by Mark Skousen, editor Hedge Fund Trader Alert
Who are the winners and the losers under four more years of an Obama administration? One big winner is financial stocks.
In the past two years, the Fed policy has been a gift to the big banks, which have recovered sharply.
Fed Chairman Ben Bernanke has made it clear that the Fed's Zero Interest
Rate Policy will continue indefinitely until the economy gets back to
normal. How will the fiscal cliff affect banking stocks? If lawmakers do
nothing, undoubtedly financial stocks will suffer. But if Congress takes
a moderate approach -- extending most tax cuts and mortgage interest
deductions through 2012 -- the impact on banking and financials will be
[Related -Banks Outperform The Market, With Regional Banks Pulling Ahead]
That's good news for J.P. Morgan Chase (JPM),
the largest banking institution in the United States since 2011. The
bank still is selling below its book value of $50 a share, but it has
shown dramatic improvement.
With profit margins exceeding 21%,
earnings jumped 34% to $18 billion in the most recent year. And at a
time when other big banks have struggled, J.P. Morgan's revenues rose 5%
to $88 billion.
CEO Jamie Dimon is a banker's banker, and is
well respected. Warren Buffett wants him to replace Tim Geithner as U.S.
Treasury secretary. Dimon has been critical of Dodd-Frank and other
overt regulations of the financial system, and with good reason.
[Related -5 Years Of QE And The Distributional Effects]
if anyone has the inside track on how to manipulate the system, it's
Dimon. As J.P. Morgan himself once said, "You can't pick cherries with
your back to the tree."
JP Morgan Chase has risen nicely this
year, but still looks cheap, since it is selling below book and at only
seven times expected earnings in 2013. Let's buy J.P. Morgan Chase and
set a protective stop of $33 a share.