Home
Audio Archives
Client Letters
OID Features Online
OID.com Exclusive
Features
Indexes:
Investors
Funds et al.
Companies &
Investments
Contact Us
Online Advertising
Online Classifieds
Employment
Opportunities
About Your
User Name
& Password
Portfolio Reports
Home Page
CARRET & COMPANY'S PHIL CARRET
(continued from preceding page)
""He went to see his friendly banker. The banker had a desk with a drawer that he could pull toward himself or he could push it out toward his customer. Well, the customer would sit down and explain that he wanted to borrow so much money. And the banker would say, 'Of course, you know the legal rate of interest is 25%.'"
"'Yes.', he'd respond."
"'And there are some fees and charges of another 6% on top of that.'"
"'Yes.'"
"'And, of course, you'll leave a compensating balance of so much.'"
"'Yes."'
"And then the banker looks him in the eye and says, 'Now what else will you do for me?' and shoves the drawer out toward his customer, Personally, I wouldn't want to try to do business in that kind of an environment."
Warning bells should be standard equipment for bankers.
"Second, money center banks made reckless loans in the oil patch at the peak of the oil boom. Economics is not quite so simple a social science. However, economic wisdom can be compressed into the old saying, 'What goes up, must come down.'"
"A banker might keep it in the back of his head. When a prospective borrower wants to borrow 80% of the current value of a property which has appreciated 300% in market value in a few years, a mental warning bell would be a good thing to have."
"Third, real estate is a notoriously illiquid asset. In making a loan to a developer to build a new shopping center, perhaps a banker should inquire - or at least wonder - whether some other banker may not be about to lend money to a competitive developer for an even bigger shopping center in the same general area."
Another loaded gun for the banks to play with....
"A beneficent government is about to give them a new area in which to operate - the provision of brokerage services. Perhaps a word of caution is in order."
"John Q. Public, an individual with a few thousand dollars in his checking account, could watch with indifference the errors of judgement committed by his bank in recent years. If he is asked to entrust his funds to a new bank employee to operate a speculative account for him, stop, look and listen should be his watchwords."
"One can only hope that bankers acting as brokers will do better for their customers than many of the loan officers responsible for massive charge-offs, restructuring and other phenomena of the last few years.
If this one's at risk, we're in far deeper than we know.
"The crisis in banking has driven prices of bank stocks to near record lows. Should a contrarian look for values in this area? I think the answer is yes."
"Granted, any attempt to appraise the assets of a bank is a mine field full of booby traps. But there are at least some indications of quality aside from a bank's general reputation. With some trepidation, I offer a suggestion of a possible bargain."
Page 5 of 9
|
(continue to the next page) |
©Copyright 1996-2008 Outstanding Investor Digest, Inc. All rights reserved.
295 Greenwich St., Box 282, New York, NY 10007 (212) 925-3885