We bought Bank of America at $8, Chemical Bank of NY at $10, and Central Bank (Ca) at $6. All of this during the late 1980's. Then, the question was: "Will they survive or go bankrupt." For us, it was a difficult but wonderful call. However, during the past five years we have seen Fed interest rates at historic lifetime lows. One or two percent Fed rates permit cover for bank management errors ( largely unseen to us) including unexpected merger difficulties, that cannot be absorbed without impacting earnings and dividends, in an 8 percent or higher Fed rate world.
My personal experience tells me that as we witnessed software industry shares of 1990-2000, with Oracle at $90 an Microsoft at more than $60, what the financial sector is today will not be in the future.
In cities like Los Angeles and the San Francisco Bay Area we see 1920- 1930 decade homes 1,000 square feet, or so, selling for $800,000 or more... to families earning less than $110,000 per year before taxes, with little or nothing down. Mr. Greenspan says they are not sustainable. Well, somebody is making these loans.
I wish I could foresee the future. I can't. But I know this: Most in bank management today were not in their positions during 1980's. They have never seen the impact of 13 percent Fed rates. On our side of the equation, shares of thinly traded banks cannot be quickly sold in a turn-down. "Stop loss" prices will be ineffective because the market will shoot through the bottom before "stop-loss" orders can be implemented. Am I doctor "Doom"? I hope not, but if "experience" is worth anything, it should be applied to avoid furure investment errors. The question is : Ahh ha, when is the future?
I think I was really awfully, unpardonably dismissive the last time you waxed worried about how nuts it is for folks to pay what they're paying for what they're paying (in the way of houses, among other things).
I'm concerened, too.... The fact that I was so concerned 2-3 years ago that I shorted some NY bank stocks is instructive, maybe.... Obviously, prices are never so crazy that some complete "fool" might not make a fortune "overpaying" as s/he almost "surely" is doing.... Did I mention my son paying $250K for an apartment in an "improving" part of NYC with about 600 sq. ft.? ... or my daughter paying 2-3 times that for a comparably sized apt. in a NYC neighborhood with some panache?!
Of course, one assumes that the madness has got to stop at some point.... But it does not have to end like the internet bubble.... I, too, lack the gift of prophecy, but there have been "corrections" in so many markets so many times that that is certainly a plausible (and possibly non-catastrophic) eventuality.
Sounds to me like you really ought to "get liquid" -- no bad jokes, just the sense that your angst is getting to a point where it might affect things like a good night's sleep.
I wish, too, that I didn't know myself well enough to say that when I see BMRC at 47 I'll have the brains/discipline to sell (things like that are why I'm still "in the game".) Of course, I hope for all of our sakes that it gets to that level (and other bank stocks and other stocks to concomitant levels), but if JHVH had been looking for 10 investors who had a rock solid sell discipline, the story would have ended eons ago.
I agree, it's time to take a serious look at liquidating, and the tax consequences thereof. We're in that process.
When "corrections" happen, people suffer losses. The housing market may be the driving element of the financial market change. Someplace there is a limit to ever higher housing prices and the perception of endless price increases. Today, because of legal changes home sellers may not be able to walk away from their contractual debt obligations by surrendering real property. No matter, in my view, any serious down turn will adversely affect banking profits. It's not as though it has never happened previously, it's the scale that's important.
Finally, it's always comforting to have cash in the mattress to make astute purchases, or go fishing, as opportunities later present themselves. Good wishes...