NEW YORK (TheStreet) --Bond yields continue to move higher and carry the momentum of a Donald Trump victory in the presidential election. Expectations that a Trump administration will embark on stimulative economic policies, including tax cuts and increased inflation spending, has resulted in increasing yields.
"It's why when you see a Bank of America (BAC) go up, that makes sense," TheStreet's Jim Cramer said on CNBC's "Squawk on the Street" Monday morning.
Cramer tackled the question of "why own a bank?" The answer, he explained, was because there will come a time, typically a 72-hour period, in which a valuation is put on a bank stock, correlating with a rate hike, much larger than that of a FANG (Facebook (FB), Amazon.com (AMZN), Netflix (NFLX), Alphabet (GOOGL)) stock.
"It takes your breath away," Cramer said.
"These stocks have so underperformed, Bank of America now is premium to book value. There was a very nice upgrade today of Citi (C), they have a $64 book value, the stocks in the low-$50s. So these have a lot of room to run," he contended.
Citigroup was upgraded to "overweight" from "equal weight" today at Morgan Stanley.
"The more you see that interest rate go up, the more you can justify paying for the banks because it's not multiple expansion, it's actually raising the earnings per share," Cramer noted.
Moreover, Cramer does not think the run in the financials is over-extended.
"If you get more appointments, if you continue to get momentum out of the White House, then I think you'll say listen, we've got the rates going back to where they should have been," Cramer said.
However, Cramer noted the "gigantic overhead" the banks wrestle with, that everybody monitors everything and some carry significant legal bills.
"Those numbers go to the bottom-line, you'll get tremendous net-interest margin expansion and the next thing you know you have these banks that are earning X, and they're earning X and a half or 2X," he said.
"Now you want Fed speak, and you want them to say yes, we're moving," Cramer stated.