US Banks will be the best performing sector of 2012.
Crazy? Maybe, but I've been called worse.
If we were simply to use Goldman as a proxy, it is trading 30% below book value. IMO, the discount is pretty justified considering the CDS risk exposure it has if an involuntary sovereign EU default. This is with out worrying about added US/EU regulation. There is a potential appreciation of over 20-30% with an ease of EU concerns.
Similar to the US muni market, as 2012 chugs along, and the world does not see EU involuntarily default, then the book value discount to the large US banks is no longer justified.
This isn't a play on earnings potential or growth (except for the regional US banks), its a play on a reduction of uncertainty, which will lead to a stock appreciation toward book value.
Considering all the negativity, and potential headline risk (especially during the times of EU debt issuance), this trade is not for the faint of heart, and will take a set of brass-you-know-what :)
I am playing it via GS.