Dod101 wrote:dealtn wrote:Dod101 wrote:... in any case do not get too carried away with investing in banks. If they do well it will be for the first time in 15 years or more that they do.
Really?
They are up 30-40% in the last year. Over the last two years have doubled. Both periods appear to me to be in the last 15 years. How are you defining "do well"?
Historically they have been a very poor investment. Many shares are up significantly in the last year. I want them to do well over a five or ten year period not in one particular year. Short termism or what?
Dod
Quite, on a 15 year view banks have been a catastrophic investment and the rise over the last two years could better be regarded as the proverbial 'dead cat bounce'
In times of higher inflation banks are not a good investment. Whilst they may be able to get a higher rate margin, their underlying capital is what? Money! which is being inflated away, so they need ever more money to maintain their business in real terms. They may report, and pay tax on, nominally higher profits but their capital is being drastically eaten away by inflation. A bank with for example £30 billion of equity, if inflation were 8%, would need to retain £2.4 bn of after tax profits just to stand still.