Bank Stocks Leap While Tech Struggles

 | Oct 16, 2013 | 6:38 PM EDT
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Shocker: Tech is hard. Shocker: IBM (IBM) screwed it up again. Shocker: There are woes at eBay (EBAY) again. What else is new? OK, a little sarcasm, not shocking at all that these two companies are doing poorly. What is shocking is that after they report bad quarters, people get behind them and bull them right back up until they report the next bad quarter.

But here is what is really eye-opening: the financial services numbers and, just as important, the reaction to them,

JPMorgan (JPM) had one of the most difficult quarters imaginable for one particular reason: The company seemed resigned to paying legal fees and penalties for as far as the eye can see. It was almost as if you could hear them in the back room saying, "We have to fight, no, we have to settle, no, when we try to settle they move the goalposts," and on and on.

What did people do? They ignored this and liked the underlying.

How about Wells Fargo (WFC)? I was off that day, having only read the release but not seeing the reaction. I figured it would be off a buck. No, it  has become go-to again.

How about the cleanliness of the Bank of America (BAC) quarter? Nice loan growth. Good margins. Terrific wealth management. Not a lot of litigation, since it settled when the settling was still good -- it only just seemed egregious at the time. I think that stock is going to $20 in 18 months.

Today I listened to KeyCorp (KEY) and then had CEO Beth Mooney on the show, who has delivered a 44% gain for the year for shareholders, of which my charitable trust is one. The loan growth there's very strong, the net interest margin basically unchanged. Yet the stock is ridiculously low compared where it was when the Great Recession broke out. That's despite the oil boom that's huge in her biggest territory, one that is creating vast wealth -- and sweet loan growth -- for many.

So, sure, lament tech, which has too much government and too much secular decline in it to make it as palatable as it needs to be, given that it is 17% of the S&P 500. But don't forget the other 17%-er, the financials, because they are just plain on fire.

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