Searching for a Home Run

Last night, as I sat watching the Yankees bounce themselves out of the playoffs in an eerily familiar October scenario, my thoughts wandered toward bank stocks and the banking industry. That happens a lot these days as banks are quickly becoming one of the cheapest assets in the financial world. We have covered all the reasons for this countless times. The credit crisis, a changing regulatory environment and fiscal policy have delivered a series of crippling blows to the industry. Unquestionably banks, especially smaller regional and community banks face a hard time for the next few years. Equally true however is that given the pricing of many of these issues, if the world does in fact survive long term investors who can deal with the probable volatility in the sector can make an enormous amount of money over the next decade.

As I watched A-Rod strike out with the bases loaded -- ending my hopes of a Yankees-Phillies World Series -- it occurred to me that there is another way to make money off the weakness in the banking industry. When I was a broker, my firm made a market in dozens of these community banks -- and for a long time, we had the marketplace pretty much to ourselves. As banks were beginning the merger wave following the savings-and-loan (S&L) crisis and changes in interstate banking laws, it was profitable -- and to be honest, a lot of fun. In the 1990s, a competitor began to slowly but surely take business away from us in the bank stocks. It had a larger research department and its focus on investment banking in the sector eventually gave the company the control of regional bank stocks that had been ours. Although they have stumbled and struggled since the 1990s, FBR Capital has survived and is still a strong presence in the bank stock sector....392 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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