As rates start to fall, Hennessy's Ellison sees "sunny days ahead" for banks

Money Life with Chuck Jaffe

David Ellison, Portfolio Manager and Financial Services Specialist at the Hennessy Funds, says that the banking industry is coming out of "a two-to five year period of darkness," heading for "sunny days ahead," though he notes that banks do not want interest rates to fall too far but he thinks earnings can grow even if the Federal Reserve cuts rates by another 1 percent or more. Ellison also notes that anticipated problems in commercial real estate — considered a real threat to the health of the banking system — aren't likely to materialize as a real threat now because the industry has spent the last two-plus years preparing for trouble. "It may be a drag here and there, but it won't be a blow-up problem," he says. Dana Staggs, President of Arrowmark Financial Corp., looks at a high-yielding alternative to standard banking plays, talking about how his closed-end fund relies on regulatory capital relief securities — esoteric investments that currently can generate yields of up to 15 percent — and that should hold up when rates get cut further in the coming year. Jason Brown of The Brown Report says that the stock market's technicals are showing him signs that a big downturn is in the offing, and Portfolio Manager Michael Roomberg of Miller/Howard Investments, talks energy stocks in the Market Call.