Clownishness, much like beauty, stands in the eye of the beholder. So let's gather together to behold a clownish trade. Granted: playing Monday Morning quarterback to lame stock trades is a bit selective, even venal. But in the end, you learn from analyzing mistakes. Plus, what's more fun than making fun of missteps and pratfalls? With all that said, welcome to the next installment of The Clownish Trade of the Day …
Complacency kills. It short-circuits reason and that is the reason we need to speak about Bank of America (BAC). Here's what we need to know: no one without a fright wig should have chased Bank of America higher on Thursday, going into a weekend when nothing was going to Wall Street's way.
When in the course of troubled times, a piece of bad news hits upon an industry - it can survive without antagonizing traders. But when that news is a credibility breaker-and when the news comes in twos -- well, an unruffled take won't do. It's going to be pandemonium. And for quite a time.
Enter the most recent twists in Wall Street's bad boys ways. Last month, JP Morgan (JPM) announced a loss. It was a big one-bigger than an elephant standing on a ball, though precisely how big, we're still not certain. That leaves the situation open-ended, which is no good. Worse: the reckless loss turned a Wall Street firm Barack Obama was willing to vouch for into another gallery of rogues, offending good senses everywhere.
Then came Morgan Stanley (MS) and the Facebook (FB) face plant. By that point in time (never even mind the exploding cigar that is Europe as a backdrop) you should not touch-let alone chase a financial higher at the tail end of a short weekend.
Sure enough, by Sunday-shareholders, with possibly legitimate gripes and, either way, taking advantage of the weakened state of the financials, filed papers in a suit against Bank of America contending that its executives knew more about Merrill Lynch losses than they let on.
The media pounced. The bad beat went on.
Did traders really think that after JP Morgan and Morgan Stanley, Bank of America contents wouldn't be under pressure? That's a good one.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.