kidstock asked the question recently:
“Alpha –
What do you make of JPM, WFC, BAC, PNC all trading above 200 Day MA. Sign of strength…no?”
kidstock—
In a word, yes. There are a number of banks that have been annointed as the “golden children”. In effect, our government has said they will survive, because they are “too big to fail”. Three of the four you named above are in that group. I think the others are C, GS and MS.
In my view, these banks are going to get stronger over time. With open access to the Fed, an egregious bailout, and the prospect of another rate cut, margins will be at the highest levels—-ever, going into the new year (assuming a reasonable bailout package).
Also, consider that they’ve been able and may continue to be able to acquire other banks assets at pretty steep discounts. It can’t be that bad for these banks in the long run.
Consumer banking and lending may be dead for a while, but commercial banking as it pertains to these guys should be pretty darn good. In spite of the “slowdown” / “recession” we’re experiencing, consider that the earnings for the eight sectors ex-financials and ex-consumer discretionary, have increased Y-O-Y. The risk is that the recession will worsen from here—something that I see as a distinctly high probability.
That said, technical analysis of the price action would seem to point that there is demand for these stocks, despite anecdotal evidence to the contrary.
Perhaps Hank’s colorful urging to, “buy the banks, now!…or we’ll kill you!!”, isn’t such a bad idea as long as you cherry pick through the annointed ones.
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