(Michael Farr) - Most of the larger banks have reported fourth quarter earnings already, and we must admit the results were better than we had anticipated. In general, the growth in problem loans declined, capital and reserve ratios strengthened, low-cost deposits continued to grow at a robust pace, and earnings largely surpassed estimates. Absent the bucket of cold water that President Obama threw on the sector when he announced new regulatory initiatives late last week, the 4Q results may have actually strengthened the resolve of those that believe we are nearing a peak in credit losses for this painful cycle. So while we at Farr, Miller & Washington remain non-believers for now (which we will explain further below), let’s examine some of the factors that have many people believing that the days of outsized loan write-offs at the banks are nearly over.

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(Lee Siler) - News that government owned Dubai World is in a financial crisis rocked stock markets worldwide. While our markets dropped more than 1.5% on a holiday shortened trading day, markets abroad took the bigger hit. After the dust settled, it appears that the U.S. has limited exposure in Dubai. However, the news is not as good in Europe. The talk is that the United Kingdom has the biggest exposure to this troubled state. Although Dubai World is owned by the country of Dubai, it is not guaranteed by the government. This should not be a surprise. All of the debt accumulated by Dubai World was accumulated with the understanding that it was not backed by the government. The good news is that the oil rich country and neighbor of Dubai, Abu Dhabi, said it would make sure the banks are solvent and lend some financial assistance.

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(Lee Siler) - Stocks had their best week in months, as some of the old school companies blew out earnings estimates. Companies like Goldman Sachs, Intel and IBM all beat a pessimistic outlook, as it seems analysts may have taken their estimates way too low. Even the banks stocks are coming in better than expected. Bank of America and Citigroup beat views despite a credit loss. Thus far, the majority of companies reporting second quarter earnings are beating views. However, it is still very early in the season. This week will be extremely busy on the earnings front, especially in the tech sector.

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(Lee Siler) - The major averages took a hit yesterday, as the banks sold off right from the open. After weeks of terrific performance, the financial stocks dropped on a wave of profit taking. As I mentioned yesterday, I sold all of my financial stocks and ETF's on Friday. I simply had a hunch that these stocks were way over done. Two months ago they represented some tremendous value. But, since then these stocks have made a parabolic move up. What's more, the banks that are in need of more capital will likely be doing secondary offerings and flooding the market with additional stock. This additional stock will cause some dilution and hence, will probably put some pressure on those issues. That said, there's not as much value in these stocks today...

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