Time to get back into banking?
The long term trend is definite. The big bankers are largely dependent on central banks to back up their own poor investments with bailouts and other solutions such as liquidity loans and collateral for treasury transactions. While these decisions ultimately hurt the taxpayer, this kind of benefit has been particularly beneficial to the big bankers. Small and regional banks are unlikely to receive any credit or help from the Federal Reserve though large banks readily get huge handouts for the greater good of the people.
Knowing this, is it time to get back into banking? Chances are that the worst of the credit crunch is ending. Keynesian economists are expecting the credit market to rebound later this summer as the new credit hits the market, Austrian economists expect a continuous plunge brought on by an overexpansion of credit. While Austrian economics has plenty of merit, the ability of the Federal Reserve to print money out of thin air is dwarfing any theories, reducing them to mere thoughts. At this point it looks like the market can absorb a few more years of inflation to keep the US economic cycle in check.
Following a rebound this fall, the banking sector should be cheap. Not by price or valuation, but solely from the hard assets that back it up. When JP Morgan completely absorbs the assets of Bear Stearns, the company will have billions in account receivables. The banking sector is still overpriced for now, but as soon as things get better, go all in. There should be a decent recovery from here.