| SCOTT WELSH
Bank Talk
In the last few weeks, you’ve probably read 100 bank disaster articles:
This could be another 2008!
Your bank could fail!
Hide your cash under a rock!
But it’s not 2008.
Back then, banks were ignoring the houses foreclosing in their own neighborhoods, while taking free money in the form of highly-leveraged derivatives based on false mortgage grades from suspect rating companies.
And none of the banks really knew what their risk was – and couldn’t find out because the derivatives were illiquid.
This time it actually appears different.
This time the banks blatantly ignored obvious risk with ordinary financial instruments for reasons we can’t quite fathom.
Not the same thing.
Ridiculous, but not the same.
And while there’s still a danger of more banks going under, there’s not a danger of the financial system collapsing.
In 2008, that was a real thing.
So, if that’s the case, if we’re not in mortal danger, what can we do?
We can do what Warren Buffett does. We can buy when others are fearful.
But not blindly, of course.
We can buy when we get a signal.
The Financial Select SPDR Fund (XLF) is a financial ETF, and – not surprisingly – it’s been hit hard lately.
If we’re not in serious trouble, though, this just means we’re getting an opportunity.
Back during the pandemic, buying XLF when it broke above the long-term moving average and into a new high that could have been a 60% winner.
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