The financial-deregulation bill passed by the U.S. Congress this week is the latest phase in the eternal tug-of-war between regulators and banks. As fast as governments impose limits on the financial industry, banks, brokers and other firms fight back.
It’s been happening for millennia, and it probably will keep happening until the end of time. To invest in financial stocks, investors need to understand this cycle and where we are in it at any given point in time.
Proponents of regulation and deregulation alike tend to underestimate how soon and how far the pendulum will swoop in the opposite direction.
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This article was originally published on The Wall Street Journal.
Further reading
Jason Zweig, Your Money and Your Brain
Jason Zweig, The Devil’s Financial Dictionary
Benjamin Graham, The Intelligent Investor
Jason Zweig, The Little Book of Safe Money