Money-steroid-like-injections and accounting tricks are what the banks have been rallying on. Such knee-jerk high-level action/reactions do not make the argument valid for a sustainable rally.

Its like sport-related dignitaries for various countries, making decisions to dope a certain class of athletes, and then “coaching” them in how to cheat the tests they will face during the games, competitions and matches they enter. Behind the scenes, they are sprawled out on a mattress or sitting at a table with a tourniquet around their arm or leg, and “performance-enhancing” fluid being injected by their minders, supporters or coaches. The dignitaries standing in the same room watching and consulting with the attending physicians. Aside from these injections, not just one but many ongoing injections, they would not be competing in the same field with other clean athletes.

During this last rally, a lot of people coming out to say how marvelously financials have “performed” since March; compared to other sectors. We even see the dignitaries in their best suits and dresses, coming to speak to the media about how well these financial athletes have performed compared to technology and health related securities (which actually produce things of value in our society). The dignitaries speak and also give show of support, “Look how well our athletes perform in this leg of the race. … See how high they jump?” …

The essence of prudence is lost the moment dignitaries compromise themselves professionally, ethically or morally. They may not be fools, but to say they are not fools, does not address the question of whether or not they are compromised professionally, morally or ethically.

As with Olympic events, a countries dignitaries are lost when it is learned the athlete has won a competition or based a career on doping and lying to the public, cheating the tests, and basing their careers on this type of behavior. Such revelations, do not salvage the compromised reputation of the dignitary. They are merely forgotten, when the news surfaces. In silence which follows, they are still very much compromised.

The consumer is, four out of five, cutting back. This is the sustainable and more reliable component through all of what has happened. Through all the lies, the accurate news mixed with misinformation and some disbelief, a few material changes in accounting and some injections on the side, the consumer is fading the market.

Every hedge fund is now long BAC, including the Paulson-type funds who were massively bearish on financials on the way down. They are not fools.

Sallie Krawcheck bought $1m of stock @ 15.97. I worked for her, and she is certainly not a fool

Insider buying in C yesterday @ 4$, though the insiders who bought @ 1.25-1.50 were even smarter

Improving housing, lower delinquencies, low interest rates, and a rebound in equity/debt markets will take them all higher

Financials are the primary battleground between the “Green Shoot – Recession is over – new bull mkt beginning” crowd vs those who believe this is a bear market rally. If the former group is correct, financials are still massively underpriced. However, according to the bears, financials will lead the next leg down as they have during every other drop due to their toxic assets. What seems like a bipolar market for financials (4% down yesterday, 1.7% up today) is really these two dueling viewpoints of how the world will look in six months. Once reality sets in that we’re in the eye of the storm, IMO financials will move significantly lower. The fact that their short interest is lowest out of any other group (per TPC’s earlier posting) gives me more confidence that they’re toast.