Loan losses and charge-offs continue to grow in the banking sector, and just about every quarterly “profit” deserved either scare-quotes or an asterisk. Still, bank stocks have made an impressive rebound off their lows.
Are you tempted to get in?
At WSJ, Brett Arends has 10 reasons you may want to avoid the sector. They’re all right on and worth considering before you decide to have Ken Lewis or Vikram Pandit manage your money.
- They’re all leveraged gambles.
- You’re betting blind, since you really have no idea what’s going on.
- The stress tests are a joke.
- Earnings quality is crap.
- The leaders of the next boom won’t likely be the leaders of the last one.
- As a percentage of the S&P, financials are still pretty significant even at these depressed levels.
- Retail banks have dubious business models based on ticky-tack fees
- Wall Street banks are run for the benefit of executives and partners, rather than shareholders.
- There are plenty of other stocks to buy, so why bother with banks?
- If they do make money again, the executives could just as easily blow it.
There you go. All pretty compelling. Definitely read his full, fleshed out argument.