Over the past six weeks, our clients have come to us with a wide array of emotions and questions. They’ve ranged from great concern to unabashed enthusiasm, and everything in between. On the upbeat calls, one question initially caught me off guard — “What do you think of me borrowing money and investing in bank stocks?”
I was surprised because usually this strategy comes up when markets have been good, and lenders are begging us to borrow money. Obviously, our current circumstance is quite different. Markets are down and have been hyper-volatile, partially due to the use of debt. Margin calls have caused forced selling which in turn has exaggerated price declines.
Look in the mirror
Nonetheless, I’m delighted by this contrarian thinking. After all, money is cheap and stocks are down, so the economics of borrowing to invest make sense. In the case of banks, the Big Five now