Michael Shulman

The Market Is Improving, Cancel the Coffin

Fundamentals win out, always, over time. The market is driven by earnings and the multiple of that earnings. It is currently selling at more than 16 times the now mid-range case for S+P 500 earnings -- the multiple stocks get in a 3% plus growth economy. Large banks -- Citigroup and BOA, and come to mind -- are technically insolvent based on their current asset holdings and conservative projections for future mortgage defaults. JP Morgan Chase and Wells are sitting on more than $150 billion in option ARM mortgages they hold, so they are writing them down as the are impaired - they do not have to use mark to market rules on these assets. That is at least $75 billion -- probably more -- in write offs in the next three years, I could keep going -- listening to the bankers yesterday was like listening to the Wizard of Oz -- you are waiting until the stress tests are over and Toto pulls back the curtain.....