Banks Rally on the Volcker Rule

As many of you know, I live in Washington, DC and as much as I love this city, it’s notoriously ill-prepared to deal with snow. Even a little sends us into a panic. If the Soviets had only known! We’re getting a modest dusting of snow, and the place is almost completely shutdown.

The S&P 500 closed at an all-time high yesterday and we’re down just a tad so far this morning. One area of strength is big banks. The government unveiled the “Volcker Rule” today, named after the former Fed chairman. The rule limits what banks are allowed to trade under their own accounts.

The belief behind the rule is that it’s highly unstable for the economy if banks can take depositors money, which is insured, and start gambling with it. It’s taken a long time for regulators to come up with the precise wording of the rule. The rally in bank stocks is because the regulations aren’t as onerous as feared.

Shares of JPMorgan ($JPM) got above $57 earlier today, and Wells Fargo ($WFC) is over $44, and close to a new 52-week high.

Investor’s Business Daily profiles DirecTV ($DTV) ahead of their investor day on Thursday. What’s impressed me about DTV is how they’ve been able to reduce share count with their buybacks. Over the last seven years, the number of outstanding shares is down 57%.

While the company has certainly done well, there are concerns about its subscriber growth in Latin America, especially in Brazil. While any business issues may impact the bottom line, it seems that DTV will plow ahead with their generous stock repurchase plan. The company has also been able to raise prices to offset slower subscriber growth.

Posted by on December 10th, 2013 at 11:15 am


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