Great thread on banks. Agree with all/most. It is important that banks/financials/lending businesses are run by thoughtful risk managers, not growthy/marketing people. Many fintechs make me nervous for this reason. The former stand the test of time, the latter usually don't.
https://twitter.com/MaxfieldOnBanks/status/1371458732060598281
One of the repeating cycles you see is that after a bust where all the go-go aggressive banks/financials get wiped out, you'll eventually see a new cohort emerge arguing trad banks are too conservative/bureaucratic/slow moving; are leaving lending opportunities underserviced etc.
The actual truth is that those segments are usually underserviced because they blew up the last cycle's go-go cohort. And long term success in a leveraged biz like banking *requires* that you be conservative/bureaucratic/slow moving to make sure you don't make any big mistakes.
Another observation: really well run banks w inspired leadership do well in all cycles. Average banks rely too much on historical datasets & extrapolation of past to future to assess risk. These banks do fine until/unless there is a *discontinuity event* that busts their models.
If you're going to invest in an average bank, ask yourself, *what's in the datasets*. If the future looks a lot like the past you'll be fine. If it doesn't, there could be a problem. I won't invest in Ausy banks for e.g. because past data sets have leveraged housing bubble in it.
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