BANK STRESS TEST = NON- EVENT => What Next?

In the first week of March 2009, Wall Street was preparing for Financial Armageddon. Just a month later we are on the road to recovery and the stock market rally continues - totally ignoring any negative / bearish news flow. When markets totally ignore bad news or interpret any bad news as ‘better than expected bad news’ its wise to be cautious.

The Banks that were on the verge of total collapse are now quite confident of raising billions of dollars in capital from the private sector.
Gigantic derivative positions still haunt these ‘solvent banks’, and it's hard to believe these guys have enough capital to sustain further losses from derivatives/ mortgage backed securities/credit card loans.
For their sake, the economy better recover really quickly or we will be headed into round 2 of the ‘save the banks’ game.

It's important to note that as markets staged their incredible recovery, the USD has lost some ground, and commodities like Copper, Crude Oil and precious metals Gold & Silver have recovered somewhat. US Treasuries yields are also rising and the FED may have to step up its purchases here, as it struggles to keep rates down.

Rising commodity prices and rising treasury yields could derail any ‘green shoot recovery’ that the pundits claim they now see!!

Links:
Why We Are Absolutely Screwed
Bank of America May Need About $34 Billion of Capital
The Bottom
DROWNING GOP RATS BEGINS TO CLING TO RON PAUL
Preliminary Stress Test Results
Here's Ron Paul again - The one guy who still continues to grill Bernanke!




EDIT : FRIDAY 8th MAY 2009:
I just came across Ron Paul's reaction to the Bank Stress Test results.

SMART MONEY UNDERESTIMATING RISK !

No wait, these guys are just as bad as the Investment Bank CEO's on Wall Street!
Tales of Hedge Fund--Private Equity--Emerging Market Losses
Don't blame the bankers, some of these 'business schools' were clearly taking too much risk with Endowment and Pension fund investments - They should have known better!

The Bullish Bear Blog advises all Sovereign Wealth Funds : "'''Stop trusting bankers and quit investing in global financial institutions and banks.!"""

Saudi Prince Burned By Citigroup
Saudi's Kingdom Holding posts $8.3 bln Q4 loss
Abu Dhabi fund faces huge loss
Losses steep at sovereign-wealth funds
Report: Arab govt funds lost big as markets fell
Norway Oil Fund Losses in Lehman Shares Exacerbate Kingdom's Worst Return

Columbia Endowment Lost 15% in Second Half of 2008
Dartmouth to Cut Budget After Endowment Loses 18%
Cornell to Cut Spending After Endowment Falls 27%
Princeton Fund May Decline 25%, Tuition to Rise 2.9%
Harvard Alumni Protest Investors’ Pay After Fund Loss
Lessons learned from Harvard's 30% endowment loss - MarketWatch
Harvard Hit by Loss as Crisis Spreads to Colleges - WSJ.com
Harvard's Endowment Loses $8 Billion
Hopkins's endowment drops amid recession
Survey shows endowment losses at many institutions
Sliced: Endowment losses cut Jefferson Scholarships
Market Losses Tighten Screws On Colleges
CalPERS investment chief sees 'no place to hide' in the markets
Harvard, Dartmouth Losses May Widen on Private Equity

GOLD : THE FRIDAY REBOUND

Even as the US Equity markets rallied late on Friday, the Gold rally seems to have gone unnoticed on CNBC (big surprise!!!).
Short covering by Hedge Funds, Bullion Banks or naked short sellers...........who knows!!
The US Stock markets have been all over the place and are impossible to trade. They can be up or down 2-4% a day without any major newsflow.
Equity markets everywhere appear extremely oversold, something that becomes especially evident on long term charts. Maybe another market bounce, post a CITIGROUP or GM bailout/rescue package.
GOLD
Over the past few weeks there have been rumours of Saudi Arabia and then Iran purchasing GOLD.
Rumours that the COMEX might default on deliveries of its DEC2008 gold contracts.
http://meltdown2011.wordpress.com/2008/10/22/warning-comex-may-default-on-december-gold/
Rumours that CITIGROUP could collapse!
Whether panic buying or short covering, the move after stabilizing in the $ 700- $ 750 range is encouraging.
Here is Mish's take on it.
http://globaleconomicanalysis.blogspot.com/2008/11/i-like-gold-here.html

I hope people are finally beginning to realise, that the guys running things are no longer in control, but are just confused bystanders, whose opaque policies and inconsistent decisions are doing more harm than good.

OTC DERIVATIVES & COUNTERPARTY RISK

Sorry for not posting regularly this month! I'm back now and there’s a lot to catch up on.

http://www.bis.org/statistics/otcder/dt1920a.pdf
Now this is something that caught my attention!!!!!
What the heck is going on!!
The whole world is falling apart and the OTC Derivative time-bomb continues to grow.
It going to turn nasty, that’s for sure. Amidst talks of Clearing Houses for derivatives, Fed & Treasury Bailouts for anyone who may be too big to fail ( or possibly too big to save), it seems that the authorities are just keen to buy time and hope this whole mess just goes away.
Counterparty defaults and Bankruptcies are going to add fuel to this OTC derivative bonfire.

A combination of record debt levels & a bout of deflation will ensure that the markets retest 'new' lows over the next few quarters.