Urgent Information

Stress Test Results Leaked?

By Bryan Bottarelli
Monday, April 20, 2009 3:04 PM EDT
Mon, 20 Apr 2009 19:04:00 GMT

Dear Bottarelli Research Member,

I openly admit, the HES and MOS plays did not work out for us — and we had to close them off this morning. But after becoming exposed to some critical information this afternoon — which I will share with you below — the gains we’ll make on our FAZ May 9 Calls (FAY EI), UGL May 30 Calls (UGL ED), and SMH May 22 Puts (SMH QJ) will blow these losses out of the water.

This might be one of the most critical alerts I send you all year, so please take note.

According to Turner Radio Network, the results of the banking “Stress Tests” have been leaked to the public. And in short, the results are disastrous.

As you know, the stress tests were conducted to determine how the top 19 banks in the USA could withstand future economic hardship. I reported to you earlier this month that regulators at the Treasury and the Fed were haggling over how to release these results. And a day later, the wool was pulled over our eyes when Wells Fargo (WFC – NYSE) reported record earnings. In response, the market extended its gains. And the problem was temporarily solved. Or was it?

Now, according to an article that I just came across, it looks as if the Turner Radio Network has obtained the stress test results. Here is a bullet-point summary of the findings.

  • Of the top nineteen (19) banks in the nation, sixteen (16) are already technically insolvent.
  • Of the 16 banks that are already technically insolvent, not even one can withstand any disruption of cash flow or any further deterioration in non-paying loans.
  • If any two of the 16 insolvent banks go under, they will totally wipe out all remaining FDIC insurance funding.
  • Of the top 19 banks in the nation, the top five (5) are so under-capitalized that there’s serious doubt about their ability to continue as ongoing businesses.
  • Five large U.S. banks have credit exposure related to their derivatives trading that exceeds their capital. Bank of America’s total credit exposure to derivatives was 179% of its risk-based capital. Citibank’s was 278%. JPMorgan Chase’s was 382%. HSBC’s was 550%. And Goldman Sachs was a whopping 1,056% percent. And that’s the big players. In addition, 1,800 regional banks are currently at risk of failure.

Now again, this is apparently a leaked report of the stress tests. But I personally believe that these findings are accurate. If so, the entire U.S. banking system runs the risk of total collapse.

If this occurs, the FAZ will soar. So will gold. And the markets will fall aggressively lower.

No matter if these results are true or not, this information is simply too urgent. I had to pass it along to you. In fact, I would consider myself irresponsible if I didn’t share it with you.

Plus, as you can see from the FAZ chart below, we timed our entry perfectly. But it’s crystal clear that the upside potential is enormous.

FAZ

As I write, we’re up 75% on our FAZ calls — which would ordinarily induce a “take profits” alert. But right now, I think the odds are in our favor to maintain the position. Our gains could truly be explosive. As always, I’ll keep you fully informed. But for now, maintain all positions. These are unprecedented times, and I remain committed to my goal of filtering out the excessive amount of bulls#*@ that’s being reported on a daily basis and keeping you ahead of every major market move.

And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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