Investors Dropping Their Shorts: Is a Financial Recovery in the Works?

Is the financial industry now in full recovery?

Investors short selling financial stocks appear to think so, notes the financial web site 24/7 Wall St.

Shares sold short in Wells Fargo (WFC) decreased 8% to 78.8 million shares. The short interest in Bank of America (BAC) is down 12% to 67 million. JP Morgan (JPM) shorts dropped 4% to 37.7 million. And shares short in CIT Group (CIT), which provides commercial financing and leasing to small and mid size companies, were off 4% to 78.1 million.

The data suggests fortunes could be turning around quickly for the troubled financial industry. Bank of America, for example, spent $29 billion to acquire Merrill Lynch during the financial meltdown. But it also needed an injection of $45 billion from the U.S. government, through the purchase of preferred shares. This week the bank's departing CEO, Ken Lewis, said cost savings from the purchase of Merrill are happening faster than the bank had forecast.

Bank of America shares were up 2% at $16.35 on Wednesday. Wells Fargo, JPMorgan and CIT were also up marginally. Royal Bank of Canada (was among the most actives in Toronto, up 57 cents to $57.39.

The financials sub index of the S&P 500 was up nearly 2%.

Comments

[ryanclarke:]

The author of the article wrote, "And shares short in CIT Group (CIT), which provides commercial financing and leasing to small and mid size companies, were off 4% to 78.1 million."

My reply is, "Uhhhhh ... I dunno know .. err maybe ... could it be that perhaps CIT filed BANKRUPTCY ... errrr .... I dunno know ... a couple of WEEKS AGO!!!! "

It's really hard not to laugh as to what dummy out there would short whats left of CITs stock ... after CIT has filed for bankruptcy ... when there are many companies to choose from to "short" which might make the short seller MORE MONEY.

Nov 11 03:39 PM

[George /Mis...:]

Cit filed for Chapter 11 not 7. Therefore the shares of CIT may continue to trade on either the OTCBB or The Pink Sheets. There is no Federal law that prohibits trading of securities of companies in bankruptcy. Short selling although risky may go on for whatever reason, hoping the common stock may end up with some value once the company comes out of Chapter11, if at all.

A Lot of crazy things go on, on acts of desperation, which may include short selling a bankrupt common stock.

Nov 12 08:18 PM