The word floating about today, after all the hoopla from the fiscal cliff nonsense, is that the ratings agencies, Moody’s and S&P, are threatening another downgrade of the US credit rating. Normally, I would respond to this by saying, “Who cares?”
Actually, that is my response, and I suspect the market will have the same take when these useless entities start making noise in earnest in about a month. As market players, we all have more important things to occupy our attention. Looking at the global financial sector for investments or trades is an excellent example.
- Bank-card delinquencies fall to 18-year low. Delayed repayments of bank-card loans dropped to the lowest level since 1994 in Q3, falling to 2.75% of all accounts from 2.93% in Q2, the American Bankers Association said today.
- CEO Brian Moynihan has instructed his staff to be “more aggressive” in lending to companies and has predicted that the bank should surpass JPMorgan in direct-to-consumer mortgage loans in the next half year.
- Consumers and firms’ deposits in banks in troubled euro zone member states remained mainly stable in November, European Central Bank data showed, indicating that worst fears of bank collapses or even a euro zone exit are receding.
As the US and global economy improve, so will the balance sheets of the banks, big and small the world over. The fuel for economic growth is lending and that has been steadily improving quarter over quarter for some two years now. Even in the hard hit Eurozone, banks are beginning to recover and that spells L-E-N-D-I-N-G. More lending spells G-R-O-W-T-H and the two together (lending and growth) spell O-P-P-O-R-T-U-N-I-T-Y.
No matter how you spell it, the door is open to making money in the global financial sector, but in order to do that, you must have a plan. You have to know where you want to put your money and how much you want to put there, but more importantly, you have to know why you are putting it there.
For example, it helps to know that in March, it is likely the US government will lift the restrictions on big banks regarding the paying of dividends. It seems to me that will attract investment money. Combine this with the information above, along with a bunch of other good data about US banks, and one has a wide open door to making money. Take some time and check this out, and while you are doing that, imagine BofA as a twenty-dollar stock …
The coming year promises much opportunity to make money, and I have talked about the financial sector as one. Consider the automobile industry and the real-estate sector as two others. Both of these areas are coming out of long slumps, just as the financial sector is, so develop a plan to get in and then begin making your money work. While you are at it, use that imagination and imagine Ford as a twenty-dollar stock.
Let me see, BofA and Ford are trading around $12 and $13, respectively, right now. That would mean a better than 50% ROI if you got in now. In my book, that spells G-O-O-D.
Trade in the day; Invest in your life …
