Bulls To The Slaughter

With the recent run up of some bank stocks exceeding the 30% mark, you would tend to believe that all is well on wall street and a reemergence of the bull market is occurring. For those that study the markets history and take into account such fundamentals as real earnings, unemployment figures, GDP, exports, and other factors, you could make the case for what some have called a SUCKERS RALLY happening recently. The reality is that an estimated 1-Trillion dollars in toxic assets are yet to be realized in the next 8 years do to resets on interest only loans in the commercial and residential real estate market. Why these factors remain ignored is pure conjecture. One could assume that this administration now needs to project a constant stream of positive sentiment so that the market moves upward. The net result is that the formula on these assets goes as follows, the resets occur causing defaults and foreclosures, toxic loans fall on banks balance sheets causing downward pressure on bank stocks instigating a sell off. A more sensible solution is to create a BAD BANK to harbor these toxic assets, so that financial institutions are freed up to loan money on transactions that are responsibly structured, thus increasing their rate of success. This strategy has worked well in the past and there is no reason that it couldn't work in the future.