Count de Monee

on slope:

""- Stress testing the stress test scenarios - actual macro data are already worse than the more adverse scenario for 2009. Nouriel Roubini: If you look at the actual data today macro data for Q1 on the three variables used in the stress tests – growth rate, unemployment rate, and home price depreciation – are already worse than those in FDIC baseline scenario for 2009 AND even worse than those for the more adverse stressed scenario for 2009. Thus, the stress test results are meaningless as actual data are already running worse than the worst case scenario. The FDIC and Treasury used assumptions for the macro variables in 2009 and 2010 both the baseline and more adverse scenarios that are so optimistic that actual data for 2009 are already worse than the adverse scenario. And for some crucial variables such as the unemployment rate – that is key to proper estimates of default rates and recovery rates (given default) for residential mortgages, commercial mortgages, credit cards, auto loans, student loans and other banks loans – current trend show that by the end of 2009 the unemployment rate will be higher than the average unemployment rate assumed in the more adverse scenario for 2010, not for 2009! In other terms, the results of the stress test – even before they are published – are not worth the paper they are written on as they make assumptions on the economy that are much more optimistic –even in the worst scenarios that the FDIC has designed - than the actual figures for Q1 of 2009.

- US savings and investment flow at the lowest level since at least 1996 - now down -82% since peak in the end of 2007 - not boding well for the stock market. TrimTabs Savings and Investment Flow, which consists of flows into bank savings; small-denomination CDs; half of large-denomination CDs; retail money market funds; and all long-term stock, bond, and hybrid mutual funds, fell to an estimated $1.8 billion in March and an estimated $26.8 billion in April. In the 12 months ended in April, TTSIF totaled $149.8 billion, the lowest since our records begin in 1996 and down 82% from the record $828.7 billion in November 2007. This indicator’s collapse does not bode well for the U.S. stock market (reasonably strong historical correlation between TrimTabs 12-month rolling Savings and Investment flows and S&P 500)."