Six months ago, I wrote about LEH, BSC, and GS Vaporizing Subprime and pushing the markets higher. In fact, if anything bailed out the markets from the three weeks of pain in February and March, it was the well-crafted earnings reports and comments from the investment banks. Hopefully, you’ll note a touch of sarcasm in my piece from 6 months ago. The idea that Wall Street firms were able to contain or hedge their risk to years of loose credit in subprime and other categories was not believable - but the markets bought it back then. Investors got what they wanted to hear - problem solved! But of course, the economic realities have only worsened and within only a few months, most of the containment crowd was exposed as overly optimistic if not recklessly ignorant.

So now that the investment banks are about to put out their numbers, will investors get what they want to hear? This time around, there is the sentiment that it would be comforting to see them “throw in the kitchen sink” and get all the bad stuff they didn’t admit to before out of the way. Isn’t that great?!? As I wrote the other day, I am not a fan of Financial Fudge whether they report good or bad numbers. But now that LEH just came out with a beat and the market is responding favorably, it might lead you to believe the worst is over -AGAIN. The old saying “Fool me once, shame on you…Fool me twice, shame on me” just doesn’t seem to apply here. Instead, the market seems to say “Keep on fooling me.” It will be fun to watch all the other financial firms post their numbers but just as I suggested 6 months ago, the economic facts are quite different. Investors may be tempted to assume that beating estimates means all is well or they may also be willing to believe that bad numbers mean the worst has been already factored in. I just happen to have a different view.