A couple of years ago, I noted that not everything reverts to its mean. I pointed particularly to the price of shares in the UK banking sector. Go back to 2012 and look at them in terms of ther historical price/earnings (p/e) ratios or their price to book ratios and they looked more than cheap they looked practically free.
But I still couldn't bring myself to buy them. As I said at the time, the banking business model of the past couple of decades (taking advantage of leverage, abnormally low interest rates, and light-touch regulation to make managers rich and shareholders poor) is not a model that will be allowed in the next decade.
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