The thing about financials is they are not the most liked Group, and I'm being Nice. When rates are low, you here rates are too low, and they won't make money of course not true, but sometimes perception is reality. When Interest rates are going up, what is the concern, bad loans are gonna baloon a recession is coming. Hence there is always a negative story to be told wherever you are on the rate cycle than.
I admit the financial sector has been terrible, but I don't know I never told anyone to Buy CUBI for example at $76, I started buying at $36. STT I didn't buy over $100, my cost basis admittingly down is in the high 60's. SF, I started buying in the low 60's and adding in the mid 50's, The stock was in the 80's. Started buying GPN in the low 120's and now my cost basis is now obviously below that with My adds, The stock was over $200+. I didn't buy at the top, I have undoubtely been early But I was allready buying down huge. You see I believe the market has wrong the amount of bad loans out there, market when it has uncertainty always prices it through with lower prices, plus the braoder market have taken everything down.
The end result is the market is fearing that more loans will go bad, than they will make with increase in net interest income will occur. I believe the opposite with occur, because Loan standards are much stronger today than say 2008, where they would litterally allow the familly dog apply for a mortgage, okay a bit of an exaggeration, but you get the point. I believe Unemplyment at the peak goes to say 4.5% or so, why not more, (a) I don't think this recession will be severe (b) We had tons of Jobs unfilled, so those in a lot of cases will be the layoffs too, as we didn't have nearly enough workers before, so part of the layoffs will simply be the disappearence of that help wanted sign. This will not be fun several quarters, But the market has allready priced not fun in. If we don't have unmitigated disaster, which I don't think this is anything like 2008, believe that is absurd. And if that's the case we are pretty much here.
Notice that 3500 Is about the 1/2 point from the lows of 2020, and the highs of 2022. And Also keep in mind financials are also down, because the market is sinking just about everything, but if you think 3500 is about the bottom as I do. And to be clear I'm not saying we will be back at 4800 by year end, but could we be 4200-4300 on the upside, and 3500 on the downside, call me nuts for being aggressive in a sector that I think has priced in loans going bad, and has not priced in the effect of net interest income rising rapidly from this process. Time will tell. My financial exposure is getting close to 30% of my portfolio. All is just my opinion, and I could always be wrong though.
