Someone get me some data on previous bull markets that not only didn’t include the banks, but also shit on them. WTI is spiking 3% this afternoon and markets are sashaying higher again. All the while, trolls from middle earth are clawing at the walls of Deutsche Bank, Credit Suisse and Barclay’s. The entire European banking system is in disarray, while ours is on permanent vacation. God willing the newly adorned Empress of America will punish them and their $3.50 ATM fees.
Naturally, if the shares of leading banks are down 20-50% for the year, credit is going to be tight. Banks cannot lend money out the door, whilst it’s being burned inside. Maybe it doesn’t matter anymore? Perhaps we’ve transcended the lucidity of balance sheets and have adapted to a world of smoke and mirrors, where share buybacks and central bank rigging is all we need?
DB is at fresh record lows.
Thoughts on the matter, good sirs?
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Hmmm, yes, carry on, indeud.
Banks are now utilities. Large pools of private capital are the new banks. And the market has gotten used to banks not joining “the recovery.”
Is apple going to enter banking with all their cash? Maybe a new model of banking similar to loan sharking?
I’d venture to say, with the benefit of hindsight of course, there are a few reasons the banks are down but markets up. The primary reason, in my opinion, is that because of the new era of massive monetary policy, while it’s buoyed the market, it’s dropped yields so low that the price of the bank shares reflect the idea that interest rates will not increase in the near future. With higher regulatory restrictions on the risks banks can take, closer scrutiny of derivatives, trading environment being difficult, minimal IPOs, and surprisingly low volume M&A activity, the only other money making activity banks can undertake is taking a larger part of the lending spread; this spread though has basically become zero.
Bingo! When and if rates rise, the regional banks will print money (provided they have position their balance sheet correctly). Obviously, who really knows what the hell is going on with the big banks; their 10k’s are hell to get through. I think if you invest with well capitalized regional banks, you can make a good return in 3 to 5 years (that assumes rates rise). Conversely, it could be dead money if we go the way of Japan….
Who knows, let the most hated bull market continue.
DB is a zero for equity holders.
Banks are like a well regulated utility. The lights will stay on but don’t expect to get rich investing in them.