On Monday widely followed Dick Bove told us that he was wrong about banks - that they’re probably not going higher.
But he also says, they should.
When speaking about the weakness in a live interview on Fast Money, Bove told us bank weakness was “not because of fundamentals – in each of the past 9 quarters, bank earnings have been up year over year. And Q3 was best in profits in more than 4 years.”
Then, why are bank stocks going down?
Bove's thesis is simple; he thinks investors are so freaked out about banks that they’re selling for no rational reason. In other words, psychology is driving bank stocks because of fears related to Europe, housing, economy, regulation and more.
But “it’s not the fundamentals – they’re getting better and better and better,” Bove says. In fact he thinks investors are missing a big bullish catalyst - that the crisis in Europe is actually good for US banks.
”People are worried about how the American banks are going to be hurt by the European crisis but it’s actually bonanza for American banks,” Bove says.
"Over the past 4-5 months we’ve seen changes in the movement of funds – deposits are flowing into American banks from Europe. And we’re seeing loans being sold by the European banks to the American banks at distressed prices. And we’re seeing customers shift from Europe to American banks. And American banks are delivering better than expected earnings as a result," Bove explains.
All told, banks stocks should be going higher. And if you’re looking for a play Bove suggests long Wells Fargo.
”Wells Fargo is one of the best banks in the United States and buying this stock at current prices makes an enormous amount of sense," he says.
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Trader disclosure: On Nov 28, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Weiss Long EUO; Weiss Long QCOM; Weiss Long NFLX puts; Weiss Long HPQ stock; Weiss Long DE Stock; Weiss Long MDRX stock
For Pete Najarian
Najarian Long AAPL Stock; Najarian Long AKS Calls; Najarian Long C stock; Najarian Long JPM Calls; Najarian Long WFC Calls; Najarian Long INTC stock; Najarian Long YHOO Stock
For Steve Grasso
Long Retailers in Retail Based Hedge Fund
Has positions in AA, AKS, AMR, ASTM, BA, BAC, D, LIT, MHY, PFE, PRST, S, XLU
For Dick Bove
* No Disclosures
For Kimberly Greenberger
Morgan Stanley managed or co-managed public offering in EXPR
Morgan Stanley received compensation for investment banking services from EXPR, LTD,
Morgan Stanley expects to received or seek compensation for products from ANF
Morgan Stanley & Co. LLC makes a market in the securities of Abercrombie & Fitch Co., Aeropostale Inc, American Eagle Outfitters, Inc., AnnTaylor Stores Corp, Chico's FAS Inc., Children's Place Retail Stores Inc., Coach Inc, Express, Inc., Gap Inc, Guess, Limited Brands Inc, Lululemon Athletica Inc., Ross Stores Inc., Skullcandy Inc, Teavana Holdings, Inc., Tiffany & Co., TJX Companies Inc., Urban Outfitters Inc..
Morgan Stanley & Co. International PLC and its affiliates have a significant financial interest in the debt securities of Limited Brands Inc, TJX Companies Inc..
For Jeff Kilburg
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For Vasily Karasyov
SFG is a market maker in the securities of AMC Networks, Inc. (AMCX), Walt Disney Co. (DIS), Discovery Communications, Inc. (DISCA), DreamWorks Animation SKG Inc. (DWA), Madison Square Garden, Inc. (MSG), Netflix, Inc. (NFLX), News Corp. (NWSA), Time Warner Inc. (TWX), and Viacom, Inc. (VIA/B).
SFG and/or its affiliates beneficially own 1% or more of the securities of Netflix, Inc. (NFLX).
For Neil Doshi
-Firm has received compensation for products and services other than investment banking from ERTS
-ERTS has been a non-investment banking client of Citgroup Global markets over the past 12 months
For Dennis Forst
Firm makes market in WYNN Securities
Expects to receive or seek compensation for investment banking from WYNN
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