Methods To My Madness

After last night’s debate, it would appear that at least one of the three pillars of my speculation strategy could be at risk.  To review, 65% of my portfolio is allocated into buckets of Anchor, Core, and Satellite categories.  The remaining 35% is loosely split into what I refer to as Speculative Pillars.  These are theme-based sections that I feel can be rewarding – at least in the short term:

  1. Cord cutting
  2. Transaction Processing
  3. Regional Banks

I will address my thoughts with #1 and #2 in a later post.  But last night the Republicans put #3 squarely in their cross hairs.  My thesis addressed here and here, is that regional banks are good investments not for their dividend but for their M&A premium.  The key to profit, I argued, was to own the bank being acquired. The trick is figuring out which is which.  Mergers in this space are rising due in part to the costs imposed by Dodd-Frank.

Maybe it’s only rhetoric, but perhaps the candidates should be reminded of the number of bank failures pre-Dodd-Frank and if Dodd-Frank is repealed, what happens to the Basil accord and the US’s ability to compete internationally in the banking sector.  Until then, I’m now following the race a little closer.

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