There are two kinds of stress, "good" stress and not so good stress. A certain amount of stress, physically certainly is necessary in training and some would say that mental stress has its place in modern day life in that it "keeps you sharp" or motivates you. These are of course lower and manageable levels of stress, not the levels of stress which can cause or contribute to illnesses and even, studies suggest, a shortening of your life span.
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It seems ridiculous that working "too hard" can be your downfall when you are trying to burn off stubborn fat. Think for a moment though; have you really pushed all of the boundaries, followed your diet to the calorie, increased your intensity across the board and yet still not managed to get rid of fat in those hard to burn, easy to see/feel places? It really might be that you are trying too hard.