Why do the analysts and forecasters keep getting it so wrong? Going from the predictions, you can see they haven't yet twigged that things are a lot worse than they're making out. The situation is even worse when you consider that regulators are coming from the same direction.

That's a point taken up by Bloomberg's David Reilly who says the President has taken a laid-back view of bank stress. The stress tests, he says, just lack the necessary rigor to fix the diabolical problems. Unemployment, for example, drives expectations of future loan losses. And yet macroeconomic assumptions for the test only go out to 2010. Trouble is the banks have got used to a low unemployment environment. Now for the kicker: if unemployment stays above 7% for the coming years, they won't have enough capital to cope. The stress tests don't take that into account.

Reilly says: "The lack of sufficient stress in the tests is especially surprising since a big lesson of the past two years is that the worst can happen, and then some. In times like these, the government and investors need to play 'What If?' even when it involves some outlandish possibilities. The failure to do such worst-case planning, even after plenty of red flags, probably made the after-shocks to the financial system from the collapse of Lehman Brothers Holdings Inc. far worse than they should have been. Perhaps the biggest lesson, though, is that banks, like plenty of other companies, will get drunk on their own Kool-Aid. And regulators are supposed to be the ones who abstain. Instead, with the stress tests, they are reaching for the strong stuff. The Treasury plans to have the banks conduct the stress tests themselves; regulators will check the results."

The New Yorker's James Surowiecki says analysts keep posting wrong forecasts on fundamentals like unemployment. Why is it that they are so off-track? What planet are they on? Surowiecki says it's simply a case that they haven't recognized how bad things are.

I would go one step further. Most analysts would be in their 20s, 30s and 40s and most wouldn't have experienced anything like this. What makes it even more complicated is that traditional equities analysts rely heavily on what companies say. Their problem is that most companies now are unable to predict the severity of the current financial and economic crisis. Similarly, economic analysts talk to the government officials who are also in the dark. So it's a case of the blind leading the blind and they are making wild stabs in the dark. My advice: take their forecasts with a bag or two of salt.