Wells Fargo Caught Red Handed... Again! Does it Even Matter?
According to Yahoo! Finance and Reuters, Wells Fargo was caught falsifying documents again.
This time it had to do with details on business bank accounts like owners' names, dates of birth, social security numbers, etc.
There are two points that immediately come to mind:
- Why do people still have accounts there?
- From an investing perspective, does this even matter?
Wells has been caught 3 or 4 times now just in the last few years faking data. So I decided to take a quick look at the stock over the past 5 years along with Bank of America and Citigroup.
Here's the chart:
Note: this is just stock price and does not include dividends or reinvestment
As you can maybe see, WFC's stock price has done surprisingly OK given that they are basically a fraudulent enterprise. For about 2 years during the 5-year period it was outperforming both BAC and C. Right now it's about even with C while BAC took off in late 2016 and is beating them both.
So I ask myself if this news even matters. Yes the stock price is down a few points today so if you're a day or swing trader you can probably make some money here.
But the bigger, long-term issue is that WFC is part of all the big indexes. So those S&P 500 mutual funds are putting their bi-weekly payroll contributions in week after week. And while it might only be a small portion of someone's 401k holdings, I wonder how many of those people would actually put the same amount of money into WFC if they were given a direct choice.
I'm not the first to point out this kind of thing as a major issue with passive investing, but it still drives me nuts. WFC stock is essentially receiving artificial life support from passive index investors. I'm sure the executives whose compensation is somehow linked to the stock price are smiling all the way to the bank. But I bet they use a different bank.
So no, I don't think this will do any serious damage to the stock price. Long-term however...
Crypto will kill the banks eventually. We in the crypto-sphere already have better warehousing functionality than banks. Transaction scaling is coming along. The two major issues remaining are acceptability and pooling capital for lending. Both of which are starting to see a lot of work being done.
Upvoted ($0.17) and resteemed by @investorsclub
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Nice post. It doesn't matter...Smart Money just bought the dips. Also, Buffett revealed that Wells Fargo is Berkshire's largest stake, worth $29.2 billion last month.
Yes iirc brk is at the max at 10% ownership in the company
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