By Justin Spittler, editor, Casey Daily Dispatch
Forget tech stocks. If you want to make 10 times your money, look at bank stocks.
Regular readers aren’t used to hearing that, and for good reason. You see, bank stocks aren’t Casey Research’s bread and butter. Our specialty is in natural resource stocks and making bets on assets that other investors want nothing to do with.
With that said, bank stocks obviously don’t fall in the commodity basket.
But they could be one of today’s top contrarian plays.
At least, that’s what Strategic Investor editor E.B. Tucker thinks.
I know this because I heard E.B. give a speech on the topic last week in Miami, Florida. It was one of the best presentations I heard all week.
After his talk, E.B. and I caught up over dinner. We talked about music and LA’s out-of-control homelessness problem. He even recommended his favorite parrilla (steakhouse) in Buenos Aires, my home for the next few weeks.
But the conversation kept coming back to bank stocks. He was pounding the table on them.
Today, I’ll tell you why E.B.’s so bullish on bank stocks. And I’ll also tell you why I think he’s spot-on with this call. But first, let me say a few words on the big picture…
• U.S. investors have fewer choices than ever…
If you read yesterday’s Dispatch, you know what I’m talking about.
In short, there are about half as many U.S. publicly traded stocks as there were 20 years ago. And E.B. says that the Federal Reserve’s to blame for this.
You see, the Fed has been running an ultra-low interest rate experiment for the last two decades. This has made it incredibly cheap to borrow money.
When you can borrow money for next to nothing, you spend more money than you would otherwise. Everyday people do this. Large corporations do, too.
• That’s why we’ve seen an explosion in mergers and acquisitions (M&A) in recent years…
All this deal-making has led to massive consolidation in corporate America. Just look at Silicon Valley: Facebook, Google, and other tech giants have gobbled up start-ups and even billion-dollar “unicorns” before they’ve even had the chance to go public.
The same thing can be said about every other major sector, including banking. Just look at this chart, which E.B. shared with his readers last month:
You can see that the number of U.S. banks has plummeted. There are now 65% fewer banks than there were in the 1980s.
That’s a dramatic decline. But E.B. says that “there will be half as many banks at the turn of the next cycle.”
That’s a bold call. But I believe E.B.’s spot-on with this prediction for a simple reason.
• Donald Trump is leaving the banking industry alone…
Two weeks ago, American Banker reported that financial regulations have fallen to a 40-year low under Trump:
Regulators now are issuing or revising two to four items a week, a dramatic drop from the five to seven items a week, on average, that companies have had to comply with for years, according to Continuity. The new range is the lowest that the compliance management provider has found since tracking the issuance of regulations dating back to the 1970s.
The company’s “bank compliance index” currently measures an average range of 24 to 48 regulatory actions per quarter, compared with a 30-year average of 60 to 85 per quarter that had held steady through the financial crisis and dates back to the 1980s.
• It’s now only a matter of time before Trump repeals Obama-era banking regulations…
That would obviously be good news for banks.
It means they’ll spend less money on compliance, and more money on growing their businesses. They’ll become more profitable. As a result, they’ll have more cash to go out and acquire other banks.
That’s why E.B. thinks we’re about to see a huge wave of consolidation in the banking sector. So consider investing in bank stocks if you haven’t already.
Buenos Aires, Argentina
April 18, 2018
P.S. I also encourage you to test drive E.B.’s new advisory, Strategic Investor. By signing up today, you’ll learn about E.B.’s top bank stock. This company has an incredible track record of acquiring other banks. Because of that, E.B. says this company will emerge as a takeover target itself in the coming years. Click here to learn more about a subscription to Strategic Investor.
Today, more positive feedback on John Hunt’s recent essay on climate change…
From your publication of comments on Dr. Hunt’s article it seems obvious that many writers are approaching this subject from the basis of a pre-conceived conclusion. Just a few items to add to the pot:
Why is our National Weather Service correcting temperatures? Objective review of raw data, before it is captured and processed by NWS & NOAA shows consistent upward revision by these agencies of from 1 to 3 degrees Fahrenheit. Actually, the raw data shows a decrease over the last 5-6 years. Recent severe cold snaps have been completely edited out.
I spend the winter in the north Idaho mountains, and five of the last eight years have been amongst the coldest with the most snow on record. Last year in the entire Pacific Northwest of the USA there were almost no surviving young deer of the past spring due to the length, snow pack, and low temperatures of the winter.
There is one stream of scientific data, which strongly suggests that snowfall in Antarctica is causing ice accumulation there equal to about the total rainfall on New Zealand yearly. The climate change mainstream is completely ignoring this data and these scientists.
Upon reviewing pronouncements about sea level rising from around 2000, one would expect the places like the Maldives would be completely underwater by now. Since they are not, the PC climate change scientists now are hypothesizing that they in fact are rising out of the sea. As they say in the South, “just saying.” PS. Keep up the thought-stimulating articles!
The August 9 climate change article was superb. At one point in my life I had close contact with some of the scientists propagating the CO2 heresy. My comments follow: In the mid-1970s I was in the Air Force flying C130Ds (ski birds). Our mission was supplying the two radar sites on top of the Greenland Ice Cap. (We brought them food, beer and Playboy magazines.) Around 1975 we began flying some scientists up to the Dye-3 site where the ice was three miles deep. They were planning to drill ice cores down as far as they could get. They would subsequently analyze the cores to determine weather patterns over the eons. After a few years, civilian ski-equipped aircraft picked up the mission. Since the scientists could only work during the few warm months it took them nearly 20 years to finish the project.
Skip forward to 1993. I was working as a computer programmer at NASA Langley Research Center, Atmospheric Sciences Division. One day, in the NASA Library, I came across a copy of Science magazine in which I found an article by those same scientists we had started bringing up to the Ice Cap. They concluded that, looking back over 40,000 years, there was no correlation between CO2 and global warming. I was working for the division director, and with a doctoral student whose thesis was to be a computer model to predict weather patterns for the indefinite future. His thesis presumed that CO2 was the primary cause of temperature variation. I gave copies of the article both to the director and to the student. The only response I got was “I don’t believe it.” So, in order to keep the Global Warming myth alive, scientists will ignore science. Enough said.
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