Earnings "growth" masks the true story–for now

There is great market excitement the past week about the prospects for earning beats in Q1. Surely we must care that 86% of the total growth in corporate earnings of the S&P over the past 12 months has been thanks to “extend and pretend” financial institutions who have so far been able to side-step acknowledging staggering losses in their loan portfolios.
The charade cannot possibly last forever, especially when commercial loans are now failing in record volume in the next wave of the on-going credit crisis.
This chart from the Wall Street Journal this week, paints the present disconnect between the rally in bank stocks, the S&P 500 which it has led, and falling commercial property values to which the banks are heavily levered.

See: WSJ: Lenders open to real-estate pain
Important to note that while the banks packaged and sold off large chunks of the residential mortgage junk in their trunk, they held on to the bulk of commercial loans all for themselves. Hopefully the government won't step in again to rescue them by throwing tax payers further under the bus.