The Bubble of Bearishness, Part 2: Banks

This is the second part of The Bubble of Bearishness Bursts. Here is Part 1.

To say the fundamentals of banks and institutions have been challenged over the past year is an understatement. The action in the financials has dominated the trading for the entire stock market. In the first five months of 2009, the financial sector and the S&P 500 traded in the same direction 85% of the time.

Investors have been sucked into a "headline tape," a hysteria-filled environment in which everyone reads the headlines and nobody reads the news. Two popular misperceptions were spread throughout Main Street. ...