Why Half of the Country’s Banks Could Disappear
Forget tech stocks. If you want to make 10 times your money, look at bank stocks.
Regular readers aren’t used to hearing that, and for good reason. You see, bank stocks aren’t Casey Research’s bread and butter. Our specialty is in natural resource stocks and making bets on assets that other investors want nothing to do with.
With that said, bank stocks obviously don’t fall in the commodity basket.
But they could be one of today’s top contrarian plays.
At least, that’s what Strategic Investor editor E.B. Tucker thinks.
I know this because I heard E.B. give a speech on the topic last week in Miami, Florida. It was one of the best presentations I heard all week.
After his talk, E.B. and I caught up over dinner. We talked about music and LA’s out-of-control homelessness problem. He even recommended his favorite parrilla (steakhouse) in Buenos Aires, my home for the next few weeks.
But the conversation kept coming back to bank stocks. He was pounding the table on them.
Today, I’ll tell you why E.B.’s so bullish on bank stocks. And I’ll also tell you why I think he’s spot-on with this call. But first, let me say a few words on the big picture…
• U.S. investors have fewer choices than ever…
If you read yesterday’s Dispatch, you know what I’m talking about.
In short, there are about half as many U.S. publicly traded stocks as there were 20 years ago. And E.B. says that the Federal Reserve’s to blame for this.
You see, the Fed has been running an ultra-low interest rate experiment for the last two decades. This has made it incredibly cheap to borrow money.
When you can borrow money for next to nothing, you spend more money than you would otherwise. Everyday people do this. Large corporations do, too.
• That’s why we’ve seen an explosion in mergers and acquisitions (M&A) in recent years…
All this deal-making has led to massive consolidation in corporate America. Just look at Silicon Valley: Facebook, Google, and other tech giants have gobbled up start-ups and even billion-dollar “unicorns” before they’ve even had the chance to go public.
The same thing can be said about every other major sector, including banking. Just look at this chart, which E.B. shared with his readers last month:
You can see that the number of U.S. banks has plummeted. There are now 65% fewer banks than there were in the 1980s.
That’s a dramatic decline. But E.B. says that “there will be half as many banks at the turn of the next cycle.”
That’s a bold call. But I believe E.B.’s spot-on with this prediction for a simple reason.
• Donald Trump is leaving the banking industry alone…
Two weeks ago, American Banker reported that financial regulations have fallen to a 40-year low under Trump:
• It’s now only a matter of time before Trump repeals Obama-era banking regulations…
That would obviously be good news for banks.
It means they’ll spend less money on compliance, and more money on growing their businesses. They’ll become more profitable. As a result, they’ll have more cash to go out and acquire other banks.
That’s why E.B. thinks we’re about to see a huge wave of consolidation in the banking sector. So consider investing in bank stocks if you haven’t already.
P.S. I also encourage you to test drive E.B.’s new advisory, Strategic Investor. By signing up today, you’ll learn about E.B.’s top bank stock. This company has an incredible track record of acquiring other banks. Because of that, E.B. says this company will emerge as a takeover target itself in the coming years. Click here to learn more about a subscription to Strategic Investor.
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