Charles Peabody, a famous banking analyst, has been down on the prospects of financial companies for a number of quarters. He now sees some of the stocks in the sector as good buys.
Peapody's change of heart may be coming at the wrong time. A number of observers believe that it is healthy that firms like Citigroup (NYSE:C) are taking huge write-offs. But, if the housing and credit markets keep falling, losses could still balloon.
According to Reuters, Peabody, a widely-followed expert says "Bank shares could rise 35 to 45 percent on average from their first-quarter lows, amid signs the housing market might be bottoming out."
Peabody's thinking is based on a premise that is probably flawed. He sees the recession as making a bottom now. Any near-term recovery should indeed aid bank stocks.
With energy and commodity prices rising, consumers in trouble with debt, unemployment moving higher, and a weak dollar, it is hard to see how Peabody draws his conclustions.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
4-20-2008 @ 7:36PM
william lindblad said...
The conclusion has merit, but is perspective based. Prices are down and there have been sales which should reflect in next months reports. I think that they will look pretty decent in light of what will be expected. It's an illusion. The buying is coming from people with great credit and cash down that any bank would welcome. They were renting and waiting but they are not house flippers or investors, they are looking for a place to call home - and stay put. This pool will exhaust in sort order and sales will again go slow. Mr Peabody did not take into account that homes are still under construction and people are still dying. A great deal of our population is older and estates are becoming more frequent. We are not at bottom in housing yet. As you say, fuel, food and other areas of rising price are impacting the consumer in the negative sense. Layoffs are on the rise and job loss will not improve economics. If these trends continue it is only a matter of time before corporate profits are adversely effected and Wall St. is confronted with an inexplicable truth, and a major market adjustment.
4-21-2008 @ 1:22AM
B. Harrison said...
RE; Previous article regarding only 30% of the economists see the economy shrinking this next year (as related to this article).
It certainly doesn't take a genius to figure this one out; perhaps a little common sense that seems to be substantially missing in our "Harvard & Princeton MBAs" who are the parties responsible for this economic debacle anyway. So, it appears that only a third of the economists surveyed showed any "common sense" about these issues . . . That certainly says a lot about the economists doesn't it. Any economist who thinks that the economy isn't going to shrink should turn in their calculator and look for employment elsewhere
Seventy percent of the economists appear to be somewhat dilusional.