One of my favorite long time investments, since 2007, has been Bank of Internet - BOFI - as originally it was cheaper than dirt (based on book value - P/E ratio - growth) but even today on a relative basis seems investible (but I don't own it). As most people know banks pay out interest according to short term rates and lend according to long term rates (borrow short and lend long). Their profit is the spread between the two or what is known as the Net Interest Margin - NIM. With the Fed raising short term rates, and long term rates stubbornly holding low, the yield curve is very narrow and will most likely flatten more come September and perhaps invert after the following Fed raise. This means two things - all banks have a hard time growing earnings and a recession is on the horizon (based on much historical evidence). These headwinds make it very hard to invest in any stock at present and double so for banks. Here is where having patience could pay off. Sure the market and some stocks like BOFI may continue slightly higher but the buying opportunities that will arise in a year or so should be much more rewarding. Of course long term investors could still purchase a little here and a little there and with dollar cost averaging muddle through the hard times to come. However I will bide my time, stay mostly in cash (or divert cash to other non stock market investments) and hope when the next recession (and bear market) hits the Fed will have all those tricks investors have come to expect ready to roll out (bond purchases - negative interest rates - outright stock purchases). And most importantly, when the stuff is hitting the fans, we investors have the wherewithal and intestinal fortitude to follow through and buy all those stocks during the bloodbath (because it is very difficult even for the most seasoned investors to buy greedily when the panic sets in).
Disclosure: No position in any stock mentioned
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