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- Proposition 1: When you buy into a bank with your own money, you buy into a highly leveraged situation.
- For me, to be able to buy into a bank I love, the expected return on its stock should be materially higher than the expected return of owning a debt-free business that also I love.
- It’s important to recognize that leverage affects returns no matter where it resides; leverage adds to investment risk; and investors should seek significantly higher returns to compensate for additional risk that leverage adds to the portfolio.