I was lucky to get to speak to Mike Mayo for work. Here's the interview (in two parts). If you like this sort of stuff, you should subscribe to Inside Investing.
“I realized that when I couldn’t understand something that a company was saying, it wasn’t my fault.”
Mike Mayo, CFA, is an outspoken analyst and a notable expert on the banking system, but the above statement is perhaps one of the most important things to come out of our hour-long conversation. In a nutshell, Mayo is saying that companies are responsible for providing good disclosure that is intelligible.
This is an important lesson: often, poorly written or difficult to understand disclosure leads investors to believe that the underlying dynamics of the business or investment are impossible to understand. In conversation with Robert Stammers, CFA and me, Mike speaks about how investors should go about analyzing financial institutions, gives his views on the present state of the industry, and talks about the surprising tack that he adopted to gain access to company management. We also treat some of the topics he raises in his excellent book, such as the accountability of the banks, their governance structures, and the role that they have played in economic history.
This is part two of an hour long conversation with Mike Mayo, CFA, a banking analyst at CLSA and author of Exile on Wall Street, which details his long and very interesting career.
We start this portion of the conversation by talking about the peculiar nature of growth in financial companies. Mike explains that one of the most important things to remember when analyzing a bank is that their product is money. To grow at an above-average clip they can simply sell more money or—as it is typically described—make more loans.
When asked to categorize the various banks that he analyzes, he makes a distinction between two types of banking companies: banks that are well-run and banks that aren’t. To hear how he analyzes that, please listen to the podcast below! Part one can be found here.