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Nearly all banks stocks are trading down, reported in the news as being hit by concerns of stress test results. This is non-sense. We all new the banks were under-capitalized in relation to the risks, earnings outlook and bad assets on their balance sheet. This bear market rally has run out of steam at the exact point where the stress tests will reveal some underlying fundamental data.

Be aware that, in the medium term, it is irrelevant what the stress tests say - losses are losses and the banks that have them (economic losses, that is) will suffer. In looking at how Obama is handling the auto industry and their bondholders (he ain't playing games), their is little reason to believe he will sugar coat things with the banks either. In any event, if he does goof around, it just kicks the day of reckoning two quarters or so down the road.

Subscribers that have been following my stress tests should be able to see with acute granularity the fissures, cracks and crevices (or lack thereof) in many of these financial institutions. I am also running the government's version with a scenario analysis to attempt to predict the outcome before the government releases the official results.