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Real-Money Stock Picks / Messed-Up Expectations Portfolio


Subject:  Re: Latest screen results Date:  5/20/2011  1:30 PM
Author:  TMFThump Number:  362 of 1287


Think I'll just cut/paste your comment about understanding financials. The wonder of it is why I have as much exposure there as I do. Every once in awhile you take stock of your portfolio and are left scratching your head as to how it came to be. In recent years I've stayed away from book value as a measure too. If you don't believe the books to begin with, which pretty much sums up my feelings, no sense giving it a second look either.

For the most part the financials I've got are what I consider legacy holdings. Most of it originated with parents and grandparents, and, after I'd absorbed the body blows of the credit crisis/financial meltdown it seemed like they had only one direction to go. The only thing I watch is the direction of loan-loss reserves and capital ratios. I don't understand banks either, but I stick to a plan that says if they are among the best capitalized and have a solid loan portfolio then they should benefit from a long awaited turn-around.

Where I made a big mistake was in concluding that the sins of the industry were largely driven by big, money center banks and that they would be the ones to suffer the most from increased oversight. I was correct on the former but dead wrong on the latter. It made sense to me, but it completely ignored the underlying politics and influence of these big financial institutions. I stuck with smaller, regional banks, and they've been squeezed the hardest.

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