After a thorough investigation, CNBC’s Jim Cramer investigated why some big bank stocks are faltering even after the Federal Reserve hiked their interest rates. The federal reserve’s announcement that it would hike interest rates four times in 2018 instead of three failed to make any positive impact on the bank stock price.
Conventional wisdom says that a flatter yield curve is suppressing what would otherwise be stronger lending revenues; that mortgage loans are attenuating because of higher rates; that Wall Street is still awaiting the Fed's stress tests to make a lasting determination on stocks like Citigroup, J.P. Morgan, and Goldman Sachs.
However, the Mad Money host wasn’t satisfied with this explanation and doubts that there is another factor affecting this. He says,
“There are plenty of younger portfolio managers who think the banks are like Sears and J.C. Penney: they're old-line brick-and-mortar stores that are about to lose their relevance thanks to all sorts of new technologies from bitcoin, blockchain, PayPal, and Square.”
Although he says PayPal might be the biggest influencer amongst the aforementioned picks. He refers to it as “the Amazon of banking” and says that the payment processor has grown into more of an “online banking company that cooperates with everyone and has gone global.”
Square, a payment technology play helping smaller businesses accept credit cards and other payments, has also made strides in presenting an alternative fintech investment, but shares have gotten costly at these levels.
He speaks very highly of blockchain technology too and calls it a potential existential threat for banks. According to him, blockchain could possibly end the banks' hegemony over the stock clearing, and cryptocurrencies, which are the populist insurgents of the blockchain movement. Blockchain has become a focal point for big bank leaders amid the rise of crypto popularity.
He concluded his segment by saying,
“I'm not saying this is the right way to look at banks, but it's certainly how younger portfolio managers view the group, and they are winning right now judging from where the group is trading,” Cramer concluded… “As I see it, they are the true reasons for the group's underperformance and until the banks regain some visible earnings momentum, their stocks will not be able to get their groove back despite the additional hype that might be coming our way.”
What do you guys think of Jim Cramer's bitcoin and blockchain comments?