Dick Bove, an analyst at Rochdale Securities, and Vadim Zlotnikov, chief market strategist at AllianceBernstein, spoke to Bloomberg TV’s Trish Regan and Adam Johnson today about the outlook for stocks. Bove said that Morgan Stanley should be “bought aggressively, and bought now.” Excerpts from the interview can be found below, courtesy of Bloomberg Television.
Dick Bove on the kind of momentum in store for financials/bank stocks:
“I think it’s considerable. If you look at the earnings power of these companies, they’re a cyclical group of companies. And the cycle is moving in the right direction for them so just about everything that could go right for these companies is going right at the present time.”
“I know people don’t believe that, but if you look at unit growth, which would be loans, they’re up substantially. If you look at margins,which would be the growth of interest rates, interest rates are going higher so margins are going higher. If you’re looking at non-interest income, that’s going to move higher and the costs are under control.So bank earnings should be very strong all year. I happen to believe strongly they may go away in May, but if you take that out of the picture, I think this will be a very good group to be in all year.”
On when individuals might start taking out loans, in addition to commercial loan growth:
“We are seeing some improvement in the mortgage area. The reason why we’re seeing such strong growth in commercial loans is because Europe has been a magnificent gift to the American banking industry.
“As these European banks pull out of the United States, they’re leaving their customers, they’re dropping loans at discounts, they’re selling businesses at discounts. So the American banks have won enormously as a result of the problem’s going on in Europe and that is likely to continue well into 2013. But you are seeing auto loans up fairly sharply. You’re seeing some increase in mortgages, no increase in home-equity loans whatsoever. Things are going well for American banks.”
On why bank profits will ‘go away’ in May:
“Because if you take a look at the price of the stocks going back to 1888, you will find there is a good correlation between money flows in the economy and the movement of stock prices. In May, there tends to be a tightening by the Federal Reserve. There’s an easing of money supply in September and you’ll see the market react very strongly in October/November to that easing of money supply that occurs seasonally every September. And you’ll see a tightening that occurs in the spring as the Fed does seasonal tightening. It has a huge effect on banks and on the market overall.”
On bank stocks to buy:
“I think Morgan Stanley (MS) will allow you to buy that house on the coast of Spain. I think that stock is so cheap right now, it’s overwhelming. It should be bought and bought very aggressively, right now.”
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