Pay Attention to Management Pronouncements

In keeping with the dictum that tough times expose true character, now is a great time to pay attention to management pronouncements. If we read one more statement like this one from Royal Bank of Scotland CEO Tom McKillop, in announcing giant writedowns and the need to raise $24 billion in new capital, we're going to be ill: “This is a difficult time for the financial services industry, and it has presented us with specific challenges.” When times were good, we must have missed the memo saying, “This is a wonderful time in the financial services industry, presenting opportunities to make money hand over fist without paying much attention to credit standards or what we really own.”