«Money makes the world go around», and most of the money in this world is in the banks. Simply because it is their product. They sell money like hot dogs on the corner. How hot are bank stocks at the moment?
Bank stocks have plummeted so far in 2016. Some of them are trading at 25 – 30 percent of their book value. A brutal start of the year for the banks, and the question is when is the time to jump in again?
Stoxx 600 Banks Index is down nearly 30% and tells us that the market is oversold. Normally it`s oversold at 30, but now it is below 20. It is the lowest ever! The valuation of the European stocks is 13 times estimated earnings, which is down from its peak at 17.
Many investors obviously jumped in today and lifted the European stock market. A rebound in bank stocks lifted the marked up from its lowest level since 2013, and Deutsche Bank AG announced earlier today that they will buy back about $5,4 billion in bonds.
Deutsche Bank AG is up over11% on the news on friday. Credit Suisse is up over 6%. Many bank stocks are up on friday. Not only in Europe. JPMorgan Chase & Co, which is nearly ten times larger than Deutsche Bank AG is also up about 8% on friday (12:30 pm New York).
Many of the bank stocks did never rebound from the peak in 2007, and many of them are trading at record low levels. How easy is it for the banks to do business with low rates and low oil prices in the middle of a currency war?
Fed Chair Janet Yellen said in the testimony this week that the turmoil in the financial markets are threatening the stability and bank stocks are contributing. Thomas Jefferson said in 1816; «I sincerely belive…. that banking establishments are more dangerous than standing armies.»
That`s 200 years ago!
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