With the tenth anniversary of the financial crisis upon us, I have been thinking about the sneaky way in which the bank fortunes of shareholders can be wiped out in a single turn of the investment cycle because lending institutions are so incredibly leveraged that a sharp uptick in unallocated-for defaults can wipe out decades of equity in a matter of months, if not days.
I took the 2008-2010 financial crisis as an important exhibit of the fact that balance sheets always matter, and eventually, leveraged trash collapses into the heap. On the upside, banks and other institutions with strong balance sheets can provide an often neglected source of real, sustainable wealth because no one pays attention to them during the good times when the relatively more leveraged institutions are prospering and during the bad times chastising the collapsed entities for their lack of prudence makes a better story than … Read the rest of this article!
The post U.S. Bancorp Stock’s Perpetual Stability first appeared on The Conservative Income Investor.