Banks Up, Up and Away - Okay Not So Fast

Let’s look at the banks today.  J.P. Morgan closed at 35.39.  J.P. Morgan was only $10 more during the housing boom when it had real earnings potential.  I use JPM as an example because I actually think it is one of the better (if not the best) bank out there.  I am not saying I like the banks (not at all am I saying that) I am just picking the best of a bad bunch.  Okay, so now ask yourself is JPM really worth only $10 less than when it actually had earnings potential?  What happens if mortgage rates continue to rise and less people are interested in refinancing or buying a new home?  What happens to the earnings potential of JPM then?  These banks (and you can look at any of them) have really come too far too fast and are not cheap by any stretch….but at this point you can take the S&P 500 and see if you think it is worth paying 19 times forward earnings (when historically it as been at least 2-3 points lower)…I think not!

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