Breathtaking move in the financials today. Just incredible. Based on what?
First, I think it is dawning on people that rates could go higher on a fiscal-cliff deal, and we are eventually going to get a deal. Higher rates mean more room for banks to make money.
Second, the Fed is saying that assets are going higher in value, and that means underwater homes go above water. That is still the biggest issue for about 10 million homeowners.
Third, we have pent-up demand for everything from shopping centers to apartments to homes to malls to office buildings, and they all require construction loans.
Fourth, our banks traded with "their" banks for the longest time, meaning that if European banks were going lower, ours went lower. There were all related.
Fifth, financial stocks have done nothing. Most people have no capital gains on these stocks, so they aren't going to sell them. The stocks are ridiculously behind the market. If the book values are worth anything, meaning that they are off only 20% to 30%, then the stocks can really climb.
Sixth, they are charging for services and getting away with it. You only see the large Bank of America (BAC) fee rejection, but tons of fees have gotten through.
My favorite: Wells Fargo (WFC). It has been a huge laggard. It is a gigantic play on mortgages, having more than 20% of the market.
Doesn't get better than that.
