Wednesday, April 13, 2016

Banking industry bounce

It makes sense that many retail equity investors would invest more in the industry that they worked in for their time in the business world than they would in other areas.  It might not be best for diversification but it could be better for their performance.  They would have opinions and knowledge about that area that might dwarf what they know about other businesses.  For that reason, today was a good day here.

Banks have been on their backs for months for a variety of reasons.  Investing and trading in them over the long term has been a good experience here and, except in extreme events, the yield is reliable. What is also reliable is that they will go through sluggish downturns.  Following JPM's earnings report today, the market bounced, more on the notion that there was no bad news than some spectacular earnings performance.

The result was that investors can see that there is potential life in this sector.  Big banks did well, with JPM up 4.2%, C up 5.6%, MTU up 4.7%, and BAC up 4% among others, and the small banks followed here like CUBI up 5.6% and FIBK up 3.7%  participated as well.  Whether this can be seen as any kind of inflection point is unknown, but any sign of life is welcome.  It is clear that institutional investors had been sitting on their hands waiting for a signal that they could move, at least for a day.

There had been a small glide up from the absolute doldrums since mid-February, but not enough to be especially reassuring.  Now we wait for the follow up

Here I chased a foreign bank that trades on the pink sheets all day, and missed on three attempts as trading with limit orders is essential for stocks like that.  I had been following the stock for several weeks closely as the new management team is exceptional(the stock was up 9% today).  If I am typical at all, and if that is typical of the overall bank equity market, tomorrow could be positive as well.  That I am typical may be a bad bet.


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