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Anton Schutz of Mendon Capital Advisors discusses whether the current set up of the world’s big banks has them set up for failure.
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Should invest in these very financial firms he's president -- capital advisors runs the Burnham financial industries fund and the financial services on -- guest on this program and Todd.
What do you say about the current state of financial firms that -- just wrong.
Well he is unemployed and he's been unemployed since he lost his job -- at Lehman so.
He was nothing whistle -- -- up there was right.
But I think he's pretty wrong about the shape of the industry today.
And I'll tell you a whole lot of points first of all the really bad stuff has been written off and has gone.
There though there -- lot of mistakes made leverage is.
Almost at all time lows in this industry any leverage kills in every example you can find history leverages -- is the culprit -- sure they have some bad stuff but.
That too much leverage the industry's well capitalized they've built up reserves so again you know that's off the table.
And on top of that you've got supervision.
That is so much stronger than ever that if this guy can't find a job I mean lots of people -- gotten laid off on Wall -- are now regulators -- mean they've really.
Had the chance to upgrade kind of people they've been able to hire and the budgets to hire them.
So -- I'd say the regulators clearly they were asleep the switch when this crisis before this crisis happen.
They are really strong now they -- strong people and you know they clearly.
Pendulum swung the other way.
Did you don't think that that these firms -- Anton.
In terms of understanding what they own and how they -- it.
There's no doubt these firms are complicated I mean.
Risk management systems are certainly better more robust than ever.
But you can solve complication by having really strong capital and that certainly one way.
And you solve complication by having the regulators' action understand what they're regulating and and their way better at it today than than they war.
Crystal lots of instruments on those books that are complicated but I can tell you that.
There's -- -- MIT -- of people building models for these firms anymore to build new products their development people and risk management that are.
Really trying to understand what is -- putting on the books and and -- by the way if you really spawned this whole crisis with Fannie and Freddie.
And all securitization issues well you know that's just really not being underwritten today and -- -- being securitized to put on the books.
Many of these financial firms and this is what you they've had an incredible run this year and you're seeing weakness in them today clearly.
Do you think that that run is over on this looking at some of the names your overall financial.
About select sector spdr is up more than 50% year today still Bank of America up 48%.
Goldman Sachs up 23%.
Do you think that these stocks did get ahead of themselves -- Anton.
Well I mean they performed so poorly last year.
And likes of the balance sheets are much much better shape I mean the currencies has been pretty terrific and most of them -- -- on a couple of disappointments.
And you know that the C -- results in in March from the Fed really -- -- stronger balance sheets were the ones that failed other than ally.
Failed only because they asked to return to much capital shareholders -- -- -- re submitting plan suntrust is one of those obviously.
They're having and I stated -- so no I don't think they've gotten ahead of themselves at all.
They're still pretty cheap.
Europe's a wild card obviously the worst performers today are the ones that are the biggest banks that the macro hedge funds -- short.
And obviously they -- covered him earlier this year because they could re short European financials again.
-- anti it was terrific to talk.
Always a pleasure -- welcome back -- and conscience of many capital.
