The banks -- always the banks. We got a bounce today, but is it for real? The headwinds keep building: bad oil and gas loans, less of a chance of a rate hike, foreign banks in trouble, very little investment banking.
But at the same time these stocks are cheap, cheap, cheap. Even Wells Fargo (WFC), which is always expensive, is cheap.
People want to ascribe a crisis to everything. Is there one? I know I am sitting down with John Stumpf from Wells Fargo, which is part of the Action Alerts PLUS portfolio, to ask about these issues. But the big problem I have is that shorting these stocks has become almost too easy. You can't have all of these issues hanging over the group and expect them to advance.
At the same time, though, they are going to make an immense amount of money. They just can't demonstrate it and no one seems to trust their earnings power.
It's almost as if we are back to the old days¿bad loans in oil and gas, which seem like bad loans in housing but with less collateral, and at the same time dividends that aren't high enough to forestall bets against the group.
Now, I know that, for example, if Action Alerts PLUS holding Bank of America (BAC) would be able to buy back stock, it could truly help its earnings per share. If it were allowed to boost the dividend -- meaning the Fed would relent -- it would help, too.
Because I have never seen a solvent bank trade at this level of a discount to true book value.
Here's the problem, though: You get this discount, why can't there be a bigger discount?
That's the real question.