Two fund managers that I have the utmost respect for have differing opinions on the state of banks.  Who is right will determine the trajectory of the stock market and the economy:

John Hussman says we are entering another wave of the mortgage crisis, which will threaten the banking system yet again:

Quoting from “The Rubber Hits the Road”:
“Although the 2010 peak in the Alt-A / Option-ARM reset schedule doesn’t occur until July, with a much larger peak in mid-2011, a small initial round of resets is already in progress, having started about November of last year. I would expect that if we are indeed at risk of a second wave of mortgage defaults and credit strains, it will show up first as a surprising jump in 30-day mortgage delinquencies in the data we see over the next 2-4 months. I do not expect quarters upon quarters of uncertainty. It may take longer to observe the full effect of continued mortgage delinquencies and foreclosures, but we are at about the point where the data would depart from the market’s “all clear” expectations if credit pressures are likely to resume with force. ”

and from “Ordinary Outcomes of Extraordinary Recklessness”
“[S]ignificant damage in the stock market is often taken in the “recognition phase” where troubling reality departs from optimistic expectations. On that front, I am doubly concerned here because on the basis of an ensemble of fundamental measures (normalized earnings, revenues, book values, dividends), the only points between the pre-Depression period and the late-1990’s when the market has been so richly valued were November-December 1972 (before a 2-year market loss of about 50%), and August-September 1987. The hostile yield trends I noted last week [ed.] only amplify that concern. ”

Meanwhile, Bruce Berkowitz says in Barrons “After the Apocalypse”:
“During a difficult period, normally everyone is focused on what I would call the pig in the python — the pig being bad debt — and wondering if the python is going to live. But what is not thought about too much is that while that is happening, those institutions that can write new business are going to do quite well. That’s because it is during tough times that you write your best business, whether it is an auto loan, a mortgage, a credit card, whatever. Your standards are significantly tighter because of what has happened. You’ve gone from one extreme of loose, easy credit to the other credit extreme, of giving credit to people who maybe don’t even need it.”

and
“..there has been enough time now where financial companies, if they are still around, are getting over the hump of the bad debt and, at the same time, have taken on new loans. So they are through the worst of it with their loans, which they have been writing off at a furious pace. And the loans that they’ve been making since around the end of 2008 have been quite good.”

To be, or not to be..thus conscience does make cowards of us all..

More Shakespeare..

Hamlet:

To be, or not to be, that is the question:
Whether ’tis nobler in the mind to suffer
The slings and arrows of outrageous fortune,
Or to take arms against a sea of troubles
And by opposing end them. To die—to sleep,
No more; and by a sleep to say we end
The heart-ache and the thousand natural shocks
That flesh is heir to: ’tis a consummation
Devoutly to be wish’d. To die, to sleep;
To sleep, perchance to dream— ay, there’s the rub:
For in that sleep of death what dreams may come,
When we have shuffled off this mortal coil,
Must give us pause—there’s the respect
That makes calamity of so long life.
For who would bear the whips and scorns of time,
Th’oppressor’s wrong, the proud man’s contumely,
The pangs of dispriz’d love, the law’s delay,
The insolence of office, and the spurns
That patient merit of th’unworthy takes,
When he himself might his quietus make
With a bare bodkin? Who would fardels bear,
To grunt and sweat under a weary life,
But that the dread of something after death,
The undiscovere’d country, from whose bourn
No traveller returns, puzzles the will,
And makes us rather bear those ills we have
Than fly to others that we know not of?
Thus conscience does make cowards of us all,
And thus the native hue of resolution
Is sicklied o’er with the pale cast of thought,
And enterprises of great pitch and moment
With this regard their currents turn awry
And lose the name of action.
Hamlet Act 3, scene 1, 55–87

via enotes: Probably the best-known lines in English literature, Hamlet’s greatest soliloquy is the source of more than a dozen everyday (or everymonth) expressions—the stuff that newspaper editorials and florid speeches are made on.

Hamlet, in contemplating the nature of action, characteristically waxes existential, and it is this quality—the sense that here we have Shakespeare’s own ideas on the meaning of life and death—that has made the speech so quotable. Whether or not Shakespeare endorsed Hamlet’s sentiments, he rose to the occasion with a very great speech on the very great topic of human “being.”