The Banking System: Don't Be a Hero

June 19, 2016
USA Today: What to do if you’re in a bank robbery

1. STAY CALM
2. OBSERVE THE ROBBER, IF YOU CAN
3. DON’T BE A HERO
4. BE COOPERATIVE, UNLESS …
5. DON’T COMPARE NOTES WITH OTHER WITNESSES
6. CONTINUE TO BANK CONFIDENTLY

1. Stay calm as you sell all of your banking stocks at the early stages of the financial crisis. Always better to calmly sell early, than sell late in a blind panic.
2. Observe the bank CEOs, if you can. In times of trouble, they can be elusive. Do not lose hope. For those who are patient, simply wait for them to testify before Congress. Watch them squirm for taxpayer bailouts.
3. Don't be a hero. Don't deposit more money in the weaker institutions until the crisis has passed. You'll know when the crisis has passed. Interest rates will be normalized to what they were just before the legendary dotcom crash, because nothing is more normal than that.
4. Cooperate. As they say, don't fight the Fed, unless fighting the Fed involves buying long-term treasuries before the Fed does. If that's the case, fight the Fed with every fiber of your being. Don't let the Fed win! Gobble them up faster than they can! And should you ever "need" to sell instead of simply holding to maturity as I intend, then be prepared to potentially fight the Fed again. Sell before they do or you might regret it, unless, of course, the Fed intends to hold to maturity too, like they've been doing.
5. Don't compare notes with other witnesses. The last thing this country needs is a bunch of naysayers continually pointing out the weak financials. Whatever you do, don't start an Illusion of Prosperity blog. Oops.
6. Continue to bank confidently. 25-sigma events are relatively rare. The odds of two of them happening in one lifetime are probably less than 50%, unless something unexpected happens. You know, like the sudden appearance of a flock of black swans flapping to the beat of the Candy Mountain song.