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Alex Cook
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Alex Cook is a graduate of the University of North Carolina, where he studied economics. In college he founded Tar Heel Business, a print and internet publication focused on business and economics. Alex now writes for frontieroutlook.com, where you can read about macroeconomic trends and... More
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  • No, the Greek crisis isn't over.

    Former European Commission President Romano Prodi put out the amazing statement today that “For Greece, the problem is completely over,” according to Bloomberg. No, it isn’t.

    First, the Greek government has announced possible austerity measures, but nothing yet has been signed into law. Moreover, the conservative opposition party announced that they may in fact vote against these measures. Additionally, talk of a French or German rescue continues, but again, nothing yet has been finalized.

    No checks have been written. No debt has been retired, deficits are still high, and GDP growth is still low.

    A spectacular collapse of Greek sovereign bonds might not happen, but the absence of a complete meltdown and destruction of the Eurozone does not mean that the crisis is over. The macroeconomic fundamentals in Greece are still poor.

    Call it a hunch, but I have a feeling that Prodi’s statement has less to do with the fundamentals of Greece, and more to do with the fact that he was a former Prime Minister of another country that is on the watch list—Italy.

    -Alex Cook



    Disclosure: None
    Mar 10 5:32 PM | Link | Comment!
  • What in the world happened to AIG today?

    AIG traded fairly flat today until around 1 PM eastern time, when it took off like a missile. As far as I can tell, no real news was announced at that time. What happened?

    I posted back on February 23 that AIG was starting to look better as a high-risk high-reward opportunity. According to Bloomberg, some of AIG’s business units were starting to regain profitability, and according to other sources, AIG was being successful in selling assets to pay off the government emergency loans.

    Today’s activity was unusual in that there was a tremendous spike in the price, but it was not related to news. AIG announced yesterday that they were planning on selling more international assets–but what happened at 1 PM? There are a few possibilities, which are not mutually exclusive and may all have happened:

    • AIG’s price or chart hit some kind of magical technical indicator at a large quantitative hedge fund, which triggered a spree of automatic buying.
    • AIG started rallying, for whatever reason, and the rally was then amplified by massive short covering. According to the most recent numbers on Yahoo Finance, AIG has a 26% short interest, so a short squeeze is possible.
    • Some kind large capital-raising deal is in the works, and word about the deal got leaked.

    As with my February 23rd article, I remain cautiously optimistic about AIG, but I must emphasize that this is still high-risk. Today’s price action was exciting for people who were already long, but it does not necessarily signal any new fundamental information. If you are willing to take the risk, AIG could have a good reward, but today alone should not be a reason to buy.

    UPDATE: Maybe this was the reason. AIG is selling more assets in a new deal.

    -Alex Cook



    Disclosure: None
    Tags: AIG
    Mar 09 11:57 PM | Link | 2 Comments
  • WSJ: Sovereign Debt Hot Spots

    The Greek crisis still shows no signs of an easy resolution, and other countries in Europe are also showing weakness. Today’s Wall Street Journal has a must-see piece on sovereign debt risk elsewhere.

    Link: http://s.wsj.net/public/resources/documents/st_heatmap022010_20100223.html

    The data was compiled by RBC, and according to the chart, deficits in the United States are “much worse than average”, compared with Spain and Portugal’s “worse than average” rating.

    Also see my previous articles on sovereign debt:

    -Alex Cook



    Disclosure: None
    Mar 08 2:30 PM | Link | Comment!
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    Aug 15, 2010
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    Jul 26, 2010
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