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alstry (< 20)




August 30, 2011 – Comments (3)

Bank of America sued by US Bancorp over mortgages

The banking business is no favorite of ours. When assets are twenty times equity-a common ratio in this industry-mistakes that involve only a small portion of assets can destroy a major portion of equity. And mistakes have been the rule rather than the exception at many major banks. Most have resulted from a managerial failing that we described last year when discussing the "institutional imperative:" the tendency of executives to mindlessly imitate the behavior of their peers, no matter how foolish it may be to do so. In their lending, many bankers played follow-the-Ieader with lemming-like zeal; now they are experiencing a lemming-like fate.

Because leverage of 20:1 magnifies the effects of managerial strengths and weaknesses, we have no interest in purchasing shares of a poorly-managed bank at a "cheap" price. Instead, our only interest is in buying into well-managed banks at fair prices.

3 Comments – Post Your Own

#1) On August 30, 2011 at 4:43 PM, AltData (32.07) wrote:

Mistakes -

It could be that the purpose of your life is to serve as a warning to others.

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#2) On August 30, 2011 at 4:58 PM, alstry (< 20) wrote:


Even technology companies are not immune from Zombulation.

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#3) On August 30, 2011 at 7:01 PM, AltData (32.07) wrote:

Innovation -

If it can make your job easier, it can probably make it irrelevant.

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