KBW Regional Banking Index (KRE) Provides an Interesting Sideshow for the Financial Crisis

Posted on September 19, 2008

If you need a prime example of the height of insanity that our financial markets have reached, look no further than the KBW Regional Banking Index (KRE).

This index, which represents regional banks in the US, fell to a low of about $22 back in July when significant pessimism surrounding US financial institutions, especially FNM and FRE, really began to take hold. Amazingly, today on the heels of the Fed rescue plan, this index opened at $51 and climbed to $60, a multi-year high. If you were long this ETF and were able to take profits: congratulations!

In essence, in less than two months, during what was supposedly the worst financial crisis in decades, an index, which represents many companies supposedly facing a crisis, nearly tripled in value and reached prices from back in 2006 before this financial crisis even started. So, presumably holders of the KRE can naively and confidently reply, as the President of Brazil Lula did just the other day when asked about the financial meltdown: “Financial Crisis? What Financial Crisis?”

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