Bank Stocks: Proceed with Caution; Huh?

The International Herald Tribune ran with this article (PDF) recently. An excerpt:

Sticking with institutions that safeguard money instead of taking big risks with it may be the best course after a multiyear expansion, especially given the penchant that bankers have for poor timing. It is always possible that they have learned from past mistakes, but Sellar, for one, is not willing to bet too much on it. “I don’t think they’re more resilient,” he said. “They try to talk good talk about improved risk models and stress-testing different scenarios, but you’re never able to know which scenario will lead to a blowup. A lot of them didn’t manage to miss Enron.”

The ending analysis, at least the Enron part, is on target. The problem is the ‘squishy’ way they get to that understanding: its all fundamentally driven.