The Banks (Again)
Jan 14, 2009
Posted by Jody Eisenman | Filed under Uncategorized
The banking stocks have been a general collapse in the last few days. Other than Morgan Stanley (who is doing a joint venture with Citi’s Smith Barney unit) these stocks are all trading near their 52 week lows. One prominent analyst told me yesterday that these banks were trading below replacement value, and in fact, were at levels that would seem to forecast massive bank failures. Although he personally disagreed that this nightmare scenario would actually unfold, the fact remains that these stocks continue to get crushed. As I write this, C is trading around 5, BAC is near 10, and JPM is around 25. Are these prices foretelling disaster, or are these stocks incredibly cheap? I’m not sure, but I would not be bold enough to buy these stocks and put them away for the long term. There are almost no securities that I would buy for the long term today, given the extreme volatility that exists in the markets.
One positive note has been the trading of municipal bonds. Muni bond prices, which had been trading at historical premiums to treasuries, have rallied dramatically in recent weeks. Although these are clearly different instruments as compared to financial equities, the fact that investors have now seen value in previously highly depressed securities could bold well for the market as well. Although I remain very skeptical of equities, I do believe that we are overdue for at least a short term rally here. On the other hand, “the trend is your friend” and the long term trend is still negative. We shall see.
