Don't bank on banks

Spring time. But it is not so clear if our Irish banks are participating. Some banks on the continent doubled in value last couple of weeks. And also in the States. But no joy on the Emerald Isle as our financial institutions are decimated and crippled..
Fromm Egan Jones, the rating agency (what’s in a name, these days) we received some comments on the resurrection of the Citi share price.

Accounting and government magic - the recasting of FASB157 enables financial institutions to defer the recognition of losses with the result that C's March trading profits swung from a $6.8B loss to a $3.8B gain. Another item worth reviewing is the decline in interest expense from $16.5B last year to $7.7B this year.
Nonetheless, much more equity capital is needed. Beyond the conversion of preferred to common, watch the form of any additional capital. The Fed and Treas. have guaranteed $306B of C's assets, have injected $45B in preferred and converted to common leaving few additional options. The problem is that C has $2T of assets ($3+T including off balance sheet assets) whose values are depressed by 10% to 20%. C needs to be watched.

We see a developing trend which is worrying: liquidity seems to dampen once again. Apparently funds are deleveraging when they can. So every uptick serves them well. But while doing this they are reducing the liquidity in the market.
Fewer dollars are available to fund the liability side.
A stronger dollar is the result. This is not boding well.
Now, the higher the market goes, the more shorts are trapped.
It seems like a remake of the past-Lehman days is in the making.

Be careful, gals and lads.
This remarkable chart was published by Tim Knight.
Remarkable in the sense that the Russell 2000 seems to do exact the same thing as this index did a couple of months ago.
Exact the same gains in exact the same time span.

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