Put on Your Rally Cap?

The markets hit obvious resistance on Friday and failed to break out - even with a 70 point ramp in the last few minutes of trading on the Dow.

I think people were afraid of commiting Capital ahead of the "news" of the "Stress Test" to be "released" on now Thursday (or will it be pushed back yet again). But the tests were never designed to do anything but provide cover for the FASB change of Marked to Market.

I never figured that a bank would actually a "fail" the "test", because the tests were designed and performed by the banks themselves, they used "worst-case-scenarios" that are actually better than the current economic data and they would allow banks to extrapolate their current (artificially inflated) quarter earnings as the baseline for future earnings. You can't make this stuff up...

On Friday, the word was that even with all of the flaws of the "test", Bank of America and Citigroup were still going to "fail" and need to raise Capital to stay solvent. Things really are that bad at these banks. But after a weekend of lobbying (and probably a few million in Campaign Contribution promises), these banks are now declaring that they need no more new capital.

And the markets are rallying. There is a reason why I wanted to short on friday but didn't... But the short setup will come soon enough.

The accounting bs does not change the fact that the banks are still insolvent and cannot lend. So where does the lending come from to move the economy forward?

Moreover, who wants to lend money (and thus own bonds) when Obama has made the Junior Creditors (The Unions) at Chrysler, more senior than the Senior Creditors (Private Investors)?

The Government continues to take over and foul things up. Each stupid policy decision has more painful future consequences. That will only crimp future growth, not increase it.