Banks Are Scarier Than Halloween?
The Motley Fool, that pugnacious purveyor of simpleton investment advice, has taken a meat cleaver to the banking industry. In a rapacious post, the Motley Fool has declared banks “scarier than Halloween.”
Now, I find Halloween pretty scary, so is the comparison truly merited? First, the Motley Fool’s argument:
So Wells Fargo should be criticized for successfully hedging its mortgage servicing rights? Is that not like criticizing the Yankees for deploying Mariano Rivera?
But the Fool finds other faults in banks. For example, leverage is still too high, the site argues:
These leverage levels are a far cry from what we saw at the height of the bubble (Merrill Lynch was at 28-to-1 in September 2007), but I’d bet my lucky Chewbacca action figure that without strict regulations these levels will start to creep right back up as soon as the companies see opportunity to cash in with more leverage. Case in point, after dropping considerably, Morgan Stanley’s leverage ratio has risen each of the past two quarters.
Again, this can be seen with two vastly different perspectives. Sure, leverage can be dangerous, but is Morgan’s advancing leverage truly a sign of danger in our midst? Or is Morgan simply on the mend after taking body blows from the credit markets?
Finally, Motley Fool tars banks for engaging in proprietary trading:
Isn’t that always the case in banking, and the case as well in so many industries? Is not ExxonMobil Corp’s earnings reliant on the vagaries of the global oil markets? Such vagaries are anything but “sustainable.” Am I missing something here? I am all for more transparency and remedies to our zombie banking problem, but it seems like some personal finance advisors are taking the easy road and tarring all banks with wild assertions. What is going on here?
