Is there a big bank stock rally coming? When analyzing the group, always figure out how the bank bonds are doing. These bank bonds are on fire, just a very big run. Some bonds, like the leftover BSC bonds, just put on 5 points, taking them to par in the last week. That's an extreme example but they are all on the move. We saw this same kind of move in ZION, the best performer in the S&P 500, when the bonds zoomed ahead of the stock itself.
To me that means we are shortly about to see a powerful rally in the common. It makes so much sense, too, when you think about it, because so many people are worried about punitive banking regulation that now seems like a thing of the past. No more dilution, no need for more offerings for now for most banks, maybe we are home-free. I think C could be ready for launch, and I think the government won't start selling until we get to a 52-week high. JPM seems to be breaking out right now and represents great value. I think that BAC and WFC are going to show that this quarter showed a definitive peak in bad assets. In the meantime I think that HBAN and FHN make a great deal of sense as specs and BBT could be the big growth story out there. This move should be swift. It should be in conjunction with the passing of financial legislation. Get ready for it. We are on the verge of it happening. It's been my experience that the bank bonds never lie. Who knows, by this time next year we could see big earnings, a reversal of reserves and the beginning of the dividend comebacks!
long C calls
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