Juli Niemann
Juli Niemann - 
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JEREMY HOBSON: A report in the Wall Street Journal said the recent stress tests on European banks understated the amount of risky debt that banks are still holding. That's where we'll begin our conversation with Juli Niemann, an analyst with Smith, Moore and Co. in St. Louis. Good morning, Juli.

JULI NIEMANN: Good morning, Jeremy.

HOBSON: So some doubt cast on the accuracy of the European stress tests. Is this a surprise to you?

NIEMANN: Well this is an old story because everybody thought that the European stress tests were a little fluffy to begin with. Ours was positively rigorous by comparison. Bottom line is they didn't allow for higher unemployment, sovereign debt default. Everyone knew that, basically, Germany was bankrolling the economic community there. How willing they be to continue on with it? Greece can't pay back their debt in three years when the bailout ends. That's $960 billion that they've already flushed down Europe already. Now Spain, Portugal, Italy and Ireland and the rest of the Club Med countries, start to follow. They've got huge problems. So they're going to have to start really cranking up interest rates at this point for all those countries.

HOBSON: Well you say ours were rigorous compared to theirs. But are ours in doubt now?

NIEMANN: No they weren't really. Bottom line is what we're looking at is it didn't allow for economic conditions that didn't recover. My argument all the way along has been that we're not out of this recession by a long stretch. In fact, it would be an official double-dip recession if we saw sovereign debt default because their banking system would drag us back down again. So we haven't allowed for the probability that unemployment was going to be higher and it is, that our asset base was going to continue to deteriorate, real estate was still going down -- in other words the recession is still not over. We've got to batten down the hatches for round two.

HOBSON: And quickly Juli, we've got the markets down today after several good days on Wall Street. It seemed like the recovery was back on track, now all of a sudden this story in the Wall Street Journal and everything's going south again. Should we have some questions about the future of the recovery in the U.S.?

NIEMANN: Well the market rally was really based on one thing -- there was no other place to put the money. The Fed put interest rates at effectively zero right now. There's little borrowing or lending going on. Real estate, you're lucky if you have a 10-year time horizon if you want to buy that. Gold at $1,200 an ounce. Commodities, only if you believe vigorous growth is about to resume. So by default, stocks have been the place to put the money. But the traders have been moving it from sector to sector. It's quite volatile. That's where the money is and the money will flow back out again. So it's not a real rally.

HOBSON: OK, Juli, thanks so much.

NIEMANN: You bet.

HOBSON: Juli Niemann, an analyst at Smith, Moore and Co. in St. Louis.