Friday Charts: Should We Be on High Alert for Another Banking Collapse?

by Wall Street Daily
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Submitted by Wall St. Daily as part of our contributors program

You know the drill by now…

Every Friday, I put on a muzzle and do my best to let a handful of carefully selected charts do the talking for me.

Longtime readers say this is their favorite column of the week. But I think that’s because they don’t have to listen to me drone on.

Whatever the case may be, I’m happy to keep serving up the pretty pictures.

If Warner Wolf were a stock analyst, it’d be time for him to say, “Let’s go to the charts!”

Banking Collapse? Not According to This Indicator

Call it simple paranoia, or battle scars from the Great Recession…

But whenever the stock market hits the skids for a day or two, like it did in the past week, everyone starts freaking out, assuming that we’re on the cusp of another major financial collapse.

Chicken Littles!

As I’ve shared before, there’s a simple and quick way to determine if such fears are justified: Consult the latest prices for credit default swaps (CDS) for banks and brokers.

You’ll recall, CDS prices reflect the cost to insure against a default. So if there’s a genuine fear that banks are on the brink, CDS prices should be rising as stock prices are falling.

As Bespoke Investment Group reveals, though, that’s not happening at all. “Now that the financial sector stocks are experiencing a pullback, our CDS Index has actually declined a little, indicating that the credit markets are not getting more fearful at all.”

You shouldn’t be, either.

Keep This Yahoo At Arm’s Length

After running through five CEOs in five years, it appears that Yahoo! (YHOO) has finally found a good leader in Marissa Mayer. At least in terms of stock price performance.

Since she took the helm in July 2012, the stock is up over 50%. That means the former internet darling must have regained its mojo, right?

Not exactly.

In the words of Paul Simon, Yahoo!’s revenue has been “slip slidin’” lower ever since 2009.

Sorry. But lower and lower sales don’t lead to higher and higher share prices. Not over the long run. So without a revenue reversal, Yahoo!’s stock is ultimately doomed.

Broken Record Alert!

I’m getting tired of telling you this, so I know you’re tired of hearing it: The real estate market is recovering. But this week we got even more proof, so I feel obligated to share it.

Housing starts rose 7% in March to an annual rate of 1.04 million. That’s the highest rate since 2008.

What’s the significance? I’ll defer to Gennadiy Goldberg, U.S. Strategist at TD Securities. Maybe hearing it from someone besides me will finally convince you to believe it.

Goldberg says, “Underlying trends remain largely consistent with a gradual housing market recovery… The ongoing recovery in the housing market will translate into better U.S. growth – not only via a rebound in construction jobs, but also due to the wealth effect due to rising housing values.”

Maybe it’s just me. But I think I hear an echo, echo.

That’s it for today. I’m sure I’ve angered or offended someone. So let me have it by sending your comments, biting criticisms and calls for my beheading to feedback@wallstreetdaily.com. You can also leave a comment on our website.

 

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