On Wednesday, January 23rd ,U.S. stocks rallied the most in two months on speculation lower borrowing costs and a plan to bail out bond insurers will restore confidence in the financial system.
Be cautious but the banks are the third group ( see yesterdays letter in the archives as to gold and oil ) that will profit from the lower rates. Simply stated ,they will pay less for deposits - compared to the rates they charge on loans they make.
Free Money
The Fed's latest rate cut ``is delivering free money to banks,'' said Wayne Wilbanks, who manages about $1.2 billion at Wilbanks Smith & Thomas Asset Management in Norfolk, Virginia. ``If you look at any of these financials, they are blown-out-of- the-water oversold.''
First Choice - Goldman Sachs ( GS) The smartest guys in the room period . GS made billions by selling derivatives to others and billions by shorting those products.
Secondly -Warren Buffett has been buying U.S. Bankcorp ( UBS)
You and I should not hesitate to walk in Warren Buffett's shadow.
Thirdly I'd look at the survivors - when other mortgage bankers closed their doors :
Wells Fargo and
Bank of America ( which recently offered to takeover Countrywide ).
Both of these banks have strong mortgage franchises which will dominate the U.S. now that so many of their former competitors have withdrawn from the field or simply ceased to operate.
Jack A. Bass is the editor of the market letter The Apprentice Millionaire Program available at www.amprogram.com
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