Trade what you see, not what you think

Too Big To Fail

The Global Recovery Is "Too Young To Die"

Keep in mind that this global recovery is only two years old – it only started in the middle of 2009. On average, recoveries in the global economy have lasted a little more than six years. The shortest one over the past 40 years took place in the second half of the 1970s and lasted only four years. The longest one was in the 1980s and ended after eight years (see Exhibit 1). Recoveries typically end when major imbalances in an economy have developed and become unsustainable – such as overinvestment in the late 1990s or overconsumption in the late 2000s – and when monetary policy becomes very tight. Neither is true now.

Atlas Shrugged

Citigroup to Triple By 2013

NEW YORK - Citigroup(C_) still offer massive upside to investors, according to an analyst who has turned decidedly more bearish on the financial sector in recent weeks.

Richard Bove, analyst at Rochdale Securities, has been pounding the table on bank stocks for nearly two years. On May 25 of last year, he predicted Citigroup would sextuple by 2015. Since then, Citigroup is up by more than 19%.

Bove, meanwhile, has turned decidedly more bearish. He says he has recently downgraded some 25% of the stocks he covers. He is concerned a massive bout of inflation will cause a repeat of the 1970's when bank earnings surged but stocks went nowhere because the earnings were in devalued dollars.

The stocks Bove expects to suffer the most during this environment are regional banks like BB&T Corp.(BBT_), Comerica(CMA_) and Regions Financial(RF_). He predicts each of these banks will grow earnings steadily through 2013, though his 12 month price targets are below where the stock currently trades.

"The companies that are going to see big increases in earnings and no increase in stock price are the regional banks. Ninety five percent of their assets are financial in nature and they're going to go down in value as inflation and interest rates go up and people will care not at all about their earnings the way they did in the 1970's. I think we're back to that environment," Bove says.

Nonetheless, Bove has high hopes for most of the big players.