It's hard to decide which way banks are set to go. They've continued their rally from the end of last week and people like Larry Kudlow continue to talk up the upward sloping yield curve as a positive sign for the banks. However, the other side of the story is told by Meredith Whitney during her appearance on CNBC today.
I agree with Whitney, there's too much credit risk on banks balance sheets and I continue to believe that the credit card shoe has yet to fall. Commercial banks continue to hold a massive amount of consumer credit (currently at $877 Billion) and 4Q08 was up by $74B over 4Q07. Check out the facts!
One other thing. I don't want to hear that changing mark-to-market will solve everything. It may help stop a continued slide in non-existent markets, but it will not stop job losses, create consumer confidence and cause skeptics like me from questioning the true strength of a bank's balance sheet.