Investing With Bank Stock Advice

Bank analysts are never privy to inside banking operations. Example: complicated derivative portfolio information, or “repo” positions. In fact, they know so little of the plain-vanilla type; if they were, they could not understand the inherent complexities.

Yet every negative word analysts utter can doom the soundest financial institution, to the point where that organization sinks towards insolvency.

Rumors are often circulated, fomented by bank analysts who cannot possibly see a bank’s asset portfolio. That makes for self-fulfilling events. Especially when bank holdings must then be priced, "marked-to-market."

Fear-frenzy takes hold as analysts persist in this self-fulfilling, bearish sentiment.

There was a time when bank stocks were bought on the basis of book value, which can now be suspect, and dividends, which these days have been pressured by governmental regulation and oversight.

Then the question arises of how secure is each bank’s capital, in our fragile economy?

Another reason why I believe in index funds, even for banking equities. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole tweets.)