Is President Obama’s economic stimulus plan working or do investors think it will work? Based on the reaction of the iShares Financial exchange-traded fund (IYF), a good gauge of sentiment about the viability of the financial system, the answer is clearly and definitely NO.
It is said that refugees talk with their feet when they walk away from a bad situation into one that they hope will be better. Well, investors are walking away from the IYF, which includes large holdings in JPMorgan Chase, Bank of America, Citigroup and the usual major banking suspects. The IYF peaked above 120 in 2007 and was even above 90 as recently as last September. Today it fell below 27.
With Bank of America shares below 3 and Citi below 2, the former financial titans are quickly becoming penny stocks, and investors are showing little confidence that the billions of bailout dollars will improve the situation. Mark me up as one who thought the government would rescue my investment in one of these “too-big-to-fail” banks – in my case, BAC – and now has to figure out how to deal with the fact that these banks might be nationalized.
