Formula for Predicting the End of the Financial Crisis

by Alex Stenback on April 17, 2009

Though I am generally skeptical that we are out of the financial wilderness, earnings season for the major financials is going better than expected, and the economy is showing a few nascent signs of improvement. 

So, is the recovery around the corner?

Our jury is still out, but Jeff Matthews Is Not Making This Up has a theory that may prove to be a masterstroke of contrarian thought and simplicity:

“…it occurs to us that if the government has decided it is time to conduct a serious analysis of the ability of our nation’s banking system to withstand an economic tsunami, well, then, the tsunami must already be behind us.”
“Putting it into a formula, we derive the following:

Improving Fundamental Outlook + Severe Government Reaction = Crisis Over.”

Original and clever, for sure. Though it remains to be seen whether the “improving fundamentals” and recent stock gains are real, or a head fake.

And one last thing: If a recovery is in the offing, mortgage rates are going back up a lot sooner than you think.  Consider yourself warned.
· Stress Test On, Crisis Over []

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