The market has passed the half-way mark for 2009, and it's good riddance to the first two quarters. Here's a quick rundown of some of the more interesting metrics for the first six months.

The S&P 500 returned 1.77 percent and increased its market cap by $177.968 billion, according to Birinyi Associates.

Jeremy Grantham's quarterly letter (you can download it from his site here) is a must-read. The title sums it up: "The Last Hurrah and Seven Lean Years."

First, the good news. Grantham says we could be in for a big equity rally thanks to massive government stimulus plans designed to keep the global economy on track, with a good chance the S&P could hit 1000-1100 before year's end. It's a bit of rare bullishness from Grantham (don't worry, it gets worse later). From the letter:

Stocks are rallying, the economy looks like it's (possibly) bottoming, and Ben Bernanke says growth could resume this year. So what's not to like? One word: Credit.

In a lengthy post, ContraryInvestor.com (re-posted in full at Zero Hedge) outlines why a sustained recovery in the credit market remains the province of wishful thinking. Without the Federal Reserve's help, sickly markets for mortgage- and asset-backed securities and even commercial paper might still be threatening to swamp the entire financial system just as they did during the worst of the crisis late last year. Scarily, stocks might simply be ignoring that fact. From the post:

As fears of a swine flu pandemic increase (emphasis on fears) market jitters are rising accordingly due to the uncertain scale and cost of the current outbreak. Citigroup strategist Tobias Levkovich takes a stab at just what sort of sickness swine flu could inspire in stocks, trade and the global economy.

While we do not want to diminish the human cost of such awful developments, the investment community is more likely to focus on the economic price. Health care stocks could benefit, while economically sensitive ones could suffer. In addition, we have worried about protectionist policies coming to the fore and it is plausible that some “America First” types may push for more aggressive action on the Mexican border and on immigration, with a populist flavor behind it. Again, we do not see that kind of legislative effort as being perceived as welcome by markets. US-Mexico trade is significant and the Mexican economy is already being hurt by a drop in tourism, exports to the US and weaker oil prices. Accordingly, the news cannot be seen as good for stocks in that country. We would refer investors to the research put out by Citi’s Latin American strategist, Geoffrey Dennis, who has been cautious on Mexican names and underweight the market since mid-December.

Banks have until May 4 to appeal the results of the government's "stress tests" designed to determine whether they've hoarded enough capital to continue functioning. Already, the results seem to hint the financial crisis will continue. All of the 19 largest U.S. banks under scrutiny are expected to "pass" but that's not really the point. Some are still expected to be forced to raise new capital no matter their grade.

Which brings us to Bank of America (BAC) and Citigroup (C), two banks reportedly being urged by the government to raise capital. That the banks are undercapitalized is no big secret. Unfortunately, new concern for two institutions that have already taken a combined $95 billion in bailout money could increase the chances they'll come back for more. The longer their capital structures are questionable, the less chance the pair will be able to convince investors to come creeping back especially as the perception problems plaguing the sector remain firmly entrenched. Officials say they don't want the market to look unfavorably on banks required to up cash reserves, or to consider them insolvent. But that is unlikely.

The NYT has the lengthy rundown of Treasury Secretary Tim Geithner's cozy relationship with Wall Street. You should read the whole thing. It's less about new revelations (other than Sandy Weill offering Geithner the top job at Citi, which Geithner promptly turned down.) The play-by-play is thorough (and thoroughly exhausting) so let's get to the point:

With his deep connections among senior finance execs and (relatively) well-respected stature as an honest regulator, Tim Geithner was the guy to call during the early days of the financial crisis. He knew the players, could get them in a room, and he understood (at least partly) what was at stake. The choice made a sort of sense, despite the unavoidable fact that the New York Fed under Geithner missed an alarming number of chances to regulate before the crisis exploded. The passage below illustrates his role and his successes and failures:

The newsy bit of Fortune's big Madoff story is that Bernie's close cohort, Frank DiPascali, (who is described as a "ninja" for his shadowy presence) is naming names in a plea deal, and claiming none of Madoff's family members were involved. But the story includes a ton of interesting tidbits about Madoff's own weirdness and how he ran his huge Ponzi scheme:

The technology he used to keep the fraud going should've been in a museum:

Bank of America's (BAC) Ken Lewis' testimony sheds some light on the gory details of last year's crisis management. From the WSJ (sub. req.):

Mr. Lewis, testifying under oath before New York's attorney general in February, told prosecutors that he believed Messrs. Paulson and Bernanke were instructing him to keep silent about deepening financial difficulties at Merrill, the struggling brokerage giant. As part of his testimony, a transcript of which was reviewed by The Wall Street Journal, Mr. Lewis said the government wanted him to keep quiet while the two sides negotiated government funding to help BofA absorb Merrill and its huge losses.

Interesting tidbit from Jefferies & Co.'s '09 cleantech outlook. Solar companies are getting squeezed by both the credit crunch in Europe and the stimulus in the Chinese economy (home to a big chunk of low-cost solar panel makers). From the report (bold is mine):

We see the fundamentals for solar as still somewhat unstable. We believe module oversupply is being exacerbated by liberal lending practices among Chinese banks which continue to support many public cell and module plays with ever larger amounts of short-term debt, leading to a disincentive to rationalize industry capacity. Conversely, in Europe, the financial institutions historically responsible for the bulk of project lending in the renewables space remain focused on fixing their own balance sheets and unable to fund significant amounts for traditional project lending time frames, apart from key projects in Germany.

The International Monetary Fund has released its latest Global Financial Stability Report, and guess what it doesn't show much of?

Pick a category, and you find signs of stress. Emerging markets? Check. Their banks face "liquidity and solvency pressures." Credit risk? Check. Lending standards are still tightening even after a global wave of looser money.

At least somebody is getting a V-shaped recovery.

Back in early November, Citi analyst Mark Mahaney downgraded Amazon (AMZN) which made some sense at the time since its shares were slumping and the company was slashing guidance. He downgraded at $52, and by Nov. 20 shares had fallen to around $35.

It has been an undoubtedly tough year for almost all green stocks, but a few recent stories show a more solid foundation for the industry is starting to take root in the U.S.

The broad future of green investing got a bit more secure today after the Environmental Protection Agency solidified its position on the dangers posed by carbon and several other pollutants. It declared greenhouse gasses a threat to public health and welfare. From the NYT:

Warren Buffett's Berkshire Hathaway saw its long-term credit rating cut to Aa2 from top-rated Aaa by Moody's, which cited the troubled economy and the "severe decline in equity markets" for the move as Berkshire's investments in the likes of Wells Fargo and American Express fell hard, the WSJ reports.

Bad news right? Not really, for a couple of reasons. Berkshire lost about a third of its value in the last year, and it's obvious even Buffett didn't escape the worst of the credit crisis. The latest rating change was expected after Fitch and S&P revised their ratings, and this downgrade actually makes the legendary investor look more like his usual honest self after questions were raised over Moody's hesitance to cut Berkshire given Buffett's 20 percent sake in the ratings firm. As Felix Salmon notes, the open conflict of interest actually makes the news less meaningful.

Who's tossing cold water on the rally? A few folks, including Merrill Lynch and Morgan Stanley in separate reports today, are predicting the bounce off of March lows is in for a bit of retrenchment.

Morgan says it's moving 5 percent of its equity allocation into bonds, and is still 5 percent overweight cash because the bear market ain't over. From Morgan (via Reuters):

Federal Reserve Governor Kevin Warsh has a reputation as one of the central bank's more assertive literary stylists, and today he's earning that distinction. In his speech today (worth a thorough read), he sees an upside to The Panic of 2008, saying, "the encouraging news, I should note, is that panics end. And this panic is showing meaningful signs of abating."

That's the good news, but he's also "decidedly uncomfortable forecasting a sharp and determined resumption of growth in the coming quarters," saying he suspects "the process of an efficient reallocation of capital and labor will prove slower and more difficult than is typical after recessions."

The Dow finally topped 8,000 yesterday morning for the first time since February. Good news for investors, especially owners of bank shares worried over whether hobbled institutions would survive under the weight of all those bad mortgage assets sitting on their books.

Bank shares are up because rule-setters just made it easier for banks to obscure the value of their toxic assets. The Financial Accounting Standards Board revised its rules to allow companies more leeway in determining "fair value" for assets on their books and reduced the threat of taking big charges against earnings on investment losses. That kicks in this quarter and can be applied to the first quarter as well.

"Not modest repairs at the margin, but new rules of the game."

That's Treasury Secretary Tim Geithner today on sweeping changes being proposed for the financial sector.

Want to know just how backward banking is right now? Analysts are downgrading financial institutions because they don't have enough exposure to bad assets!

Standard & Poor's cut its rating on merger advisor Greenhill & Co. (GHL) to "strong sell" from "sell" on valuation. That's no big deal, but look at the reason. From S&P (bold is mine):

Institutional Investor's Alpha magazine ranks the Top 25 Money Makers in the hedge fund world based on 2008 earnings:

1. James Simons, Renaissance Technologies Corp. - $2.5 billion