Obamaphobia creates bank stock bargains

The post-election rout of bank stocks has gone too far.

By TheStreet Staff Nov 16, 2012 7:40PM

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John Foxx Stockbyte Getty ImagesBy Dan Freed

 

It is no longer an arguable point that the selloff in U.S. stocks -- and bank stocks in particular -- is attributable to Obamaphobia in the financial services industry.

 

The S&P 500 ($INX) took a sharp dive after Election Day, and stocks have only just begun to recover. Shares of Wells Fargo (WFC), Citigroup (C), Bank of America (BAC), JPMorgan Chase (JPM), Goldman Sachs (GS) and Morgan Stanley (MS) have also had very bumpy rides.

 

There is a large contingent of banking industry people: executives, analysts, and investors among them -- who believe they are the victims of a witch hunt, and that know-nothings in government will spare no effort to extinguish every chance they might have at making a decent profit.

 

These people see Obama's victory as something close to a death knell for financial services industry profitability. No doubt they are especially alarmed by the fact that of the dozen or so executives who met with the president on Wednesday, only one -- American Express (AXP) chief Ken Chenault -- comes from the financial services industry.

 

But let's not go overboard. After all, Obama chose Tim Geithner as his Treasury Secretary -- a man who has defended banks' interests at every turn. Though Geithner is on his way out and Obama is under pressure to pick someone who won't kowtow to Wall Street interests, he is a long way from the radical that some would make him out to be. Geithner was Obama's pick. Whoever replaces him may have a more populist bent, if Obama decides he must defer to the populist public mood, but Obama is not, at heart, a populist, and the decisions he makes will reflect that fact.


Tom Russo, partner at money management firm Gardner, Russo & Gardner, has been puzzled by the selloff. He concedes banks may be under tighter constraints from President Obama than they would have faced if Romney had won the election. Still, he says of Obama's reelection, "I don't think it's a large enough item on the margin for them to cause a sharp selloff in commercial banks."

 

Russo adds that banks "have a prospect for better loan growth as the result of low interest rates that come about because of a continuation of a Fed with a fairly loose policy at the moment."

 

Separate from Obamaphobia were fears regarding the fiscal cliff. A separate group of financial services executives -- many of whom also suffer from Obamaphobia -- believes politicians are idiots who have no idea how markets work and turn everything they touch into lead. Thus they look ahead at the looming "fiscal cliff," and think that Congress may very well be idiotic enough to send us plunging off it.
 But where were these people before the election, Russo wants to know.

 

"The fear about gridlock in Washington and all of the things that now seem to be pressing investors' attention were all in the market before. I personally think it's a bit remarkable that the market has seemingly focused on the post-election time as something different than they would have expected."

 

Russo has been adding to shares of Wells Fargo, shares of which comprise about 5% of the funds he manages, as the stock has cheapened in recent days.

 

He may have to stand another few days of losses, but it seems difficult to believe he won't be rewarded in fairly short order for standing firm amid the wave of post-election negativity among investors in bank stocks.

 

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27Comments
Nov 17, 2012 10:45AM
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Its time for wall street to use their own money !!!!!!! No margin buys ! No more short sells ! And reinstate the GLASS STEAGAL ACT.... The too big to fail mantra must be KILLED!!!! The federal reserve is , with their QE1-2-3 40 BILLION a month in toxic bond buying from the to big to fail banks ??? WHY.... They made the loans and took the chance and lost ! What's up with their welfare socialist mentality on wall street ! The gravy train has been strong for over 7 yrs now !!!! Zero int rates at the fed window on wall street! the QE1-2-and now 3 . Talk about welfare socialism .. Wall street and corporate America has had it too long... This is not capitalism folks ! Its bailout welfare socialism ... Its time for wall street to use their own money !
Nov 16, 2012 8:13PM
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Do you believe in Santa Claus?  How, about the Easter bunny?  Maybe wall street  doesn't believe in our village idiot..
Nov 16, 2012 8:59PM
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The last 10 days have been the gift horse buying opportunity for buying stocks.Thanks wall

street.We`ve gotten the nervous Nellies out of the market.They should be in CD`s

getting 1%.

Nov 17, 2012 6:21PM
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I've been in Penney's once since the do-over. Don't plan to go back unless there are some changes. How can you have a retail store without competition? By competition, I mean the sales and the coupons. People thrive on that. People love to go to work on Monday morning and brag about how little they paid for something. It's fun to do the math in your head to figure how little you'll end up paying for something. It's the competition and adrenaline that drives shoppers, not a mundane-looking store where the prices never change and rarely does the merchandise. And those booklets that come in the Sunday paper: BORING. It gets tossed aside immediately with the stuff that goes in the trash.  In the meantime, my JCP credit card will continue to gather dust......      : /

Nov 18, 2012 6:34PM
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OMG....those poor banksters.....Did you all catch this article?

http://www.nbcnews.com/business/banks-may-shrink-good-layoffs-near-160-000-1C7127106

It begins: 

Major banks have announced some 160,000 job cuts since early last year and with more layoffs to come as the industry restructures, many will leave the shrinking sector for good as redundancies outpace new hires by roughly two-to-one.


A Reuters analysis of job cuts announced by 29 major banks showed the layoffs were much bigger in Europe than in Asia or the United States. That is a particular blow to Britain where the finance industry makes up roughly 10 percent of the economy.


And Ends thusly:

More senior investment bankers are among those in the line of fire. Those ranking as managing directors (MDs), who can command base salaries of around 350,000 pounds ($556,000), are becoming costly to keep - and difficult to take on.

Whatever will those poor, poor banksters do?  *crocodile tears*

Nov 18, 2012 10:31PM
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This election was purchased with the promise of illegal residents being giving citizenship. And voters don't need identification to vote so the criminals voted the communist back into office. I'm starting to think the doomsday prepers have the right idea. But what the hell we're probly not going to make it past 12/21/2012 anyway. ha ha

Nov 17, 2012 4:09PM
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"WASHINGTON (AP) — To hear some Republicans tell it, the Grand Old Party needs to get with the times. Some of the early prescriptions offered by officials and operatives to rebuild after devastating elections: retool the party message to appeal to Latinos, women and working-class people; upgrade antiquated get-out-the-vote systems with the latest technology; teach candidates how to handle the new media landscape. From longtime GOP luminaries to the party's rising stars, almost everyone asked about the Republicans' Nov. 6 election drubbing seems to agree that a wholesale update is necessary for a party that appears to be running years behind Democrats in adapting to rapidly changing campaigns and an evolving electorate. Interviews with more than a dozen Republicans at all levels of the party indicated that postelection soul-searching must quickly turn into a period of action. "We've got to have a very brutally honest review from stem to stern of what we did and what we didn't do, and what worked and what failed," said former Mississippi Gov. Haley Barbour, who ran the party in the 1990s. The party "has to modernize in a whole wide range of ways," added former House Speaker Newt Gingrich, who ran against White House nominee Mitt Romney in the 2012 presidential primary. "We were clearly wrong on a whole range of fronts." To determine what went wrong, the Republican National Committee is examining every detail of the 2012 elections, with the goal of rebuilding the party for the future-  much as the Democratic Party did in the 1980s after suffering a series of stinging losses at all levels of government."

 

You know what the GOP WON't DO... it won't ask those who oppose it, what's wrong with it. There is a huge difference between saying it has to get with the times and analyzing why deadbeats like Bush and now Romney overtake those who can get asked questions point-blank and answer them without prompts, mistakes, outright incrimination and flip flops. Apparently, running for Offices is a career to the GOP and because it is, the cost to campaign has risen ridiculously. If there really was a qualified Republican, the cost to campaign would be nominal and the actual campaign would be about issues and qualifications. Come on boys... Romney was NEVER qualified from Day One. It wasn't a race, it was a disgrace. Tax evasion, job terminations, grubbing and greed. There are the attributes of the enemy. Ron Paul was too old but his ability to answer point-blank questions with answers America wanted to hear was HUGE. Obama failed these past 4 years. Mostly because a bunch of moronic Good Ol' Party Boys compromised us using Congress and State positions to do us in. You want a REAL competition? Dump Rove. Ban PACs. QUALIFY you prospects. No one wants your version of ethics... geez, you had problems explaining rape and the role of some religions in Society. These have no place in politics. MANAGEMENT does. Dubya was a loser of massive proportion, not a CEO. Show us someone with dirty hands from building something good for America from scratch. Show us a builder of things who is of working age. Stuff your paper pushing financial pariah and law biz jerks where the sun doesn't shine. America hurts from your bad acts. Find a good one or dissolve your Party. BTW, we HATE the TEA PARTY, NRA and Far Ultra Conservative Klan Evangelist Republican Southern fanatic Right Extremists. Could you aim for folks with ALL their marbles?

Nov 19, 2012 7:00AM
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fear not my fellow americans.  obama is in thailand telling them to buy high priced, union made, american products.  or.....maybe they are not as dumb as we assume and will make consumer goods for the american market at a slightly higher price than we are used to.  at any rate obama will either give them more money or give us another stimulus.  the secret is printing more worthless money.

 

as for our banking system.  maybe the banks are not as stupid as obama thinks and will not be lending any money for some time to come.  destroying capitalism was a success for obama and his hate the rich followers.  lets all get used to controlled socialism.  by that i mean learn to speak either russian or chinese.

Nov 19, 2012 12:25PM
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This is a good thing. We so easily forget what the banks did to America and the world. Now they are whining? Gimme a break. I for one am glad that bank profits are way down. Why do you think that is, hmm?
Nov 18, 2012 12:27PM
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You can keep thumbing me down but you can't suppress my commonsense. You are completely useless to America, Tea Party.
Nov 19, 2012 1:31AM
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This is off topic. However, for many of you, this will be the most important post you will ready for all eternity. 

There is a great truth most never really consider. We all die, be it today or 100 years from now.  We will all be dead.  It is an absolute fact. 

What I briefly wish to talk about is where you will spend eternity.  Since we will all be dead someday, where we spend eternity is off paramount importance.  It is the only thing that truly matters.

I believe most people don’t really like to think about death, and pretend it will not happen.  But it will.  I also believe most people don’t like to think about eternity much because it cannot be proved. 

I am making a definitive statement.  Jesus Christ, whose birthday we celebrate on Christmas, and whose resurrection we celebrate at Easter, is the risen Son of God.  It is only through faith in him that your eternity can be made secure.    2,000 year ago or so, God sent Jesus, his only Son, to die on a cross for us.

Why did he have to die, you might ask.  All men have gone against and disobeyed God’s commandments, the most basic of which is the 10 commandments.  As result, all men according to God are under the penalty of death.  The Lord is a just God and does not tolerate disobedience; his ways are higher than our ways.   

God however is merciful, and is not willing that anyone should perish.  So he sent his only Son, who was sinless and never disobeyed God, to die on the cross and therefore pay the penalty for all our sin. 

He offers forgiveness to those who are willing to accept the death of his Son as payment for your disobedience.  I am proclaiming this good news to you so that you might believe on the Lord Jesus and receive God’s forgiveness.  In order to secure your eternity, you must believe that Jesus Christ paid the price on the cross for your sins, and you must accept his death on the cross as being the full and only payment.

If you believe in Jesus, then you should begin to read the word of God, the holy bible, and find out how God commanded us to live.  His two greatest commands are these, to love him with all our heart, and to love our neighbors as much as we love ourselves.  According to Gods word, if we do this we will live.

I have put before you the way to life.  It is your choice what you do with it.  I hope you choose well.    

Nov 17, 2012 3:20PM
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Obamaphobia is an affliction of idiot America. Most of them lack political or critical depth and are blind as bats. They're being played like pawns and gullibly swallow the disinformation and propaganda aimed directly at them. They'll never get what's better for them and the country. That's why their bad judgement and bad choices have had consequences. America started a slow decline after the 2000 election, which had it's full repercussions felt by the end of the Bush-Cheney terms. Obama has been trying to turn things around in strong headwinds. Remarkably, there's been real progress, a number of things are moving in a better direction despite the ever-present pinhead hatred, and obstructionism by the corrupt.
Nov 17, 2012 2:17PM
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The worst of what could happen already has happened: Republicans and Tea Party Freaks will not shut up and go away. A complete waste of oxygen on these low grade morons!
Nov 17, 2012 9:52AM
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Call it what you will. It makes no sense to blame long overdue drops in stock values on the President. Banks are well-past their usefulness. Notably, the article doesn't comment on banks severing tens of thousands of employees now and in coming weeks and it doesn't overlay the extremely relevant and pressing issues from the Roubini article. Is this dip worth buying into? Are you THAT stupid? There is no way for stocks to rise without viable means. With the majority of the world impoverished and only paper and button pushing and administrative jobs earning family-sustaining wages, what have we got? SQUAT!!! 2013 is forecast as dismal. I see the markets falling way off before the New Year. We didn't close banks or end the Federal Reserve's trash buy-back program. Only 15 years ago, the sum total currencies in the world were $50 to $60 Trillion. Today, the THREE currencies in the world: tangible and electronic cash, debt contracts and derivatives, tally over $1 QUADRILLION and counting. Stocks are entirely fiat because no American business platform has any assets. They sold the factories, terminated the skilled labor and rely entirely on a financial gambling strategy using fake money. Lending rates are too low to be viable. Banks lend to earn a Return on Investment. Prevailing rates are actually too low to service, so they are losing on every dollar lent! The Fed takes in the bad debt and gives them the cash back. If that credit is only losing money while it exists and a debt note is created in offset, the financial sector is creating two LOSSES with every loan!

 

It's time to tell CONGRESS, not the President to Close the Banks, End the Federal Reserve and to get RID of Wall Street. We don't live for money, it's supposed to exchange for effort so we can all live as we would like to. Wealth HAS to GO. Tell CONGRESS-- increase taxes on the rich and free up our currency. Restore and recover jobs, make Corporate America pay for it or close up. We are fully capable of making Twinkies again. Only the Law Biz mumbo-jumbo prevents it. The guy who invented them is dead. Now the company who exploited the invention is now dead. Dissolve the patent, the trademark and free it for new enterprise. Let's stop kidding ourselves... we don't need or want rich inheritors... we want opportunity and the freedom to pursue it, not New World Order.

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