Don't ever accuse the banks of not giving you the buy signal. Do you recall that on Feb.11, with the banks at a low, Jamie Dimon, the CEO of JPMorgan Chase (JPM) , plunked down of $26.6 million to buy 500,000 shares in the open market at $53.18. At today's price of $80, that's worth $40 million. At the time he bought the stock he said it was cheap.
Every stock is cheap to every CEO. But when you see that kind of buying, that's not some "paint the tape" couple-of-thousand share buy that people talk about. That's real money -- what we used to call a "statement" buy. Nothing like it. Just literally a sense that enough is enough, JP Morgan's a safe place to invest.
Owning bank stocks has been a labor of love for ages. They have been terrible performers. Every time I have recommended them, I have had my head cut off because some Fed official says there's no ability to raise rates because things aren't good enough in the economy.
Now with rates really moving up, and the ten year at 2.25%, banks can start making a ton of money on mortgages and regular lending -- and the Fed has the cover to raise short-term rates because the market is moving long-term rates. It's now to the point that when you see a slate of Fed heads talking, you hope they are hawkish to keep this move going.
Banks are part of a massive under-owned portion of the market, along with the transports, industrials and the broad-line retailers. They just caused too much disappointment to own, and if you thought that Hillary Clinton was going to be President this would have been the absolute worst group to own.
Think about the strikes against it. First, there was gridlock. Remember when we loved gridlock because it meant the government would do nothing so there wouldn't be much spending? Now our builder-in-chief, President-elect Trump, gets tabbed with someone who will bust the Treasury budget -- and that's driving rates up, which is going to help earnings.
Second, a sweep in Congress or a win by the Democrats in the Senate, meant multiple years of Democratic hectoring from Elizabeth Warren, the senator from Massachusetts who had become the scolder-in-chief. That's over.
Third, the legal and compliance spend for banks was so great that it routinely impacted earnings per share. If Trump does dismantle Dodd-Frank, then you will not need as many regulators within the house and won't need as many dollars spent on outside counsel. Remember when Deutsche Bank (DB) , the Trump bank, was in big trouble with the Justice Department over mortgage issues? How about a two-birds-with-one-stone move by Trump, calling Angela Merkel the German Chancellor and pardoning the biggest German bank for previous transgressions if they make some sort of donation for moderate-income housing?
Finally, while rates are low, many people don't make enough after-tax money to be able to procure loans. With lower taxes that changes, too. More take-home pay means more lending, especially second house lending -- which has really been shut down.
Did Dimon know something we didn't? Only that his stock has gotten ridiculously low -- no matter who won. But if you go over Bank of America's (BAC) , and Action Alerts PLUS holding Citigroup's (C) , quarters, all you can say is they should have had a ton of insider buying, too.
Maybe Dimon was lucky. Maybe he's just good.