David Ellison on fundamental headwinds for banks: "they aren't life-threatening"

We don’t have much credit deterioration so far. We do have rates going up and bond prices falling, and there is duration risk. That makes things even worse for the banks, as they borrow short and lend long. That model is broken, but it isn’t broken forever. 

[...]

Over the next six to nine months, banks will be working through the rate issue. So maybe margins will bottom in the next quarter, and then start to improve as asset yields start to catch up with the rise in deposit rates, or cost of funds.

[...]

I’m not sure if the stocks will go down another 30% or another 3%; maybe they have already bottomed. The banks have fundamental headwinds. However, they aren’t life-threatening headwinds. They are just earnings-threatening, to some degree, and they are valuation-threatening.

~ David Ellison, portfolio manager, Hennessy Funds, "Trouble Ahead For Financials. Where to Hide," Barron's, April 29, 2023

Judy Shelton on how the Fed's stress tests missed the Silicon Valley Bank failure

A: I will say the call for more stress tests overlooks the fact that the stress tests that became a part of the post-2008 regime were really oriented toward what will the bank do to survive if the Fed drops rates to zero again.  And it's uncanny, given that the Fed has over a trillion [dollars] in unrealized losses on its own portfolio that wasn't alert to this sort of dilemna in the valuation of bank assets.

Q: Yeah, theoretically the Federal Reserve is broke.

~ Judy Shelton, senior fellow, Independent Institute, "How Did Silicon Valley Bank Miss Its Ticking Time Bomb?," Fox Business, 1:30 mark, March 27, 2023

 

Jason Benowitz on the banking crisis: "signs that things have stabilized"

We do think that there's been some stabilization from the worst throes of this crisis earlier in March.  And so you can see that, for example, there's something called the forward rate agreement overnight index swaps spread.  It's a measure of bank funding costs, or credit costs, and it peaked in early March and it's come down to sort of its 10 year average, actually...  Similarly, when we look at the Fed's balance sheet disclosures weekly, and they disclose how much crisis borrowing there is by banks, and that number peaked about a month ago and it's been coming down weekly ever since.  So these are signs that things have stabilized.

~ Jason Benowitz, "First Republic stock plummets after revealing deposit exodus in March," Yahoo Finance, 3:30 mark, April 25, 2023

Thomas Phelps on patience and investing

To make money in the stock market you must have the vision to see them, courage to buy them and the patience to hold them.  Patience is the rarest of the three.

~ Thomas W. Phelps, 100 to 1 in the Stock Market (1972)

Thomas Phelps on investing, judgment and experience

Good judgment comes from experience and experience comes from bad judgment.  I've had a great deal of experience.

~ Thomas Phelps, 100 to 1 in the Stock Market: A Distinguished Security Analyst Tells How to Make More of Your Investment Opportunities (1972)

Charlie Munger on learning about investing through experience

Learning about investing from books is like learning about sex from romance novels.

~ Charlie Munger

Matthew McConaughey: "life is not easy"

Life is not easy.  It is not.  Don't try to make it that way.  Life's not fair.  It never was, it isn't now and it'll never be.  Do not fall into the trap, the entitlement trap, of feeling like you're a victim.  You are not.  Get over it and get on with it.  And yes, most things are more rewarding when you break a sweat to get them.

~ Matthew McConaughey, "5 Rules for the Rest of Your Life," 3:05 mark, January 18, 2023