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Saturday, May 14, 2016

$bac charts and thoughts

I keeps harping on bac only cause of the ridiculous nature of its valuation. Its currently trading 14-15% below tangible book!

No secret the driver are rates. The 10yr is low and the world is a wash with negative rates. The correlation is pretty fierce.

Even though the above relationship reigns, key negatives are not really negatives anymore. While bankruptcies in oil and gas have continued, oil and junk bonds have recovered.

The prices are back to oct 2015 prices. At this time, bac was consistently near mid 15 and as high as low 17! This may explain why the bac has a premium in the bac/tnx correlation.

The move in oil does have me questioning if the 10yr is trading efficiently. (Real world me doesn't mind as I'm shopping for a mortgage. Trader me is like wtf to my bac trade.)

Adding to the inefficiency theory is the GDP Now the last two prints. Currently projected to be 2.8% (up from 2.2%).

If the GDP forecast proves accurate, treasuries will rise, despite the negative rate trend. If treasuries rise, so will bac. 

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