friendly practices.” For example, a company may be repurchasing shares. But are the buybacks lowering the share count significantly (which boosts earnings per share) or are they merely mitigating the dilution caused by the shoveling of new shares to executives as part of their compensation?
    

    Finally, Simpson cautioned investors not to get caught up in tech-focused hype.
    

    “When I talk to our clients, I get questions about AI and ChatGPT and how to play it. People get focused on a new great tech innovation,” he said. “You can replace ChatGPT with bitcoin, metaverse or 3-D printing.”
    

    “I caution everyone that until there is revenue, earnings and a product, the hype can be more dangerous than an opportunity.”
    

    Two examples
    

    These companies are held by theRiver Oak Discovery Fund and the Black Oak Emerging Technologies Fund.
    

    Cirrus Logic Inc.
    
        CRUS,
    
        -2.37%
    
       is the largest holding of the River Oak Discovery Fund. Stimpson calls the company “a derivative play on the success of Apple.”
    

    “They are focused on the chips that go into mobile and [vehicles],” as well as the needs of their customers, including Apple, “rather than problem areas of the chip sector, such as memory or PCs. They are not talking about chips for AI, for example,” Stimpson said.
    

    Cirrus focuses on systems and related software used in audio systems..
    

    Kulicke & Soffa Industries Inc.
    
        KLIC,
    
        +1.92%
    
       makes equipment, tools and related software used by a variety of manufacturers of computer chips and integrated electronic devices.   
    

    Stimpson likes the company as a long-term play on the worldwide disruption in semiconductor manufacturing and supply, in the wake of the Covid-19 pandemic. “All chip companies learned that any supply disruption in Southeast Asia is a problem. Over time, the opportunities for semiconductor equipment makers are very good. There will be more plants in more locations, so more equipment,” he said.
    

    He said KLICK was in a “protected” position, with returns on equity of about 20% and free cash flow yields of about 10%.
    

    Top holdings of the funds
    

    Here are the largest 10 holdings of the River Oak Discovery Fund as of March 31:
    

    

    

      Company
    
    		

      Ticker
    
    		

      % of portfolio
    
    		

    

    

      Cirrus Logic Inc.
    
    		

        CRUS,
    
        -2.37%    
          		

      4.9%
    
    		

    

    

      Kulicke & Soffa Industries Inc.
    
    		

        KLIC,
    
        +1.92%    
          		

      4.6%
    
    		

    

    

      Advanced Energy Industries Inc.
    
    		

        AEIS,
    
        +0.30%    
          		

      4.5%
    
    		

    

    

      Cohu Inc.
    
    		

        COHU,
    
        +1.45%    
          		

      3.7%
    
    		

    

    

      Asbury Automotive Group Inc.
    
    		

        ABG,
    
        -1.75%    
          		

      3.7%
    
    		

    

    

      Korn Ferry
    
    		

        KFY,
    
        -0.96%    
          		

      3.6%
    
    		

    

    

      Kforce Inc.
    
    		

        KFRC,
    
        -2.40%    
          		

      3.4%
    
    		

    

    

      Ambarella Inc.
    
    		

        AMBA,
    
        -0.50%    
          		

      3.3%
    
    		

    

    

      Applied Industrial Technologies Inc.
    
    		

        AIT,
    
        -1.71%    
          		

      3.3%
    
    		

    

    

      Perficient Inc.
    
    		

        PRFT,
    
        +0.72%    
          		

      3.2%
    
    		

    

    

    Click on the tickers for more about each company.
    

    Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.
    

    Here are the largest 10 holdings of the Black Oak Emerging Technology Fund as of March 31:
    

    

    

      Company
    
    		

      Ticker
    
    		

      % of portfolio
    
    		

    

    

      Apple Inc.
    
    		

        AAPL,
    
        -0.05%    
          		

      5.7%
    
    		

    

    

      KLA Corp.
    
    		

        KLAC,
    
        +1.69%    
          		

      4.6%
    
    		

    

    

      Advanced Energy Industries Inc.
    
    		

        AEIS,
    
        +0.30%    
          		

      4.5%
    
    		

    

    

      Cohu Inc.
    
    		

        COHU,
    
        +1.45%    
          		

      4.1%
    
    		

    

    

      SolarEdge Technologies Inc.
    
    		

        SEDG,
    
        -3.76%    
          		

      3.9%
    
    		

    

    

      Cirrus Logic Inc.
    
    		

        CRUS,
    
        -2.37%    
          		

      3.9%
    
    		

    

    

      Cohu Inc.
    
    		

        COHU,
    
        +1.45%    
          		

      3.9%
    
    		

    

    

      Ambarella Inc.
    
    		

        AMBA,
    
        -0.50%    
          		

      3.4%
    
    		

    

    

      Applied Industrial Technologies Inc.
    
    		

        AIT,
    
        -1.71%    
          		

      3.4%
    
    		

    

    

      Salesforce Inc.
    
    		

        CRM,
    
        +0.69%    
          		

      3.3%
    
    		

    

    


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  • 
		
		
    
			
    How First Republic ended up as the second-largest bank takeover in history after Washington Mutual
    
			
    How First Republic ended up as the second-largest bank takeover in history after Washington Mutual
    
			
    

    

    

    A quick rise in interest rates, a large amount of uninsured deposits and a first-quarter update that revealed further weaknesses in its business all contributed to the demise of First Republic Bank, now the second-largest bank blowup since Washington Mutual.
    

    As of Dec. 31, First Republic FRC was ranked as the 14th largest bank in the U.S. by the Federal Reserve with consolidated assets of nearly $213 billion.  Washington Mutual had $307 billion of assets as the largest bank failure in U.S. history during the global financial…
    
    

    

    


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  • 
		
		
    
			
    20 banks that are sitting on huge potential securities losses—as was SVB
    
			
    20 banks that are sitting on huge potential securities losses—as was SVB
    
			
    

    Silicon Valley Bank has failed following a run on deposits, after its parent company’s share price crashed a record 60% on Thursday.
    

    Trading of SVB Financial Group’s
    
        SIVB,
    
        -60.41%
    
       stock was halted early Friday, after the shares plunged again in premarket trading. Treasury Secretary Janet Yellen said SVB was one of a few banks she was “monitoring very carefully.” Reaction poured in from several analysts who discussed the bank’s liquidity risk. 
    

    

    California regulators closed Silicon Valley Bank and handed the wreckage over to the Federal Deposit Insurance Administration later on Friday.
    

    Below is the same list of 10 banks we highlighted on Thursday that showed similar red flags to those shown by SVB Financial through the fourth quarter. This time, we will show how much they reported in unrealized losses on securities — an item that played an important role in SVB’s crisis.
    

    Below that is a screen of U.S. banks with at least $10 billion in total assets, showing those that appeared to have the greatest exposure to unrealized securities losses, as a percentage of total capital, as of Dec. 31.
    

    First, a quick look at SVB
    

    Some media reports have referred to SVB of Santa Clara, Calif., as a small bank, but it had $212 billion in total assets as of Dec. 31, making it the 17th largest bank in the Russell 3000 Index
    
        RUA,
    
        -1.70%
    
       as of Dec. 31. That makes it the largest U.S. bank failure since Washington Mutual in 2008.
    

    One unique aspect of SVB was its decades-long focus on the venture capital industry. The bank’s loan growth had been slowing as interest rates rose. Meanwhile, when announcing its $21 billion dollars in securities sales on Thursday, SVB said it had taken the action not only to lower its interest-rate risk, but because “client cash burn has remained elevated and increased further in February, resulting in lower deposits than forecasted.”
    

    SVB estimated it would book a $1.8 billion loss on the securities sale and said it would raise $2.25 billion in capital through two offerings of new shares and a convertible bond offering. That offering wasn’t completed.
    

    So this appears to be an example of what can go wrong with a bank focused on a particular industry. The combination of a balance sheet heavy with securities and relatively light on loans, in a rising-rate environment in which bond prices have declined and in which depositors specific to that industry are themselves suffering from a decline in cash, led to a liquidity problem. 
    

    Unrealized losses on securities
    

    Banks leverage their capital by gathering deposits or borrowing money either to lend the money out or purchase securities. They earn the spread between their average yield on loans and investments and their average cost for funds.
    

    The securities investments are held in two buckets:
    

      

    • 
      Available for sale — these securities (mostly bonds) can be sold at any time, and under accounting rules are required to be marked to market each quarter. This means gains or losses are recorded for the AFS portfolio continually. The accumulated gains are added to, or losses subtracted from, total equity capital.
      

      • 

    • 
      Held to maturity — these are bonds a bank intends to hold until they are repaid at face value. They are carried at cost and not marked to market each quarter.
      

      • 

    

    In its regulatory Consolidated Financial Statements for Holding Companies—FR Y-9C, filed with the Federal Reserve, SVB Financial, reported a negative $1.911 billion in accumulated other comprehensive income as of Dec. 31. That is line 26.b on Schedule HC of the report, for those keeping score at home. You can look up regulatory reports for any U.S. bank holding company, savings and loan holding company or subsidiary institution at the Federal Financial Institution Examination Council’s National Information Center. Be sure to get the name of the company or institution right — or you may be looking at the wrong entity.
    

    Here’s how accumulated other comprehensive income (AOCI) is defined in the report: “Includes, but is not limited to, net unrealized holding gains (losses) on available-for-sale securities, accumulated net gains (losses) on cash flow hedges, cumulative foreign currency translation adjustments, and accumulated defined benefit pension and other postretirement plan adjustments.”
    

    In other words, it was mostly unrealized losses on SVB’s available-for-sale securities. The bank booked an estimated $1.8 billion loss when selling “substantially all” of these securities on March 8.
    

    The list of 10 banks with unfavorable interest margin trends
    

    On the regulatory call reports, AOCI is added to regulatory capital. Since SVB’s AOCI was negative (because of its unrealized losses on AFS securities) as of Dec. 31, it lowered the company’s total equity capital. So a fair way to gauge the negative AOCI to the bank’s total equity capital would be to divide the negative AOCI by total equity capital less AOCI — effectively adding the unrealized losses back to total equity capital for the calculation.
    

    Getting back to our list of 10 banks that raised similar red margin flags to those of SVB, here’s the same group, in the same order, showing negative AOCI as a percentage of total equity capital as of Dec. 31. We have added SVB to the bottom of the list. The data was provided by FactSet:
    

    

    

      Bank
    
    		

      Ticker
    
    		

      City
    
    		

      AOCI ($mil)
    
    		

      Total equity capital ($mil)
    
    		

      AOCI/ TEC – AOCI
    
    		

      Total assets ($mil)
    
    		

    

    

      Customers Bancorp Inc.
    
    		

        CUBI,
    
        -13.11%    
          		

      West Reading, Pa.
    
    		

      -$163
    
    		

      $1,403
    
    		

      -10.4%
    
    		

      $20,896
    
    		

    

    

      First Republic Bank
    
    		

        FRC,
    
        -14.84%    
          		

      San Francisco
    
    		

      -$331
    
    		

      $17,446
    
    		

      -1.9%
    
    		

      $213,358
    
    		

    

    

      Sandy Spring Bancorp Inc.
    
    		

        SASR,
    
        -2.91%    
          		

      Olney, Md.
    
    		

      -$132
    
    		

      $1,484
    
    		

      -8.2%
    
    		

      $13,833
    
    		

    

    

      New York Community Bancorp Inc.
    
    		

        NYCB,
    
        -5.99%    
          		

      Hicksville, N.Y.
    
    		

      -$620
    
    		

      $8,824
    
    		

      -6.6%
    
    		

      $90,616
    
    		

    

    

      First Foundation Inc.
    
    		

        FFWM,
    
        -9.11%    
          		

      Dallas
    
    		

      -$12
    
    		

      $1,134
    
    		

      -1.0%
    
    		

      $13,014
    
    		

    

    

      Ally Financial Inc.
    
    		

        ALLY,
    
        -5.70%    
          		

      Detroit
    
    		

      -$4,059
    
    		

      $12,859
    
    		

      -24.0%
    
    		

      $191,826
    
    		

    

    

      Dime Community Bancshares Inc.
    
    		

        DCOM,
    
        -2.81%    
          		

      Hauppauge, N.Y.
    
    		

      -$94
    
    		

      $1,170
    
    		

      -7.5%
    
    		

      $13,228
    
    		

    

    

      Pacific Premier Bancorp Inc.
    
    		

        PPBI,
    
        -1.95%    
          		

      Irvine, Calif.
    
    		

      -$265
    
    		

      $2,798
    
    		

      -8.7%
    
    		

      $21,729
    
    		

    

    

      Prosperity Bancshare Inc.
    
    		

        PB,
    
        -4.46%    
          		

      Houston
    
    		

      -$3
    
    		

      $6,699
    
    		

      -0.1%
    
    		

      $37,751
    
    		

    

    

      Columbia Financial, Inc.
    
    		

        CLBK,
    
        -1.78%    
          		

      Fair Lawn, N.J.
    
    		

      -$179
    
    		

      $1,054
    
    		

      -14.5%
    
    		

      $10,408
    
    		

    

    

      SVB Financial Group
    
    		

        SIVB,
    
        -60.41%    
          		

      Santa Clara, Calif.
    
    		

      -$1,911
    
    		

      $16,295
    
    		

      -10.5%
    
    		

      $211,793
    
    		

    

    

      Source: FactSet
    
    		

    

    

    Click on the tickers for more about each bank.
    

    Read Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.
    

    Ally Financial Inc.
    
        ALLY,
    
        -5.70%
    
       — the third largest bank on the list by Dec. 31 total assets — stands out as having the largest percentage of negative accumulated comprehensive income relative to total equity capital as of Dec. 31.
    

    To be sure, these numbers don’t mean that a bank is in trouble, or that it will be forced to sell securities for big losses. But SVB had both a troubling pattern for its interest margins and what appeared to be a relatively high percentage of securities losses relative to capital as of Dec. 31.
    

    Banks with the highest percentage of negative AOCI to capital
    

    There are 108 banks in the Russell 3000 Index
    
        RUA,
    
        -1.70%
    
       that had total assets of at least $10.0 billion as of Dec. 31. FactSet provided AOCI and total equity capital data for 105 of them. Here are the 20 which had the highest ratios of negative AOCI to total equity capital less AOCI (as explained above) as of Dec. 31:
    

    

    

      Bank
    
    		

      Ticker
    
    		

      City
    
    		

      AOCI ($mil)
    
    		

      Total equity capital ($mil)
    
    		

      AOCI/ (TEC – AOCI)
    
    		

      Total assets ($mil)
    
    		

    

    

      Comerica Inc.
    
    		

        CMA,
    
        -5.01%    
          		

      Dallas
    
    		

      -$3,742
    
    		

      $5,181
    
    		

      -41.9%
    
    		

      $85,406
    
    		

    

    

      Zions Bancorporation N.A.
    
    		

        ZION,
    
        -2.44%    
          		

      Salt Lake City
    
    		

      -$3,112
    
    		

      $4,893
    
    		

      -38.9%
    
    		

      $89,545
    
    		

    

    

      Popular Inc.
    
    		

        BPOP,
    
        -1.56%    
          		

      San Juan, Puerto Rico
    
    		

      -$2,525
    
    		

      $4,093
    
    		

      -38.2%
    
    		

      $67,638
    
    		

    

    

      KeyCorp
    
    		

        KEY,
    
        -2.55%    
          		

      Cleveland
    
    		

      -$6,295
    
    		

      $13,454
    
    		

      -31.9%
    
    		

      $189,813
    
    		

    

    

      Community Bank System Inc.
    
    		

        CBU,
    
        -0.22%    
          		

      DeWitt, N.Y.
    
    		

      -$686
    
    		

      $1,555
    
    		

      -30.6%
    
    		

      $15,911
    
    		

    

    

      Commerce Bancshares Inc.
    
    		

        CBSH,
    
        -1.61%    
          		

      Kansas City, Mo.
    
    		

      -$1,087
    
    		

      $2,482
    
    		

      -30.5%
    
    		

      $31,876
    
    		

    

    

      Cullen/Frost Bankers Inc.
    
    		

        CFR,
    
        -1.08%    
          		

      San Antonio
    
    		

      -$1,348
    
    		

      $3,137
    
    		

      -30.1%
    
    		

      $52,892
    
    		

    

    

      First Financial Bankshares Inc.
    
    		

        FFIN,
    
        -0.90%    
          		

      Abilene, Texas
    
    		

      -$535
    
    		

      $1,266
    
    		

      -29.7%
    
    		

      $12,974
    
    		

    

    

      Eastern Bankshares Inc.
    
    		

        EBC,
    
        -3.16%    
          		

      Boston
    
    		

      -$923
    
    		

      $2,472
    
    		

      -27.2%
    
    		

      $22,686
    
    		

    

    

      Heartland Financial USA Inc.
    
    		

        HTLF,
    
        -1.26%    
          		

      Denver
    
    		

      -$620
    
    		

      $1,735
    
    		

      -26.3%
    
    		

      $20,244
    
    		

    

    

      First Bancorp
    
    		

        FBNC,
    
        -0.31%    
          		

      Southern Pines, N.C.
    
    		

      -$342
    
    		

      $1,032
    
    		

      -24.9%
    
    		

      $10,644
    
    		

    

    

      Silvergate Capital Corp. Class A
    
    		

        SI,
    
        -11.27%    
          		

      La Jolla, Calif.
    
    		

      -$199
    
    		

      $603
    
    		

      -24.8%
    
    		

      $11,356
    
    		

    

    

      Bank of Hawaii Corp
    
    		

        BOH,
    
        -6.15%    
          		

      Honolulu
    
    		

      -$435
    
    		

      $1,317
    
    		

      -24.8%
    
    		

      $23,607
    
    		

    

    

      Synovus Financial Corp.
    
    		

        SNV,
    
        -2.91%    
          		

      Columbus, Ga.
    
    		

      -$1,442
    
    		

      $4,476
    
    		

      -24.4%
    
    		

      $59,911
    
    		

    

    

      Ally Financial Inc
    
    		

        ALLY,
    
        -5.70%    
          		

      Detroit
    
    		

      -$4,059
    
    		

      $12,859
    
    		

      -24.0%
    
    		

      $191,826
    
    		

    

    

      WSFS Financial Corp.
    
    		

        WSFS,
    
        -2.78%    
          		

      Wilmington, Del.
    
    		

      -$676
    
    		

      $2,202
    
    		

      -23.5%
    
    		

      $19,915
    
    		

    

    

      Fifth Third Bancorp
    
    		

        FITB,
    
        -4.17%    
          		

      Cincinnati
    
    		

      -$5,110
    
    		

      $17,327
    
    		

      -22.8%
    
    		

      $207,452
    
    		

    

    

      First Hawaiian Inc.
    
    		

        FHB,
    
        -3.48%    
          		

      Honolulu
    
    		

      -$639
    
    		

      $2,269
    
    		

      -22.0%
    
    		

      $24,666
    
    		

    

    

      UMB Financial Corp.
    
    		

        UMBF,
    
        -3.35%    
          		

      Kansas City, Mo.
    
    		

      -$703
    
    		

      $2,667
    
    		

      -20.9%
    
    		

      $38,854
    
    		

    

    

      Signature Bank
    
    		

        SBNY,
    
        -22.87%    
          		

      New York
    
    		

      -$1,997
    
    		

      $8,013
    
    		

      -20.0%
    
    		

      $110,635
    
    		

    

    

      

      

      

      

      

      

      

    

    

    Again, this is not to suggest that any particular bank on this list based on Dec. 31 data is facing the type of perfect storm that has hurt SVB Financial. A bank sitting on large paper losses on its AFS securities may not need to sell them. In fact Comerica Inc.
    
        CMA,
    
        -5.01%    ,
    
       which tops the list, also improved its interest margin the most over the past four quarters, as shown here.
    

    But it is interesting to note that Silvergate Capital Corp.
    
        SI,
    
        -11.27%    ,
    
       which focused on serving clients in the virtual currency industry, made the list. It is shuttering its bank subsidiary voluntarily. 
    

    Another bank on the list facing concern among depositors is Signature Bank
    
        SBNY,
    
        -22.87%
    
       of New York, which has a diverse business model, but has also faced a backlash related to the services it provides to the virtual currency industry. The bank’s shares fell 12% on Thursday and were down another 24% in afternoon trading on Friday.
    

    Signature Bank said in a statement that it was in a “strong, well-diversified financial position.”   
    

    


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  • 
		
		
    
			
    Silicon Valley Bank branches closed by regulator in biggest bank failure since Washington Mutual
    
			
    Silicon Valley Bank branches closed by regulator in biggest bank failure since Washington Mutual
    
			
    

    

    Silicon Valley Bank has been closed by the California Department of Financial Protection and Innovation, and the Federal Deposit Insurance Corporation (FDIC) has been appointed receiver, becoming the first FDIC-backed institution to fail this year. 
    

    The news comes amid a crisis at parent SVB Financial Group
    
        SIVB,
    
        -60.41%    ,
    
       which lost a record 60% of its value on Thursday, after it disclosed large losses from securities sales and announced a dilutive stock offering along with a profit warning. The stock was halted premarket Friday amid reports the company was seeking a buyer.
    

    

    The FDIC, which insures deposits of up to $250,000 at eligible banks, said all insured depositors will have full access to their accounts no later than Monday morning. Uninsured depositors will get a receivership certificate and may be entitled to dividends once the FDIC sells the bank’s assets.
    

    The bank had 13 branches in California and Massachusetts and will reopen on Monday. As of Dec. 31, it had about $209 billion in total assets, and about $175.4 billion in deposits.
    

    That makes it the biggest bank failure since Washington Mutual Inc. was brought down during the financial crisis of 2008. 
    

    See now: 10 banks that may face trouble in the wake of the SVB Financial Group debacle
    

    “At the time of closing, the amount of deposits in excess of the insurance limits was undetermined,” said the FDIC. “The amount of uninsured deposits will be determined once the FDIC obtains additional information from the bank and customers.”
    

    Read: Treasury monitoring a few banks ‘very carefully’ amid Silicon Valley Bank’s woes, Yellen says
    

    Related: Silicon Valley Bank collapse a cautionary tale, says New Constructs
    

     Customers with more than $250,000 in their accounts should contact the FDIC at 1-866-799-0959. 
    

    The last FDIC-backed bank to close was Almena State Bank, Almena, Kansas, back in October of 2020, said the FDIC. 
    

    The bank’s collapse has come swiftly just days after the parent announced a huge loss on bondholdings after it was caught out by interest rate increases. Some venture-capital firms reportedly told their startup clients to pull their money from the bank, triggering a classic run on the bank. 
    

    On Friday, employees were told to “work from home today and until further notice,” the Wall Street Journal reported, citing an email it had obtained. 
    

    

    


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  • 
		
		
    
			
    Wells Fargo, once a mortgage giant, shrinks home-lending business
    
			
    Wells Fargo, once a mortgage giant, shrinks home-lending business
    
			
    

    

    Wells Fargo said late Tuesday it was shrinking its home-mortgage business, aiming to serve its own bank customers as well as people in “minority communities.”
    

    Wells Fargo
    
        WFC,
    
        -0.07%
    
       also said it was exiting the correspondent business, in which a bank serves as a third-party intermediary in transactions, and that it plans to reduce the size of its loan-servicing portfolio.
    

    

    The stock edged lower in the extended session after ending the regular trading day down less than 0.1%.  
    

    “These plans continue the work the company has advanced over the past three years to simplify this business,” Wells Fargo said in a statement.
    

    Mortgage is “an important relationship product,” hence the decision to continue to be a lender to Wells Fargo bank customers as well as minority home buyers, Kleber Santos, chief executive of consumer lending, said. 
    

    “We are making the decision to continue to reduce risk in the mortgage business by reducing its size and narrowing its focus,” Santos said. 
    

    “As the largest bank lender to Black and Hispanic families for the last decade, we remain deeply committed to advancing racial equity in homeownership.”
    

    Wells Fargo was once among the top mortgage lenders in the U.S. 
    

    Late last month, the Consumer Financial Protection Bureau ordered it to pay $3.7 billion relating to alleged mismanagement of auto loans, mortgages and deposit accounts. The bank did not admit wrongdoing as part of the settlement.
    

    Shares of Wells Fargo have lost about 24% in the past 12 months, compared with losses of around 16% for the S&P 500 index.
    
        SPX,
    
        +0.70%    
       
    

    

    


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  • 
		
		
    
			
    CES 2023: AMD, Nvidia, auto applications get the hype, but analysts say this one chip maker ruled
    
			
    CES 2023: AMD, Nvidia, auto applications get the hype, but analysts say this one chip maker ruled
    
			
    

    

    As CES 2023 draws to a close, much of the attention in the chip world was lauded on companies like Advanced Micro Devices Inc. and Nvidia Corp. but a lower profile chip maker appears better positioned coming out of the convention.
    

    Morgan Stanley analyst Joseph Moore said there’s still a lot of caution about overall chip demand especially with softness in China, but autos appear to be one of the strong themes of CES 2023, he said.
    

    

    “The areas that have been weak remain somewhat weaker – notably memory, semi cap, and generally PC and cloud builds – while the markets that have been strong (such as automotive and industrial) remain strong but with lead times clearly starting to normalize, which likely points to longer term revenue pressures particularly in a weaker economy,” Moore said. 
    

    “Still, the longer term themes remain positive, especially for autos (which is increasingly the focus of CES),around themes such as EVs, ADAS and autonomous.”
    

    Such was the case when Nvidia Corp.
    
        NVDA,
    
        +4.16%
    
       said on Tuesday it was partnering with Hon Hai Technology Group
    
        2317,
    
        +0.41%
    
       , or Foxconn, best known for being the manufacturer of Apple Inc.’s
    
        AAPL,
    
        +3.68%
    
       iPhone, to make electric vehicles that use Nvidia’s Drive Orin chips and sensors, and bringing its GeForce Now streaming video game service to autos made by Hyundai Motor Group
    
        005380,
    
        +0.31%    ,
    
       BYD
    
        1211,
    
        -2.60%    ,
    
       and Swedish EV maker Polestar.
    

    “We generally think that Nvidia numbers are likely OK from here, though there was some caution on sell through in China for gaming, and a clear awareness that while the company’s position within cloud is very good, that pressure in cloud budgets leads to somewhat lower visibility,” Moore said. “But we would say that generally we think that they are past the worst of the pressures in their business, in contrast to most of the semiconductor group where there are still likely numbers cuts ahead.”
    

    Meanwhile, Advanced Micro Devices Inc.
    
        AMD,
    
        +2.62%
    
       used the CES keynote to introduce the Instinct MI300 chip as “world’s first data-center integrated CPU + GPU.” The  combined central processing unit and graphics processing unit meant for AI inference, the months-long process where data centers spend millions of dollars a year on electricity to train and develop artificial intelligence. AMD Chief Executive and Chair Lisa Su said the MI300 can reduce the time it takes for an inference modeling process from months to weeks.
    

    But one chip maker that doesn’t get a lot of attention appeared to emerge from CES best positioned for the year: ON Semiconductor Corp.
    
        ON,
    
        +4.57%    ,
    
       which focuses on electric vehicles and advanced driver assistance systems as primary growth drivers, leveraging its legacy position in auto chips.
    

    “Most notably, the company’s push into [Silicon Carbide] remains on track, and expect to still exit the year at a run-rate where the majority of crystal driving the business is internally sourced,” Moore said. “The company remains confident that demand in the EV space will far outpace supply for a long time and have thus shifted their focus over to execution on the production side.” 
    

    Citi Research analyst Christopher Danley lauded ON as being the most bullish chip maker of CES 2023.
    

    “ON remains on track to triple Silicon Carbide revenue YoY from roughly $300 million in 2022 to $1.0 billion in 2023,” Danley said. “The company stated it is sold out through 2023.”
    

    But ON aside, Danley said everyone at CES is “nervous” about “cracks” in data-center demand, “and they should be.”
    

    “There was a tone of nervousness on the data center outlook with many execs and investors cautious and talking about ‘uncertainty’ in data center outlooks from both hyperscalers and enterprise customers,” Danley said. “We continue to believe data center correction will happen given a multitude of datapoints and leading indicators.”
    

    Back in early December, Danley said his checks “indicate order rates from the data center end market are fading with downside from the enterprise end market (roughly 40% of the data center end market) and Facebook,” which is owned by parent company Meta Platforms Inc.
    
        META,
    
        +2.43%
    
       “We continue to expect a correction in the data center end market in 1H23,” Danley said.
    

    That said, Danley said his top pick was and continue to believe a correction there is inevitable. We remain cautious on semis until all end markets and companies correct and our top pick remains chip maker Analog Devices Inc.
    
        ADI,
    
        +3.65%    
      
    

    Back to autos: Ambarella Inc.
    
        AMBA,
    
        +6.77%
    
       on Thursday, Ambarella said it was partnering with Continental AG
    
        CON,
    
        +2.32%
    
       to develop hardware and software for assisted driving using AI with the ultimate goal of an autonomous driving system. The companies hope to have systems in production in 2026.
    

    Moore said Ambarella’s tech “continues to impress,” and said the Continental partnership will provide software revenue that’s shared but with the larger portion going to Continental. 
    

    At CES 2023, “the companies are showing a full L2+ ADAS implementation for a 10-camera system running on a single chip, which per AMBA was only using 8% of the compute value of the chip.”
    

    

    


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  • 
		
		
    
			
    Wells Fargo ordered to pay $3.7 billion for alleged mismanagement of auto loans, mortgages and deposit accounts
    
			
    Wells Fargo ordered to pay $3.7 billion for alleged mismanagement of auto loans, mortgages and deposit accounts
    
			
    

    

    The Consumer Financial Protection Board on Tuesday said it is requiring Wells Fargo & Co. to pay $3.7 billion as a result of alleged widespread mismanagement of auto loans, mortgages and deposit accounts. 
    

    The CFPB said Wells Fargo “repeatedly misapplied loan payments, wrongfully foreclosed on homes and illegally repossessed vehicles, incorrectly assessed fees and interest, charged surprise overdraft fees, along with other illegal activity affecting over 16 million consumer accounts.” 
    

    

    Wells Fargo
    
        WFC,
    
        -2.01%
    
       has been ordered to pay more than $2 billion in redress to consumers in addition to a $1.7 billion civil penalty for legal violations. 
    

    “Consumers were illegally assessed fees and interest charges on auto and mortgage loans, had their cars wrongly repossessed, and had payments to auto and mortgage loans misapplied by the bank,” the CFBP said. 
    

    Wells Fargo did not admit wrongdoing as part of the settlement.
    

    Wells Fargo CEO Charlie Scharf said the settlement marks an “important milestone in our work to transform the operating practices of Wells Fargo and to put these issues behind us.” 
    

    As a result of the settlement, the CFPB will terminate a 2016 consent order, Wells Fargo said. 
    

    The settlement will also provide clarity and a path forward for termination of a 2018 consent order and will underscore that the CFPB “recognizes recent acceleration of efforts,” the bank said.
    

    “The CFPB recognized that since 2020, the company has accelerated corrective actions and remediation, including to address the matters covered by today’s settlement,” the bank said in a statement.
    

    Wells Fargo warned it will book an operating-loss expense of $3.5 billion, or $2.8 billion net of tax, when it reports fourth-quarter results on Jan. 13. 
    

    “Wells Fargo has made significant progress in strengthening its risk and control infrastructure over the past several years,” the bank said.
    

    Jefferies analyst Ken Usdin said in a research note that the CFPB action marks a “positive step in the regulatory improvement process” for Wells Fargo.
    

    But he said Wells Fargo’s plan to book a fourth-quarter operating loss of $3.5 billion does not mean that the bank’s accrual for probable and estimable losses (RPL), which it discloses every quarter, will go to zero.
    

    “We would hope that probable and estimated losses would decline somewhat after [the fourth quarter] given the magnitude of today’s settlement,” Usdin said. “[Wells Fargo’s] separate announcement that it will book $3.5 billion of operating losses in [the fourth quarter] suggests that only some of the CFPB-specific settlement was already reserved for. But this sizable [fourth-quarter] number also means that [Wells Fargo] has been booking losses for other actions along the way that are still open-ended.”
    

    Scharf has been CEO of Wells Fargo since late 2019 and has been focusing on bringing the megabank into regulatory compliance.
    

    While an asset cap has remained in place for Wells Fargo since 2018 as punishment for its phony-accounts scandal, other regulatory matters are now in the rear-view mirror. 
    

    In December 2021, the Office of the Comptroller of the Currency (OCC)  terminated a consent order issued in 2015 regarding add-on products that the bank sold to retail banking customers.
    

    A CFPB consent order issued in 2016 regarding the bank’s retail practices expired in 2021, and a 2015 consent order from the OCC regarding Wells Fargo’s bank-secrecy and anti-money-laundering compliance was terminated in January 2021.
    

    Finally, a CFPB consent order issued in 2015 regarding claims that the bank violated the Real Estate Settlement Procedures Act expired in January 2020.
    

    Shares of Wells Fargo fell 0.3% on Tuesday. The stock is down 13.1% in 2022, compared with a 19.6% loss by the S&P 500
    
        SPX,
    
        +0.10%    .
         
    

    Also read: Fed banking supervisor eyes ‘holistic’ review of bank regulations while doubling down on protections they offer
    

    

    


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  • 
		
		
    
			
    ‘I’m paycheck to paycheck.’ I make $350K a year, but have $88K in student loans, $170K in car loans and a mortgage I pay $4,500 a month on. Do I need professional help?
    
			
    ‘I’m paycheck to paycheck.’ I make $350K a year, but have $88K in student loans, $170K in car loans and a mortgage I pay $4,500 a month on. Do I need professional help?
    
			
    

    

    

    

    

    

    I’m the first of my generation to own a home and the first to earn this much annually and don’t want to mess this up. How, specifically, can a financial adviser help me?
    

          
    
            Getty Images
    
          
    
  
    

    

    Question: By the end of 2022, I will have made $350,000 before taxes as the sole breadwinner and head of household. This is a great starting point and I’m very aware how blessed we are to be in this position, but I’m always looking ahead on how to improve. I currently have $88K left in student loans (originally close to $150K) and very little credit card debt (less than $2K with more than $25K available). I have two auto loans totaling $170K for two electric vehicles at 5% interest. 
    

    I’ve recently been offered a $200K HELOC at 9%, which would help me bring down some of my monthly payments and do some small home repairs and improvements, but I want to make the right moves. And I’ve also been presented with a few long-term real estate investment opportunities that are rental properties out of state and are currently bringing it 10-12% ROI.  But my biggest concern is that after taxes, 401(k) contributions, bills, savings and mortgage ($4,500), on paper I’m paycheck to paycheck. I’d like to use this HELOC to consolidate debt while also participating in some of these investment opportunities. I’m the first of my generation to own a home and the first to earn this much annually and don’t want to mess this up. How, specifically, can a financial adviser help me?  (Looking for a new financial adviser too? This tool can help match you with an adviser who might meet your needs.)
    

    Answer: You have a few questions to tackle here, so let’s go one by one. The first being the HELOC. Yes, HELOCs can be a good way to consolidate debt, but the rate you’re being offered isn’t favorable, as average HELOC rates are a little over 6%. “I would ask if 9% is the best rate you can get, because it appears a bit high,” says Chris Chen, certified financial planner at Insight Financial Strategists. What’s more, “I would like you to consider the potential impact that our Fed policy and inflation are having on interest rates, as HELOCs usually have variable interest rates and we’re in an environment with rising rates. You may start at 9% and end up significantly higher,” says Chen. 
    

    What’s more, your student loans, car loans and mortgage are all likely less than 9%, so it’s not likely that consolidation via a HELOC would save you money. “You may want to start somewhere different, like the snowball method, where you focus on one loan, usually the smallest one, and direct all of your resources to pay off that loan while maintaining payments on the others,” says Chen. This method could work to finish off your student loans and maybe one of your car loans, to start with. 
    

    Have an issue with your financial adviser or have questions about hiring a new one? Email picks@marketwatch.com.
    

    As for those real estate investments, what do you really know about those returns? “With regards to real estate investments, I assume that the 10% to 12% ROI you speak of is the income that you would be getting from the investment. If so, that’s very high and often when you get a return that is significantly higher than the norm, there’s something else that makes the investment less desirable. Be careful,” says Chen. (Looking for a new financial adviser too? This tool can help match you with an adviser who might meet your needs.)
    

    Certified financial planner Kaleb Paddock says you may actually want to work with a money coach before you work with a financial adviser. Whereas a financial adviser assists with developing investment strategies and long-term financial plans, a money coach offers a more educational experience and focuses on shorter term goals for money management. “A money coach will help you with paying off all of your debts, maximize your cash flow and help you create systems and processes to direct your money proactively,” says Paddock. 
    

    While having a high income is great, there’s a concept called Parkinson’s Law, which essentially states that your spending will always rise to meet your income no matter how high that income rises, explains Paddock. “Working with a money coach will help you defeat Parkinson’s Law, eliminate your debt and then enable you to supercharge your investing and life planning with a financial adviser,” says Paddock. 
    

    A financial adviser could help too, and Danielle Harrison, certified financial planner at Harrison Financial Planning, says to look for one who does comprehensive financial planning and can help you create a more holistic plan for your money. “They can assist you in the creation of both short and long-term goals and then help you by giving guidance on the financial decisions and opportunities you are presented with,” says Harrison. 
    

    A financial adviser would also help you take a long-term approach to your money and help you create a spending plan where you don’t feel like you’re living paycheck to paycheck on a $350,000 salary. “Everyone has blind spots when it comes to their finances, so finding a competent financial partner can be invaluable,” says Harrison. (Looking for a new financial adviser too? This tool can help match you with an adviser who might meet your needs.)
    

    Have an issue with your financial adviser or have questions about hiring a new one? Email picks@marketwatch.com.
    

    *Questions edited for brevity and clarity.
    

    

    
      The advice, recommendations or rankings expressed in this article are those of MarketWatch Picks, and have not been reviewed or endorsed by our commercial partners.
    
    

    


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