Richard Bove
Richard Bove
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I wouldn't own any bank stocks in the Midwest. They're exposed to the problems of the auto industry and the Ford layoffs today are just the latest example.
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The problems in the credit card division are structural, and kind of long-term,
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It is significant because it expands J.P. Morgan's distribution capability without forcing the company to buy anything. It also allows Fidelity into the new issue game without becoming an underwriter.
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Midwestern banks are accustomed to shifts in the local economies. They plan for it. However, they do not avoid it. They get hurt. Their loan losses rise. Their earnings tumble and their stock prices are impacted. It will happen again.
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The ability to utilize those marketing programs is going to be enormous for Bank of America. You'll see a significant increase in the bank's credit-card activity now that they have MBNA.
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This transaction, if it occurs, would be a major plus for the company.
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Treasury prices have been rising and oil is up and down,
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From 1965 to 1982, the yield curve in this country was inverted 47 percent of the time, yet bank earnings averaged a more rapid increase than non-bank earnings. Bank stocks also outperformed the S&P 500, on average, over that period.
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But that cycle is over. The banks are going to get squeezed.
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Imagine the doctor who built an office next to a Ford factory. If the workers lose their jobs and those benefit plans disappear, this doctor isn't going to be able to afford his office.
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You have to have scale in this business. By doubling the size of their credit-card business, Bank of America will lower their cost of handling each individual account.
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Mr. Oken may have lost some credibility with analysts when the bank's net interest margin dropped dramatically,
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Ninety percent of a retail bank's primary business is lending money on residential real estate, and that cycle is over.
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It would have been difficult for Goldman not to do well. Goldman is more oriented to equities than debt, and stocks rose throughout the period.