market folly

We're posting up notes from the Great Investors' Best Ideas Investment Symposium in Dallas and next up is Rusty Rose of Cardinal Investment Company.

Rose: Avoid Major Banks

His presentation centered around avoiding major banks as investments.  He argued that they've gotten so big and have strayed from what true banks used to be that you no longer really know what you're investing in.

Rose rattled off a list of reasons why, including capital structure, subsidy (banks enjoy low regulated interest rates), and structural mismatch among others.  He feels that banks should compete without subsidy and that the deposit guarantee should be axed.

He wondered why analysts use book value for banks when they don't underestimate assets and they don't overestimate liabilities.  He also feels banks are still over-levered and taking too much risk (due to management incentives).

Rose also touched on how the regulatory/political environment for financials peaked in 2008.  He compared big bank stocks to Paris Hilton, saying both are famous for being famous.


For the rest of the presentations, head to notes from the Great Investors' Best Ideas conference.