Why Banks Won't Modify Mortgages.

They have $1,100,000,000,000 (trillion) in second-lien loans. According to Bloomberg, the four largest banks have reserved $29 billion in reserves against $366 in second-lien loans. While 8% is a large number, JP Morgan reports that 6.2% of their second-liens are delinquent. More extend and pretend. Analysts estimate that properly reserving for second-lien loans would wipe out expected profit for the year at JPM, BOA, WFC, and possibly Citigroup.

Rosenberg says that the earnings estimates and outlook is extremely optimistic, to the point where it correlates with a 1% drop in the S&P over the next month. Should I buy a couple SPY puts for a month out? By probability, the May 118 puts are priced at 1.3% for a fall of 1.4%. Hmmmm.... Tempting.