Should Investors Buy Bank Stocks?

The answer is an emphatic YES if you believe that they will, in the end, get away with the biggest economic heist in human history. Lest you think otherwise, all the evidence points in the direction of the Banks prevailing. The enforcement actions brought by law enforcement and regulatory agencies has been tepid at best allowing the banks to settle claims for less than a reserve for defaults in a typical loan portfolio. Law enforcement has concentrated on civil actions rather than criminal actions presumably bending under pressure from policy makers who have swallowed “too big to fail” hunk line and sinker. And there is a virtually unending supply of money — real money as well as shadow money that might aspire to real value — to support fictitious transactions as the ill-gotten gains are laundered back into the banks and reported as profits from proprietary trading.

All this was predicted in exquisite detail when I wrote about the bank blueprint for action back in 2007-2009 in numerous articles. Absent a turnaround by policy makers, the whole thing will be dropped in favor of allowing the banks to corner the market on natural resources, which is now providing cover for trillions of dollars siphoned out of the world economies. So profits will go up at whatever rates the banks wish to announce and so will dividends. Earnings growth will accelerate causing the stocks to achieve price-earnings ratios never awarded to banks. Each dollar reported as “earned” becomes $20 of equity. It is quite a successful game they are playing, but the rest of the world is paying for it and that is the risk factor. How long will the world tolerate increasing income and asset disparity or will people rise up and upset the apple-cart just as they have done hundreds of times in world history. Since the banks have the next 50 years of earnings and dividends covered already, it seems a fair bet that they will return many times any current investment over the short-term as well as the intermediate and long term.

But there is another side of the story. This great escape of the banks, this avoidance of accountability may not work. The entire strategy is subject to lynchpin dynamics — such as the unavoidable discovery that most of the assets reported by banks are fictional (although they can be replaced by assets held abroad in natural resources). The number of Judges is increasing — who reject the improper and illegal submission of pleadings, service of process and proof through through professional witnesses. If this reaches critical mass, the entire foreclosure apparatus could collapse leading to more inquiries, lawsuits and potentially indictments. In that case, the banks that engineered this crisis might have their “earnings” discounted and even offset by huge judgments for damages payable to investors and borrowers.

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