Dick Bove, who recently said you should buy Morgan Stanley when it was trading for around $19 a share so you could get that beach house in Spain, now says NOT to fear the unknown. It was almost like he was channeling Donald Rumsfeld, and his unknown unknows pronouncement. Bove was essentially saying don’t concern yourself with unknowns since when those unknows are taken away the bank stocks will soar. That seems quite risky to me, not to worry about what could happen in the face of a European debt crisis or if the unemployment rate continues to rise. It’s like he’s saying only concern yourself with known knows. And for Bove, that means the balance sheets of the banks are stronger than ever.
“The fundamentals of the industry have never been better. It is only the unknown, unquantifiable, contagion risk which is keeping these stocks down,” Bove said in a nearly euphoric note to clients. “Take this issue away and investors may realize that banks are massively oversold relative to the power of their balance sheets and their earnings potential.”