Why the Banking Sector’s Golden Age Is Long Gone

It appears that this is one of those rare times when it’s hard to be a bank. And the stock market is finally starting to realize that… [Jeff Clark's Market Minute]( Why the Banking Sector’s Golden Age Is Long Gone By Jeff Clark, editor, Market Minute Banking is an easy business… most of the time. Banks take in customer deposits, pay some small amount of interest on the money, and then loan the money to other customers at a higher rate. The difference in rates is called the “spread.” And the spread is profit for the bank. It’s an easy business when the spread is wide, like it was for most of the past 15 years. It gets even easier when banks can borrow money from the Fed for nothing, and then lend that money back to the U.S. government – which has the power to print money, thereby making it a risk-free loan. Over the past years, it’s been good to be a bank. But those days are gone. Recommended Link [Get the name and ticker of Master Trader’s No. 1 stock pick here]( [image]( Hi. Jeff Clark here. I am going to reveal the one stock I use in my One Stock Retirement strategy that enabled me to achieve financial freedom early, at the age of 42. I’ve used it to profit during any kind of market condition, including complete market meltdowns. And you can get started with as little as $100. [Watch my video here.]( -- It’s no longer possible for banks to borrow from the Fed at 0% interest and then lend the money to the U.S. government, by buying 10-year Treasury notes and 30-year Treasury bonds for a positive spread. Last October, the yield curve inverted – meaning short-term interest rates popped above long-term interest rates. The “spread” is now negative – more negative, in fact, than at any time over the past 30 years. Banks can still borrow from the Fed. But now it costs them 4.75%. And the best yield the banks can get right now on a 10-year T-note is about 3.75%. Nobody is making any money right now with a negative spread. So, the banks must rely on other business activities to profit. For example, banks can lend money for mortgages and refinancing activity. But there’s not as much of that happening these days. Banks can profit from credit card fees and charges. But while that activity is higher, delinquency rates are higher too. Banks can profit by consulting on and financing new corporate activity such as reorganizations, initial public offerings, and mergers and acquisitions. Here again, though, there’s not as much of that happening these days. Banks can also try to profit by offering asset management and trading services. But that activity is way down too, thanks in part to a year-long bear market in stocks. Free Trading Resources Have you checked out Jeff's free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career – at zero cost to you. Just [click here]( to check it out. So, it appears that this is one of those rare times when it’s hard to be a bank. And the stock market is finally starting to realize that. Over the weekend, the Fed announced several measures to help build confidence in the banking sector and prevent a large-scale “run on the banks.” Those measures may help to stop the bleeding for now. But although valuations have come down a bit over the past year, most banks are still trading well above their historic book-value multiples. [Finally, gain financial freedom in 2023 using this method]( There are longer-term, systemic problems with the banking business that’ll likely only be cleared up through time. So, while it may be tempting to jump in and start buying the bank stocks right now, they likely have lower to go. Best regards and good trading, [signature] Jeff Clark Reader Mailbag When do you think bank stocks will bottom-out? Let us know your thoughts – and any questions you have – at feedback@jeffclarktrader.com. 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