#416 Chris Whalen: Cheap Credit Is Over, K-Shaped Economy Becoming an L, Long Energy & Short Financials

The Wrap with Chris Whalen is back after a weak jobs report, with just 29,000 jobs added against expectations of 90,000, and long-term yields still elevated. Chris argues that rising bond yields reflect real inflation running in the mid-to-high single digits, well above the official numbers, and that the era of Fed-suppressed rates that began in 2008 is over. He expects the Fed to hold in October and possibly hike in November, and makes the case that Powell gave Trump nearly everything he wanted while incoming Chair Warsh is a hawk. Chris explains why $8–9 diesel and high replacement costs mean building more homes won't fix affordability, and why consumer credit stress is spreading upward. In his words, the K-shaped economy is "fast becoming an L." He reveals he's now short a couple of bank names, has rotated heavily into energy, and sees "long energy, short financials" as the trade for the next year or two. He also previews a tough midterm for Republicans, answers a viewer question on raising taxes, and discusses Judy Shelton's move to Treasury and his critique of the FASB's mortgage servicing rights proposal.Thank you to our sponsor, Monetary Metals. Learn more at https://www.monetary-metals.com/THEWRAP/Links:    The Institutional Risk Analyst: https://www.theinstitutionalriskanalyst.com/  Twitter/X: https://twitter.com/rcwhalen    https://www.amazon.com/Inflated-Money-Debt-American-Dream/dp/139428571XUse the code TheWrap2026 for 25% off your first year of The Institutional Risk Analyst https://www.theinstitutionalriskanalyst.com/plans-pricing⁠Timestamps:0:00 – Welcome to The Wrap0:18 – Jobs report misses badly, but yields stay high1:28 – Is real inflation higher than the official stats?2:51 – October FOMC: hike, hold, or wait for November?4:20 – Powell gave Trump everything he wanted6:24 – The easy environment is over: diesel and demand destruction7:36 – Why building more homes won't fix affordability9:28 – 7%+ mortgage rates and pain in the mortgage industry10:40 – Portfolio rebalancing: selling financials, buying energy11:43 – Cracks in consumer credit13:01 – Restaurant and grocery margins (and the Publix real estate play)14:45 – The K-shaped economy is becoming an L17:11 – Why Chris is bearish on banks and shorting a few18:34 – Is a recession ahead?18:56 – Midterms, affordability, and Trump's lame-duck period21:29 – Will Warsh give Trump what he wants?23:36 – Viewer Q: Why not raise taxes to cut the deficit?25:36 – Judy Shelton joins Treasury, and gold as money27:01 – Chris critiques the FASB mortgage servicing rights proposal29:08 – What Chris is watching: credit markets and Q3 earnings31:18 – Why this year will be remembered as extraordinary31:58 – Wrap-up