1) As expected, on Wednesday, the Federal Reserve held interest rates steady amid a very difficult and uncertain environment...
As the Wall Street Journal reported, the Fed:
... tentatively preserved a path to cutting rates this year as higher energy prices from the Iran war threaten to prolong their yearslong inflation fight.
But at a news conference after the meeting, Fed Chair Jerome Powell said little to suggest cuts were around the corner and instead emphasized how little room officials might have to ease. He described the Fed's current policy stance as sitting much closer to one that neither spurs nor slows growth, which would make rate reductions much harder to justify unless the economy weakens.
My outlook for the past few years, which has kept me bullish on stocks, has been that the economy will be stronger than expected, and inflation will remain in the 3% to 4% range, above the Fed's target of 2%.
As such, my view has been that the Fed wouldn't cut as aggressively as the market was expecting. And if I was wrong and the economy weakened, the Fed would cut rates. But either way, stocks will do well.
I first laid out my expectations for the rate cuts – and how they differed from the consensus view – at the Stansberry Research annual conference on October 23, 2024.
As you can see in the chart I presented, my outlook proved to be almost exactly correct:
At last year's conference, on October 21, I made a similar prediction when I presented this slide:
Sure enough, as this chart from Charlie Bilello shows, market expectations are now almost exactly what I predicted five months ago:
With rates remaining higher than the market expected – but in line with my expectations – there's still plenty of room for the Fed to cut rates if the economy slows.
But I don't expect a recession. I continue to think the Iran war will end in a matter of weeks, not months. And when it ends, there will be a big relief rally in the stock market.
2) Yet Another Value Podcast interviewed Will Cleary of Carriage House Fund about FTAI Aviation (FTAI)...
This caught my eye because FTAI is a similar business to Willis Lease Finance (WLFC), about which I've written many times (archive here).
Here's a summary of the podcast interview:
Host Andrew Walker speaks with Will Cleary of Carriage House Fund about FTAI Aviation and its rapidly expanding jet engine aftermarket platform. Will explains how FTAI transformed from a traditional aircraft leasing company into a vertically integrated provider of engine maintenance, repair, and module swaps for commercial airlines. The discussion examines the economics of engine maintenance, why FTAI's model reduces costs and turnaround times for airlines, and how its growing ecosystem of engines and modules creates competitive advantages. They also address the Muddy Waters short report, valuation considerations, and FTAI's new power initiative converting retired jet engines into turbines for data centers.
I asked my friend, who is a financial company expert and has a large position in WLFC, what he thought of the interview. He replied:
While I would disagree with the valuation and sustainability of FTAI's growth, it's a good interview to get up to speed on the business and its transition to an asset management model. And I definitely don't disagree that this management team is smart and one of the most (if not the most) promotional I have ever seen.
I have been short FTAI on and off again – and am currently short – but reduced the position a bit recently as the stock has really pulled back in the past couple of weeks with the entire aviation-related sector due to the Iran war and rising fuel prices.
Our research on its AI data-center powering has also resulted in us being skeptical. It's a short-term Band-Aid solution, and we think much better and efficient options will soon be available, so it's a melting ice cube business.
Comparing the two companies, he continued:
The crazy thing is FTAI has a $24.7 billion market cap even after the move down, while WLFC has only a $1.1 billion market cap, despite recently pivoting to following the FTAI playbook with an asset management model.
WLFC also recently announced a partnership with CFM International to extend the operational life of CFM56 engines, which is exactly what FTAI is doing, but WLFC will use actual original equipment manufacturer materials.
Regarding WLFC's fourth-quarter earnings, reported on March 10, he commented:
Earnings looked optically light due to the way it recognizes maintenance income. As a refresher, a component of that income defers until the actual engine is returned to WLFC, and in this environment the majority of leases are being extended due to the massive engine shortage. The earnings from that dynamic alone would have doubled its reported numbers, and when you strip out other one-time items, you get closer to our expected core earnings run rate of $5 per share per quarter (or $20 per share per year).
Further, it disclosed that the unrealized gain in its engine portfolio is currently $700 million. When combined with its stated common equity of $662 million, deferred maintenance income, the value of its order book, and an estimate of its Russia insurance recovery, you have around $1.6 billion to $1.7 billion of value trading for $1.1 billion. Lastly, as it embarks on an asset management model similar to FTAI, we expect to see significant earnings growth in 2026 and beyond.
He concluded:
I won't try and talk anyone out of owning FTAI, but if someone is happy to own FTAI for a $25 billion valuation, they should wet their pants with excitement to own WLFC at $1.1 billion.
I think my friend is right that WLFC is compelling here.
3) I added used-auto retailer Carvana (CVNA) to my "Stinky Six" stocks to avoid on December 12. And since then, it's down a staggering 38%.
One of my readers, Brent F., shares my bearishness on the company...
He notes that 44% of Carvana's loans are to subprime (nonprime) borrowers and, of these, 80% are sub-subprime (credit scores below 580 or 500, depending on the lender).
According to his research, subprime delinquencies are at a 32-year high, well above the peak of the 2008 financial crisis. And 28% of trade-ins for new-car purchases carry negative equity.
Here are the full results Brent shared with me from his Google Gemini search:
Subprime (60-Plus Days Past Due):
- The delinquency rate hit a 32-year record high of 6.9% in January 2026, according to Fitch Ratings.
- This exceeds the 2008 financial crisis peak (5%) and the previous 1996 record high.
- Recent data from December 2025 showed a slightly higher 7.1% for borrowers with scores below 620, according to the Equifax U.S. National Credit Trends Report.
Deep Subprime/"Sub-Subprime" (30-Plus Days Past Due):
- While specific 60-plus day data for deep subprime is less commonly aggregated into a single public index, the broader 30-plus day delinquency rate for all subprime (below 620) was reported at 15.78% as of late 2025.
- Industry experts note that within certain portfolios, such as Carvana's, more than 80% of subprime loans fall into the deep subprime category, which is seeing the most acute stress.
Comparative Performance:
- Prime Loans: Delinquencies remain "pristine" at approximately 0.4%, according to Fitch Ratings.
- Total Auto Market: The average 60-plus day delinquency rate across all credit tiers is roughly 1.56% to 1.61%.
Key Drivers of High Delinquency:
- Negative Equity: 28% of trade-ins now carry negative equity, with buyers owing an average of $7,000 more than the vehicle's value.
- High Monthly Payments: The average monthly car payment now exceeds $750, with nearly 20% of new loans surpassing $1,000.
- Vehicle Prices: Average transaction prices remain near $50,000 for new cars and $25,000 for used cars.
Needless to say, Carvana remains firmly near the top of my list of stocks to avoid.
4) Speaking of cars, there's a lot of good advice in this WSJ article about a man who's a "car dealer's worst nightmare" – working as a middleman to talk down car prices:
Mikula, 33 years old, spent more than a decade selling cars and auto financing at dealerships. Now he deploys his fluency in car-dealer speak and his encyclopedic knowledge of dealer inventory to try to talk down the sticker prices. Some dealers hate him enough that they won't take his calls. Others relish the chance to go toe-to-toe with a dealmaking foe.
Negotiating a car price has become something of a lost art, but it is one Mikula has become practiced at in the three years since he started his business. For a flat fee of $1,000, he negotiates on a buyer's behalf. He also livestreams some of his conversations to 600,000 subscribers across TikTok and YouTube.
In Mikula's view, car buying has become so absurd that what he's doing makes perfect sense, even if it is a little offbeat. "You're hiring a middleman to deal with the middleman to make the middleman more efficient," he said.
His technique can apply to more than just cars: Be polite but firm, price shop aggressively, and know how strong your negotiating position is.
Best regards,
Whitney
P.S. I welcome your feedback – send me an e-mail by clicking here.