I will be revisiting this in detail after I finish the European Crisis Series. Practically all of the big and regional banks have purposefully contracted their loan portfolios and lending activities to curtail risk. This means that they will be making less interest income. Normalized (as in less) trading income, less interest income, the Fed looking (we will see if this actually happens) to stop putting an artificial bid under the MBS market, housing still in a downturn as foreclosures/distress sales are still ramping, much tighter regulation, a bunch of trash on the balance sheets (remember, the cause of this malaise has never changed) and an increase in price of several hundred percent for many banks is an elixir for a short seller's ambrosia.

It may have taken 10 months or so, but believe it or not it appears as if fundamentals may be returning to the investment game. If so, be aware that the banks are quite overvalued. Keep in mind that the comp valuation of many banks have increased because the peer group has risen so much and so broadly. That doesn't negate the fact that the underlying balance sheet issues are still there and regulatory and macro headwinds are quite stiff. I am looking for the peer group valuations to return to mean, which means a sharp dip in many of the banks that I have covered. I will attempt to review relevant scenarios in detail for subscribers. 

 See...

 JPM 4Q09 review 

 WFC 4Q09_Review