Risky Stocks>“As a group, the nation’s savings and loan associations and savings banks lost a staggering $6.4 billion in 1981—far more than the losses of the beleaguered auto and airline industries combined. Faced with the prospect of even larger losses this year, hundreds of thrift institutions will simply not survive.”—Newsweek, March 15, 1982
Around this time, people were saying it was not only unsafe to buy S&L stocks, it was unsafe to put your money in S&Ls on deposit, because many feared there wasn’t enough insurance in the world to cover all these banks. Meanwhile, Charles Brandes was buying S&L stocks for a discount to the net cash reserves of the company. In essence, it was like buying money at a 50% discount. If you were brave enough to do that, a lot of these S&L stocks went up 5- to 10-fold, if not more, over the next five years. But how many of you, left to your own devices are going to buy “S&L stocks” (e.g., high risk) in that kind of environment?
If you’ve taken the time to put together a financial plan, and work with a financial planner to tweak as you go based on what’s happening, you’d know whether you can “afford” (both financially and mentally) to add something like S&L stocks (maybe today’s version is Citibank or Bank of America) to your portfolio.
