The Untold Story of U.S. Banks, and Other Market Observations

Regional Variation in Bank Performance - With the help of the Barchart site, I revisited the performance of commercial banks as a function of their geography. Specifically, I looked at the number of banks with stocks that are up on the year and the number of banks that are down 50% or more on the year. Here's how it shakes out by region:
 

Southwest: 8 banks up, 2 down big

Northeast: 36 banks up, 4 down big

Midwest: 19 banks up, 4 down big

Southeast: 29 banks up, 14 down big

West: 16 banks up, 13 down big

As you can see, 27 of the 37 banks that are down 50% or more on the year are located in the southeast (think Florida) and the west (California, Nevada). The story relatively untold in the media is the number of banks that are up year-to-date in their stock market performance -- an astounding feat, given general market and financial sector weakness.

Playing It Safe - While the NYSE Composite Index was poised to open today at new bear market lows, Consumer Staples stocks (XLP) are hovering near their bull highs. Check out charts for Proctor & Gamble (PG), Clorox (CLX), and Colgagte-Palmolive (CL); no bear market evident there. It's also interesting to see the relative strength in Wal-Mart (WMT) and McDonald's (MCD). Investors are rewarding companies that offer perceived value in a time of recession. Meanwhile, note the vicious decline in gold, as inflation themes have retreated to the back burner. A total of 66% of XLP stocks are trading above their 200-day moving averages; only 32% of SPX stocks overall are above that benchmark.

Treasury Tells - Treasury instruments have been a great tell for risk aversion and risk assumption, with yields moving in tandem with equity indexes.

Risk Aversion is Worldwide - Notice how emerging markets (EEM) continue to underperform the U.S. (SPY), with political problems weighing on Russia; weak commodity prices weighing on the resource-rich economies; and economic tightening affecting China. I noticed recently that Indonesia cancelled a bond offering; it could not get bids at acceptable yields.

Going Different Directions - It interested me yesterday to see New Zealand cutting rates and Brazil raising rates. Meanwhile, the U.S. is staying steady and low, and the ECB is staying firm and higher. I continue to suspect that the inflation fighters have it wrong; their tightening will exacerbate a significant recession. Some interesting pairs trades have been coming out of this difference in central bank priorities.

Comments

[Jake2]

You still didn't tell the whole story. What you gave us was a kind of "cute" teaser. Save it for someone else.

2008 Sep 11 11:53 AM

[venividivici]

Since you won't tell us the whole untold story about U.S. banks. I am going to have to give it a crack. They have engaged in five years of outrageous and profligate lending practices, they have built a skyscraper out of playing cards and paid themselves an obscene amount of money for building this monstrosity and now, despite the best efforts of the decrepit and corrupt regulators and politcal bodies to hold this rotting edefice together, it is all coming down baby. Aggggggggg!!!!!!

2008 Sep 11 12:44 PM

[phdinsuntanning]

wrong? recession? come on: compare commodity prices now and 12 months ago, still the same with a bubble in the middle. Inflation is the risk, even when gold is being transfered back to the non private sector. Your staples are doing good because costs are adjusting as raw materials are getting real. Kiwi money was just yen, and now is going home. Real is one of the few serious currencies now. Most of the others will follow kiwi trend and credit will get a revival outside the US.

2008 Sep 11 01:07 PM

[Reinko]

This article contains weird logic, quote:

Meanwhile, note the vicious decline in gold, as inflation themes have retreated to the back burner.

Inflation retreating to the back burner?????
As you see what is in the pipeline; producer price index, wholesale price index are all 10% or more year on year (and this for a whole lot of months now) it is hard to see inflation retreating.

For the gold retreat please read some of the other articles around gold prices on this website; massive short selling on the futures markets have driven down the spot price to such an extend that the normal relation between supply and demand has been destroyed.

Furthermore; what happens if you add up all the market cap of the banks in this sample? Rather likely it has declined in the last year... And not by a few percent!

2008 Sep 11 02:07 PM

[Socialism cannot compete!]

Reinko...agreed. And GLD has been selling their physical gold lately. Many don't realize they hold more physical AU than most nations!

2008 Sep 11 04:18 PM