Buy Bank Stocks for Your Kids

They were babies and Gerber baby food was in the right place at the right time.

They were teenagers and McDonalds was in the right place at the right time. 

They were adults and home builders, and mortgage companies were in the right place at the right time.

They are getting older now and health care services are in the right place at the right time.

Dr. K. Foot, wrote a great a book about them. “They” are the Baby Boomers.

I went to a Primerica info session last night - a Citigroup company.  According to them, $1.5 trillion dollars (over and above the norm - which, I still have to look into) will change hands (just in Canada) in the next 15 years.  This is going to happen as the currently ~45 to 62 year old baby boomers start to distribute the pile of wealth they call nest eggs.

Where will the money flow?  To their kids, travel, and luxury, are my best guesses.  Looking at the kids, what will they need?  Financial services.  That transaction will cause an influx of opportunity in fees and commissions for brokers, financial consultants, fund runners, insurance companies, etc. 

It’s amazing how this minuscule drop in the bucket, known as sub-prime has all these stocks bottoming now (by “now” I mean +/- 6 months) at just the right time.  I know the problem is on the order of 100’s of Billions, so by no means is it a non-event, but the market will bottom and the uncertainty is likely priced in now (emphasis on ”likely”). 

I don’t think it’s possible to loose very much more money from these levels, although Bespoke did note that PE’s have climbed from 10 to 15 on the sector in the last month or so.   I have not had time to look into specific names yet, as I have been staying away from the “uncertainty” myself and have not held a financial stock for myself in over 5 years.  But now, I think it’s time to start shopping for bargain 15 year plays in the sector.

Then again, I have a great deal to learn on how the real-estate bubble essentially created by boomers will effect this “opportunity”.  It’s complicated, and worth noting.  Housing sky rocketed when Boomers all needed housing, and now the sub-prime caused a deflation in wealth and in the the post war real estate market, just as Boomers are going to stop actually needing the tons of square footage they have accumulated. 

This is a real problem, smaller houses are going to start looking more attractive than “Big, hard to take care of houses and properties” that were once the “American-white-picket-fence-dream”.

Comments

[locke]

Why buy XLF when you can buy UYG? It has twice the performance with only 1% expense.

[Reinko]

Just unbelievable how those 'now is it time to buy financials' keep on popping up.

In fact combined reserves of the US commercial banks is negative; at the moment it is 18009 million in the red. Combined reserves are declining at over one billion for every working day and the end is not in sight by far.

Do not believe me? Go to the Federal Reserve h3 release (there are the combined reserves listed) and look in the column 'non borrowed (3) and scroll down till you see the latest update: -18009 million...

Here is the link:

www.federalreserve.gov.../

I would wait until stuff is in the black ink again!

[Whisper OnThe Wind]

Locke: One word - dividends.

[blah-blah]

I love dividends

[locke]

Merryclicker: XLF and UYG pay similar dividends, and both funds track the same index. Indexes include dividends... don't they? Explain.

[TPoise]

Try PGF (PowerShares Preferred Financials) for if you're looking for dividends.

(Full Disclosure, I am overweight PGF)

[McLarty]

locke: I wrote the piece, Seeking Alpha editors associated it to XLF, so I can't answer your question.

Reinko: You sound much more informed than I, this piece was written after I spent a couple hours with some folks at Primerica. I haven't read a single opinion yet from anyone else on the topic. I just wanted to share my two cents and some info on a demographic trend I'm beginning to research.

Good Luck All!