One billion dollars? Six billion? Ten billion? More?
After scratching their heads for weeks over how much the foreclosure mess will hurt banks’ bottom lines, investors got out their calculators Thursday to tally the potential costs — and sent bank stocks plunging.
The markets are beginning to discount the growing balance sheet problems presented by what is being characterized as the second wave of the mortgage crisis.
The counter trend rally of banking stocks relative to the stock market (S&P 500) and gold ended in July and May of 2010, respectively. The break of the counter trend rally was the first sign of trouble.
The resumption of the downtrend which began to accelerate in 2007 is far more pronounced in the banking stock to gold ratio. The breach of the December 2009 swing low suggests a retest of the March 2009 panic low.
Capital, always balancing reward relative to risk, senses that the fuse on the powder keg has been lit. Perhaps the Fed’s announcement MOPE and measured liquidity is not enough? If so, is the market beginning to discount the reality hyperinflation and the possibility of more public funds? As always, the market trends will reveal themselves long before an official answers are provided.
Banking Stocks to Gold Ratio:
Banking Stocks to S&P 500 Ratio:
Source: finance.yahoo.com
0 comments:
Post a Comment