So, no small banks are no invulnerable. But, traditionally they are a great store of value, simple stocks that rely on simple economics. Also, they never sell at extraordinary valuations. Despite remaining cheap FOR YEARS, they can gown by 10-12% in an ordinary economy. We don’t have that kind of economy, but I betting that by next year, interest rates settle into a more normal pattern. That pattern would be a very slow drift upward in rates along side a slow upward drift in inflation. Sticky inflation. Not scary inflation, just persistent.
The late 1940s to early 1970s were consistent with this pattern. There were some other characteristics, the middle class expanded, ordinary “Main Street” businesses did very well, and small banks followed along.
Without sounding too political, that older period was one of bi-partisanship. Frankly, the Republican Party was nothing like what we have now. Republicans were fiscal conservatives who insisted that debt be paid. During and after WWI, when federal debt levels were high, the wealthy paid very high taxes. Republicans of the time, Eisenhower most notably, were OK with that.
But, after that a drift started to occur. IMHO, it was NOT a good drift. Republicans started actively wanting to intervene: cut taxes, cut social programs (which were working IMHO), and “stimulating” the rich. While their programs were not initially successful……….AND part of the problem was the growth was beginning to slow due to natural, demographic forces and pushes for free trade, however by the time Reagan came along, there was a near unanimous force for lowering taxes on the wealthy with the supposed “supply side stimulus.”
This proved elusive. I’m being generous; there was no proof it worked. Rather, modern research seems to indicate that at least moderate high taxes on high income people actually stimulate growth, not vice versa.
I’ll sign off now. Suffice to say that I’ve grown ever stronger in my believe that, despite some minor hickups, small banks are a great place to sit for the next 10 to even 20 years.