John Maxfield : Maxfield on Banks Periodization [on Youtube]

[John Hjorth]

For good reason, a lot of discussions has been going on about the banking sector here on CoBF, especially about the recent US regional banking developments, certain US banks and the Swiss CS/UBS calamity unfolding.

 

I may have mentioned John Maxfield here on CoBF before - today, I would like to share some of his work with you, because I personally appreciate it, as a guy with a sweet tooth [some may call it a fatal attraction] for banks as investments. [To make a full confession, I think I should add insurance companies and various holding companies in conglomerates].

 

Here we go : Youtube - John Maxfield [May 3^rd 2023] : Maxfield on Banks Periodization .

 

This is from a banking seminar hosted by Mr. Maxfield short time ago. I like to read his stuff on Twitter and what I can read on his Substack [the part of it, that I'm able to read without a paid subscription, that is]. He isen't trying to provide / sell investment ideas related to US banking, he is simply providing a reference and overall framework about how to think about and look at US banking over time, that I'm not aware anyone else has been trying to do.

 

Please feel free to call Mr. Maxfield a US banking historian - because I think he is.

 

Within the first minute of the video it's cut to the bone : The US banking sector is a war of attrition, and has always been through its history.

 

Through 22 K mergers and 17 K failures, US banking now consists of approx. 4.8 K banks. [Please see at 00:52 mark in the video].

 

USA does not need 4.8 K banks to have a functional and efficient banking system. Small banks will likely continue to be weeded out, if they don't have a local or regional moat [, whatever that may turn out to be], or if they do dumb things.

 

The winners long term are to me the banks with actual satisfactory capital levels, that have proved to have - over time - consistently non-stupid management.

[Saluki]

Just watched this.  Great find, thanks for sharing. 

[John Hjorth]

Thank you, @Saluki,

 

From what I have understood, John Maxfield will later release a part two, and when I see it, I'll share it here.

 

- - - o 0 o - - -

 

These days, I can't help project this stuff to Swedish banking and the carnage evolving over time in Sweden, with regard to Swedish real estate, with SBB.STO [SBB AB] and CAST.STO [Castellum AB] situated center stage. I'm thinking about who will eventually be the bag holders on that mess, which mess to me is pretty wild, while at the same time fascinating to study and experience play out in real time. I'm pretty sure it is about bad banking and wrong/missing use of the word : "No".

[Spekulatius]

I am not sure why Maxfield did not classify the period since 1980 as a new period in banking. the deregulation signed by Carter in 1980 significantly the frameworks for banking since it allowed banks more freedom to expand across state lines and also more flexibility how much they could pay for deposits. This increased competition almost immediately increased competition and lead to an increasing rate  of bank failures and mergers as is visible in the chart shown in the background of Maxfields video. 

 https://en.wikipedia.org/wiki/Depository_Institutions_Deregulation_and_Monetary_Control_Act

 

I have not heard about Maxfield before and went down the rabbit hole and watched some other videos of him hosted by 7investing and some of his statement make me question how competent he is. He at some point claims that there is no way to tell what is going on in bank just studying the financial statement . He instead focuses on studying the people running the bank. While I clearly think that people are important, there is a wealth of info from required statements like FDIC reports, that clearly give a lot of insight. This information is also structured the same way for all banks which is very impotent since you can compare banks that way. Maxfield mentioned none of this.

 

Maybe I am just misinterpreting an isolated statement but this and a few other things quickly sour me on this “expert” somewhat.

Edited May 14, 2023 by Spekulatius