It’s Especially Tough to Evaluate Banks

I always remind investors not to bother to evaluate companies when attempting to buy securities; they will never get all the cogent facts, not from the companies, nor from the analysts whose work is to get at the facts. There is no chicanery involved; it’s impossible to do the job for the purpose of knowing everything an investor must have.

That’s why I recommend index funds.

The problem of evaluation is even tougher with banks because it’s impossible to determine value of much of the essential underlying assets. They’re simply not available or determinable.

Examples are derivative holdings and what make up much of what is considered “level 3” bank assets. (See the Earl J. Weinreb NewsHole® comments.)