Below is a video of Meredith Whitney talking to Maria Bartiromo earlier today on CNBC (hat tip Calculated Risk). In the video she suggests that banks might be able to beat earnings estimates for another one or two quarters before the lack of earnings power from deleveraging and the lack of the securitized business model becomes apparent. She also indicates that the latest rally is a momentum play made that much more powerful by short covering. I agree with all of that (with the caveat that government intervention is giving banks fat spreads for an indefinite period the length of which is hard to predict).
The questions are two-fold: when is the government support of the financial sector going to end such that underlying weakness in the sector becomes evident again? What happens to bank stocks when the poor fundamentals in the sector are laid bare? Unlike Whitney, I see signs that retail consumption is continuing at an unsustainable level and this would suggest that the fake recovery can continue longer than many are anticipating.