By David Gillie, Contributing Editor and subscriber to ETF Digest
NEW YORK ( ETF DIgest) -- Remember the day when you used to deposit your paycheck into your hometown bank? (Notice the ashtrays at the teller windows.) The teller recognized you and knew you by name. Her name was Helen, right? She went to school with your sister. Believe it or not, these banks are still around. And doing quite well, I might add. S&P Regional Banking ETF ( KRE) holds many of these banks. In the banking business, smaller is better. Regional banks are actually in the banking business. They make loans to small businesses, write mortgages to people who can afford to buy homes (and do the due diligence to ensure that) and their executives don't receive exorbitant salaries with multi-million dollar bonuses. Unlike their behemoth brethren, they don't leverage their assets 40:1, they don't buy and sell high risk assets not even knowing what's included in them (mortgage-backed securities and Ponzi schemes); they don't have proprietary trading desks with a trunk line to the casino; they're not loaded to the gunnels with European junk bonds; and, most important of all, they didn't gamble away our money and then have to be bailed out with our money.
Unfortunately, as a high tide raises all boats, a low tide sinks all boats. Since 2009, anything in the financial sector has been considered toxic and this has been one of the worst performing sectors dragging these good banks down with it. Now that we're seeing a little relief in the U.S. economy and the media has quieted in Europe (at least for now), regional banks are the first in the financial sector to recover.