Are you new to shares but want to buy banks?

Reaper

The current bank rally is an exception, they were ludicrously over sold. Barclays were at 150p before the current round of selling started so I don't see why it can't get back to near that figure. I'm less up on the others banks, however I suspect some of them are rising just because Barclays did which is a bit daft.

Moving on from this brief blip in bank stocks for a moment the rest of the market worries me more. The FTSE was down to 3500 at one point but rose from there to its current value for no discernable reason I can work out. The economic news hasn't improved since then, if anything it has got worse.

Do any of you more knowledge people have a view on this? I feel I ought to be in the market but I see little chance of sustainable growth for the forseeable future so I'm holding back (except for that Barclays opportunity which I grabbed).

I,_Brian

Can't call myself more knowledgeable, but previously the big fear was unknown exposure to toxic assets, and frankly investors have dumped banks out of panic of the unknown more than anything these past months, factoring a possible depression rather than recession into their share price.

I think we're in a bear rally, and a strong one at that - but looking at 200 day averages, things could deteriorate pretty badly over the rest of the year as unemployment impacts.

My ISA is shot to tatters - bought into banks at £2-3 share, though am happy to leave as it was always very long-term - but my business investments are already down only 10% - will keep in for the rally as long as possible, then sell up for profit and stay with cash and observe what happens over the summer.

2c.

tradetime

cheggers wrote: »

Nearly bought in at Lloyds at 40p last week, now at 92p

Nevermind. Could have easily been sitting on a loss.

Console yourself in an old trader saying, don't know who it's attributed to, but it holds very true.
"I'd rather be out of a trade, wishing I was in, than in a trade wishing I was out."

mars_2

The only Banks I would invest in is a pint of Banks' Bitter

sabretoothtigger

Moving on from this brief blip in bank stocks for a moment the rest of the market worries me more. The FTSE was down to 3500 at one point but rose from there to its current value for no discernable reason I can work out. The economic news hasn't improved since then, if anything it has got worse.

Been thinking the same for a while now but still searching for a explanation. Plot ftse vs sp500 and it shows a premium which is not normal so is that inflation or currency devaluation

I think we're in a bear rally, and a strong one at that - but looking at 200 day averages, things could deteriorate pretty badly over the rest of the year as unemployment impacts.

Yea bear rallys seem to be strong as they include both a bounce from over selling, short coverage and misplaced optimism.

The real skill to me seems to be forming your own price target. Like if holding a bank share, selling barclays at 180 when it rose strongly at jan start then buying at 50p last friday would have been pretty good considering as a whole that share is a dog.

Be dammed if I can tell the price precisely like that and timing is hard to get right. If the price is going to fall like that, it pays to be ready to sell even at a loss in order to avoid an even greater fall with the aim of rebuying

tradetime

Reaper wrote: »

The current bank rally is an exception, they were ludicrously over sold. Barclays were at 150p before the current round of selling started so I don't see why it can't get back to near that figure. I'm less up on the others banks, however I suspect some of them are rising just because Barclays did which is a bit daft.

Moving on from this brief blip in bank stocks for a moment the rest of the market worries me more. The FTSE was down to 3500 at one point but rose from there to its current value for no discernable reason I can work out. The economic news hasn't improved since then, if anything it has got worse.

Do any of you more knowledge people have a view on this? I feel I ought to be in the market but I see little chance of sustainable growth for the forseeable future so I'm holding back (except for that Barclays opportunity which I grabbed).

No more knowledgeable than anyone else here I'm afraid, but we are in a secular bear market, they are characterized by strong counter trend moves, "bear market rallies" In general human beings are optimists, after a significant period of selling, people want to believe the bad times are over, so they rush to get in, afraid to miss the next big bull, shorts are forced to cover, adds fuel to the fire. We had a very steep drop, in a short period of time driven by mass deleveraging, once the initial wave of deleveraging ended the selling pressure subsided, and short sellers have been exiting the market taking profits, and bottom fishers entering, volume has been falling on this move up, though it looks like there is an uptick today so far. New president in US has added a little hope for a magic remedy, such as the "Bad Bank" rally today, and the impending stimulus package, it will play itself out in due course, (not too soon, I hope)
As for the banks, they are still in a mess, I see people talking about P/E's unless my newsfeed is telling me porkies they are making losses, certainly most of the US ones are so I'm not sure how people price them on a P/E. I agree, for any bank you can believe will survive this, they're probably cheap, but that's just a shot in the dark imho

Blah99

I,_Brian wrote: »

Just bumping this thread to show why panic and doom-mongering is misinformation.

Banks have all risen between 25% and 60% since this thread was posted, thanks to investors realising they were just panic selling.

It's not mis-information. Please remember the reason I posted this thread - it's in the title. It was intended for the floods of people coming to this forum, brand new to shares, and hoping to make a packet by buying bank shares. The discussion has moved on from there, which is great, but I still believe the sector is a dog (and your later posts seem to agree).

Let's put this in context. Banking sector over the last month:




Looks positive, right? Banking sector over the last 3 years:



I believe we have yet to see further writedowns due to the impact of current economic conditions. We're within the first third of the fallout at the moment - look at Corus, Adams, Woolworths etc. We haven't seen the full effect of recessionary conditions on defaults of personal and corporate debts. We haven't seen the full effect on housebuilders or landlords, both private and commercial.

Let's be clear - the only reason for this dead cat bounce is because of LLoyd's open letter and the Government's announcement of a second bailout. If you want to buy into the banking sector, go right ahead, but at the moment to me it seems like a disproportionate risk.

Someone has already pointed out that fear and panic selling is driving this down, which is right (and shorting reinstatement won't have helped). The problem is that it's a trend, and individual investors have little choice but to follow it. The markets are just as much about sentiment and herd mentality as they are about financials and facts.

There are other excellent opportunities out there that represent a much lower risk and are giving excellent returns. I recommended BAE Systems at the end of last year (this post, 25th October http://forums.moneysavingexpert.com/showpost.html?p=15299835&postcount=25 and some other posts) If you'd have bought in when I posted you'd be sitting on a 30% + gain already. For me that blows any banking sector opportunity out of the water.