Better balance sheets. That's what seems to be motivating the move in the banks.
They have been cleaning up their losses and taking them. They have built capital. They are in the opposite shape of the European banks. And they are making for crummy shorts for the moment, if hedge funds are making bets against them because they can't short European banks.
Let me say point blank that a better balance sheet is not enough to own a bank. You need earnings, real earnings based on net interest margins on loans and on banking fees. You need revenue growth to show that there's a better demand for loans out there. You need some how to be able to build a model for earnings.
I don't see how that can be done off of Bank of America (BAC) or Goldman Sachs (GS) or even from Wells Fargo (WFC) or JPMorgan (JPM).
That said, if the balance sheets are improving they are poor proxies for the stocks that people really want to get short, namely the big French banks (but also the Italian banks that people feel are on death's door, true or not).
So, the group rallies. We can have several days of rally. We are going to get to some regional banks that might even have something positive to say because they are not hobbled by weak investment banking.
Still, I don't care for the group. It doesn't have what every other group I follow has: a compelling story for 2012 when it comes to sales and earnings.
Balance-sheet improvement is not enough to move the needle long term, even as it can certainly cause a squeeze as it seems to be doing today.