The above graph shows a complete correlation between US financial stocks and financial credit until the middle of 2011. As credit collapses, the bank stocks have not reacted as expected. There are only two conclusions possible:
1. The historical connection between the two was an anomoly.
2. The US banking sector is being artificially supported by the Federal Reserve and the Administration.
When banks stop making money, everyone stops making money.
David DeGerolamo
How Much Further Can Financial Stocks Fall?
It seems to us that the entire global financial system continues to walk the tight-rope of public-confidence in fictional reserve banking. Where it is European (or Chinese) bank runs or mega losses at US bank non-proprietary businesses, it appears the credit market has been becoming more and more fearsome of the endgame since last Summer’s US downgrade when S&P made the impossible possible. While not all of the US financials have active CDS, the dependence between stocks and credit had remained high with current CDS levels inferring a drop of over 60% in XLF as the top 30 globally most systemically important financial entities reach their March 2009 peak in riskiness once again.
David DeGerolamo
SIMPLE…AND THE TRUTH…..it does not get any better than this Randy
Would like to give a big shout out to the blog Zero Hedge….without such we’d all be in the dark.