Credit expert David Goldman has a good post up at Asia Times on why you might want to be cautious before taking a bite out of US banks, particularly their high-yielding preferred stock.
His three reasons:
- Bank earnings are still based on lies (e.g. extending and pretending the value of various depressed assets).
- Bank profits are also base don leveraging up purchases of equities, which you could probably do yourself without paying the bank.
- European-borne bank funding fears have not gone away yet. There’s been some easing of the panic of late, but the banks could still be torpedoed by an issue emanating from Europe.