Attention Locusts: The Party Is Moving to Merrill and AIG

 |  Includes: AIG, MER
by: TraderMark

Ok locusts, we've fed off the lands of Bear, Countrywide (CFC), Fannie (FNM), Freddie (FRE), Lehman (LEH), and Washington Mutual (NYSE:WM).

Time to concentrate our forces and take down AIG (NYSE:AIG) and Merrill Lynch (MER) - let's get to it.

Who said it's hard to make money in this market? This is like shooting fish in a barrel? Now whose going to start the rumors this time around?

Folks, if they ever investigate the coordinated attacks (collusion) and rumor starting that I believe is going on here, I think in 2-3 years time you will see potential jail sentences for some of the things happening. Banks are all about trust - it is the one sector where it is so easy to start rumors and cause a run on the bank. Again, I do not think they will investigate because hedge funds have become among the biggest political donors, but just saying... *if* they did. Daniel Loeb is one guy feeling the heat. We'll see if it spreads.

  • Third Point Management fund manager Daniel Loeb told his investors last night the firm is the target of a formal investigation being conducted by the Securities & Exchange Commission. According to Loeb, the subject of the investigation is his communications with other hedge funds.

I would be short Merrill and AIG here folks if we were up and running. Not on facts but on the

power of hedge funds to create panic

. It will take time but they will use these as their new playings. Can you imagine how rich they just got off Freddie, Fannie, Bear, Lehman, WaMu? All that new money has to go create a panic somewhere new. David Gaffen writes,

  • The trading reflects increasing fear among investors – or attempts by some to promulgate panic, and this is evident when looking at indicators other than the share prices, namely, activity in the options market and in the credit-default swaps market.
  • Merrill options activity would certainly suggest that some are taking disaster bets, or doing so to undermine confidence in the shares. “Once the downdraft starts in one of these stocks people start selling,” said one market strategist, who asked not to be identified.
  • More than 30,000 September put options have traded at the $10 strike price, and more than 17,000 put contracts have traded at the ridiculously low $5 strike price ...
  • “The investment community is at the point where it believes that failures have been replaced by shotgun weddings,” writes Mike O’Rourke, chief market strategist at BTIG, in a late Thursday comment. “It is apparent that the most feared market on Wall Street is not the bond market or the stock market, it is the credit default swap market. As a result, problem companies are finding themselves targets of rescue mergers. This is the ‘playbook’ for the current market environment.”

Free market capitalism.