Watch Out for Bank Stress Tests

by The Investment U Research Team

We’ve been talking about the potential for a second market drop, bringing to light the specter of the “double bottom,” and the possibility the current market increase is nothing more than a bear market rally.

But even with some of the negative earnings, housing starts and manufacturing figures we’ve seen, the major indices have gained over the past few session in choppy trading.

It doesn’t appear like there’s anything on the horizon that could destabilize the markets enough to send them lower… or is there.

The only thing that we can see that has the balance shifting power to send the broader markets sharply lower at this point is a government announcement or action…

Hmmm… Like the delayed announcement of the bank “stress test?”

If these tests point to a weaker banking system with United States being required to invest (read: bail out) banks that they’ve already sunk billions into, it could be politically unpopular and hit the markets hard.

If that happens, we could see a pullback of 30% from current market highs.

We’ve already known that the banks receiving funds will not be allowed to fail. What we don’t know is the extent of the credit damage, and just how much it’ll take to make these companies solvent.

The delay from results to announcement could give the administration time to use them best to “cheer up” the markets. The news could be great, and the administration could be concerned no one will believe them… It could be the reason why U.S. regulators have detailed the procedures behind them.

The interesting thing for investors is the potential for the results of these tests to send the market sharply up or down.

On the other hand, if the news was good, shouldn’t we have heard already? Isn’t good news something you want to rush to the press? The delay could be a clever explanation as to why the banks didn’t do well.

And either way, it could be an incredible buying opportunity. It’s why we’ll be paying close attention to their release in May.

• Wall of Worry Grows over Rally
• Market Volatility Fraught with Danger
• Brace Yourselves

Sign Up now and receive this Free report: Collect 122% in the Next 12 Months From Gold's Surge.

Could you use an extra $600 - or more - each month?

If so, you’ll want to check out the details of an overlooked government-backed program in THIS REPORT.

It shows you why the government is set to distribute $457 million to a small group of recipients, how to get your name on the list and the exact deadline you must meet in order to qualify.

One Response to “Watch Out for Bank Stress Tests”

1. Stephen Says:
   April 18th, 2009 at 11:06 pm

   I’m sorry, but the stress tests will be positive. No question about it. Why? Because they can make them that way and there’s nothing anyone can do about it. So just enjoy the ride and the fluff and make as much money as you can.

   Reply

Comments

Check out our selection of daily Investment Research:

We Respect Your Privacy

---

What is Investment U?

Since 1999, Investment U has provided impartial, no-nonsense investment advice on how to build long-lasting wealth.

---

Recent Articles

Platinum Services

The Oxford Club is an exclusive, global network of investors, who collectively participate in the pursuit of prosperity and wealth. The Club is renowned for its market-beating, tried-and-true investment principles.

The White Cap Report exclusively identifies companies, White Caps, which - by being among the earliest to gain traction - have secured dominant positions within untapped, billion-dollar markets.

With an elite trading team at the helm, the Xcelerated Profits Report shows any investor how to "invest like a pro," using high-level, yet easy-to-execute strategies that "xcelerate" profits while minimizing risk.

---