NEW YORK (Real Money) –- When we talk about mergers and acquisitions, we think they run the gamut of industries. In fact, they don't, and the two areas where we have seen no consolidation are the two areas whose stocks are just acting horrendously at this moment.
This makes sense. When there is no consolidation, there's no ability to rationalize and take out costs. Without consolidation, there's way too much competition. Without takeovers, you just can't boost estimates, the lifeblood of all positive stock moves.
Which two industries am I talking about? The banking stocks and the industrials.
I have watched the sickening dribs-and-drabs selloff in the banking group for what seems like ages now. My Action Alerts PLUS charitable trust has watched SunTrust (STI), which reported a terrific quarter, see its shares pretty much give up a few pennies a day, except for the days when it gives up 25 cents or 30 cents. It's totally gut-wrenching.
I look at the stock of Wells Fargo (WFC), and I wonder what happened to that spike to $53 on that fabulous quarter. KeyCorp (KEY), which was knocking on $15's door, now looks like it can slice through $13.
Meanwhile, Bank of America (BAC) got permission to raise its dividend for the first time in seven years -- obviously something that wouldn't have been done if it were about to be bankrupted by the U.S. Justice Department. Yet the stock is now below the level where it had been when the firm had gotten the go-ahead.
We know the degradation is occurring because interest rates on U.S. Treasuries have gone down to the point at which the earnings estimates -- which analysts set when these companies reported a month ago -- are now too high. They are all vulnerable to number cuts.
Here's what's more important, though: This was a group that, before the Great Recession, used to be the subject of endless merger talk. Shares of a bank such as SunTrust couldn't go down like this without prompting the worry that a name such as BB&T (BBT) would take it over.
TheStreet's Jim Cramer talks about his reasons why banks and industrials are not performing well: