Funds profit as bank shares slide – MoneyWeek

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Second,“burdensharing”threatenstolandbankswithasignificantshareoflossesfromthedebtcrisis。

Thepolicyofrefusingtoimposelossesontheownersofbankbondsisbeingreversed。

WiththeprospectofsovereigndefaultsacrossEurope,thevalueofgovernmentguaranteesthatbanks’debtswillbeunderwrittenisquestionable。

Remember–bondholdersgetpaidfirstandshareholderslast。

Ifbanks’bondsfacelosses,aretheirsharesworthmuchatall?

Third,thepolicyofbailingouteverybankatanycostmeanssomeverybadlyrunorganisationsarestillinbusiness。

Proppingupzombiebanksisbadnewsfortheirbetter-runcompetitors,whofindthemselvesundercutbystate-subsidisedrivals。

Thatmeansit’shardforthesectorasawholetomakemuchofareturn。

Lastly,there’sstillnobalanceinmostbanksbetweentherewardsofferedtostaffandthoseleftforshareholders。

Notehowquicklymostbankchiefsreturnedtobonuses(sorry,‘business’)asusualoncetheworstofthecreditcrunchappearedtobebehindthem。

However,bankpayrollsarestillbloated–costsstillswallowupto80%ofincomeinsomeinvestmentbanks。

ThisiswhyI’mholdingthedbx-trackers’StoxxEurope600BanksShortDaily(LSE:XS7S)ETF。

Itgivestheinversereturn(compoundeddaily)onthemostwidelyusedEuropeanbanksectorindex。

Inotherwords,itrisesifbanks’sharepricesfall。