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3 Reasons Banks Are Currently Cheap (I Bought More Wells Fargo Anyway)


Banks and other financials are historically cheap relative to the market and their own histories because of recency bias related to the 2009 melt-down.

The largest legitimate reason for low bank P/Es is persistently low net interest margins in a low rate flat yield curve environment (perhaps 65%).

Regulatory risk probably accounts for another 25% of the cheapness of banks, followed by potential risk from alternative lending models (10% at most).

Regulatory risk is gradually receding, and banks have demonstrated that they can still make good money in the present environment while waiting for rising rates.

I'm not...