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Tuesday, January 3, 2012

interesting info... banks, oil

1. Banks.

Remember when the accounting rules were altered to allow for market-to-model accounting because the lack of liquidity in 2009 was causing a vicious cycle of negativity for US banks? The rule change played a major role in halted the banking crisis. A similar development is taking place in Europe, except with the risk characterization  of sovereign debt. By Feb 3rd, or so, most EU gov debt will be considered risk-free, markets be damned. This is one of those powerful 'stroke of the pen' type of characterizations that will render rating agencies useless, and further stabilize the EU banks. (I do not agree with the characterizations, but I am not going to ignore potential effect on the markets.)

I still think US banks are the safer way to play bank appreciation, but EU banks should see the larger appreciation.

2. Oil.   With the price of Oil above $100, oil service names are very cheap. For instance, SU needs oil to be around high 77/low 80 to be profitable. With its increased production and sustained price of crude, fundamentally it looks good. With today's move, technically it looks positioned to test 33 as well.

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