What Comes After Big Banks Hit 52-Week Lows

It'd be irresponsible to suggest the U.S. is staring down the barrel of a second credit crisis. The three-month LIBOR rate has dropped to 0.031% from a peak this year of 0.055% in less than two months, suggesting banks are loaning to one another and credit may be easing.

With that noted, three of the most prominent banks in the U.S. hit new 52-week lows during the Aug. 25 trading session -- Bank of America(BAC), Wells Fargo(WFC) and BB&T(BBT).

What's more, these "too-big-to-fails" constitute 21.25% of the SPDR KBW Bank Fund(KBE). It should come as no surprise, then, that KBE was within -3% of a 52-week low during last week's early Wednesday sell-off.

Equally disturbing, KBE has fallen 26% below its April top, has broken well below its July lows and is charting an ominous pattern of "lower lows." If KBE were to continue along this path, it's hard to imagine the S&P 500 fending off a bear assault. At 1,055, the index is 13.5% below its April pinnacle.

So why is this happening? Is it the lack of home-buying activity? Is it the deteriorating quality of loans on the books, as more folks default on home equity loans? Did FINREG's restrictions on consumer banking fees and proprietary trading activity damage earnings prospects? Sadly, it may be all of the above.

Credit crisis redux? Not likely. Earnings uncertainty amid more write-downs and less revenue? Very likely.

Is there any reason to be bullish on the banking industry? There's one possibility -- that is, it is conceivable write-downs, lack of loan demand and FINREG have been "priced in" at this point.

The CEO of Bank of America, Brian Moynihan, bought 30,000 shares on Monday for a few thousand shy of $400,000 at $13.03 per share. Insiders don't typically make substantial buys when they're lacking confidence in the businesses they run.

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