mikebrah

Speculative Trading Indicates Rally Losing Steam

Are you suggesting the only reason tech stocks crashed is because they didn't build "proper" bases? Valuation had nothing to do with it? If their bases were better, the dot.com stocks would still be making new highs today?

Are you serious?

MM


On Aug 30 05:11 AM aarc wrote:

> There is a big big difference between 1999 and 2009 for these kind
> of stocks and stock runs.
>
> In 1999, the dot.coms did not provide enough retracements or pullbacks
> ... so they did not have enough base preparations to sustain their
> rallies into the year 2000. They simply kept going up without the
> necessary corrections to support sustainable upsides. And so they
> fell like a rock when the wind was taken out of their wings.
>
> Now look at AIG, FNM, and FRE; they kept building their bases from
> March to July 2009 after an intial vertical rally in early March;
> it is called a pullback or a correction and a significant one. Naturally,
> after enough preparations had been made; the ensuing rally has a
> better chance of sustaining itself for sometime before the next major
> pullback or corrective action similar to the last one becomes necessary.
>
>
> There is a good chance AIG will be able to reach the $62 to $75 range
> but highly unlikely be able to reach or break above $110 upper run
> rate limit before it will require another major pullback or correction
> that can last 3 to 5 months.
>
> For FNM, the volume support of last week should be able to sustain
> further runs into the $2.26 to $2.67 range with upside limit of $3.40
> before it will need 3 to 5 months rest. Volume should start tapering
> off as it approaches those upper ranges on the daily and weekly charts.
>
>
> FRE and FNM are basically in tandem so they will rise and fall more
> or less in synch with each other on the daily basis.
>
> It is very hard to make a bet against them when the volume of the
> last few weeks indicated impulsive runs rather than corrective C-wave
> run of a normal ABC upside correction or a bear rally or a bear flag
> as most traders call it.
>
> Obviously, they are in a 1-2-3 Elliott Wave runs to the upside and
> will need 3 to 5 months of 4-th wave correction before they can execute
> the 5-th wave rally to complete the 1-2-3-4-5 basic pattern.
>
> After that, they will need bigger, longer and perhaps deeper corrections
> that should not break the bottom lows in order to sustain further
> rallies into the years/decades ahead. You may call it resting or
> healing process or base building or a selloff or even a meltdown;
> TAs called them pullbacks or corrections. Necessary ingriedient
> toward building supports to sustain further rallies.
>
> It takes time and time is the essence in such a dibilitating circumstance
> that should have bankcrupted them immediately.
>
> So unless any or all of them cannot heal themselves and build enough
> bases in order to become profitable into the years and decades ahead;
> they have the necessary volume supports right here at this tentative
> bottom just by looking at their monthly charts.

Speculative Trading Indicates Rally Losing Steam

This is very erroneous logic.

The "stimulus" (read: debt) being created by the FED/Treasury is all being strapped to an already over-strapped consumer. The benefits of the added debt go the elite.

If you think this is a prosperous system, then I can only assume you are a staunch supporter of colonial slavery as well? Though (arguably) less cruel, our modern economic system is in principle the same. The slaves do the work, and the masters get the bounty.

Keep in mind that even the most fiscally responsible, conservative citizens are being saddled with involuntary debt. Regardless of your lifestyle, you will be paying your portion of TARP, TALF, CARS, et al.

That is not Democracy, and it certainly isn't the system envisioned by the patriots that fought a war for their ideals.

MM

MM

On Aug 29 01:51 PM ari5000 wrote:

> Everyone's been calling the top for the last 3 months.
>
> Instead of wondering -- why is the market still going up?
>
> There's something new taking place. The Government has essentially
> made an ALL IN bet by stimulating. The govt. has now replaced all
> spending by the private sector and consumers in an attempt to keep
> the economy alive. The financial sector only thrives if the economy
> outside Wall Street thrives. By backstopping the banks, the Fed
> is trying to have the tail wag the dog -- stimulate the banks and
> hopefully, somehow, the financial dealings will stimulate the greater
> economy.
>
> I believe this is why the zombie banks are now leading the pack --
> it's an attempt by the Fed to up-end the nature of the business cycle.
> It makes perfect sense as a government drowning in debt and creating
> more each day -- absolutely NEEDS a growing economy... even if that
> growth comes by simply through inflation.
>
> Predictions of a 1000 point drop are almost ridiculous at this point.
> It shows a total lack of understanding of how a bankrupt entity like
> AIG could rise 100% in the first place. The Fed cannot stop what
> it has started. If the stimulus package fails, they will start a
> new one... TARP, TALF, cash for clunkers, housing credits... I've
> left out a dozen more. A crash? How? The Fed can spend more money
> than the entire world. What could possibly cause a crash when the
> Fed can spend infinite $$ ?? The Fed has supreme power now. Nobody
> can stop them. The taxpayers have no voice. Congress work for the
> corporations that benefit from Ponzi spending.
>
> The Fed has spent an is backstopping bets that probably equal a few
> hundred grand per citizen. All traders need to maximize their share
> of the takings. 90% of the trillions spent will go to a small percentage
> of insiders. We are living in a country that no longer has a rational
> government. The stock market, with zombie banks leading, clearly
> reflects the new mentality.
>
> I feel sorry for those who 'cashed out' or are sitting in gold (which
> the FCBs control an will never let rise) -- they are missing the
> greatest giveaway this generation will ever see. And I really doubt
> this is going to end any time soon.
>
> I can only dream of the next round of programs to come. But I will
> stay fully invested to capture as much upside as I can.

While Citigroup Jumps on John Paulson's Investment, AIG Jumps on Anything

But even if they are government backed, that doesn't make them a good investment. It just means they won't go to zero, right? It does NOT make them any more profitable so the buying spree still doesn't make sense.

I've said this before, but simply NOT going bankrupt doesn't make these stocks a good investment. At some point people will realize they are paying virtually infinity PEs for these "zombies" and the silliness will stop. OK, so BAC is not going bankrupt. Fine. That fact alone doesn't make it worth $156B which is the current market price.

Most "bull" arguments I read essentially come down to this: yeah, I know its all BS, but I don't want to miss it and I'll just get out before it gets bad!

Not exactly what I would call sound.

MM

Why This Rally Is Unsustainable

Jasper,

"It is the hallmark of irrationality to react badly to reality."

Great sentence!

Three Card Monte and the Feigned Outrage Against AIG

Furthermore, if AIG had just been allowed to fail then by the nature of bankruptcy I think a lot of these debt obligations would have been altered.

The whole reason the taxpayer is paying these exorbitant amounts is because the government stepped in and declared we would. That is the government's fault, not AIG's counterparties'. The byproduct of the "too big to fail" ideology is that taxpayers pay the bill.

Three Card Monte and the Feigned Outrage Against AIG

Re: kb

'Without the contrarians who were buying these speculative CDS' the bubble would just perpetuate into an even more destructive event.' - by what transmission system did a CDS contract slow or stop the bubble?

I'm not saying it slowed the formation, but that it popped it much faster than would have occurred without its existence. Instead of having a building slowly rot due to lack of upkeep, the CDS market (combined, unfortunately, with naked short selling) acted like a demolition squad. While violent and destructive on the surface this is actually a much healthier situation and I think could prevent a decade of stagnation. I am a firm believer in the "liquidation" model.



'The CDS market is actually quite beneficial and thus far has operated quite smoothly despite all the bad press and hyperbole.' - how is hundred of billions of tax payer money being sent to counterparties quite beneficial and smoothly operating?

This was a bad business model on AIG's part. What their intentions were is debatable, but I just have a hard time blaming policy holders for an insolvent insurance company. Sort of like Floridians demanding "reasonable" insurance even though they live in a hurricane zone, only to find when one eventually strikes their insurance company no longer exists.
Also, I was never in favor of the way AIG was handled from the get-go. I readily concede a lot of sh*t has happened, I just don't think the brunt of it should fall on CDS speculators. By their very nature, speculators are reactionary. They are the trend-followers, the chartists, technicians, etc. As the giant stumbled, they simply bet he would fall.

Just my $.02 and I welcome dissent. Thoughts?

Three Card Monte and the Feigned Outrage Against AIG

This sounds a bit like a witch hunt to me.

What did you expect AIG to do with the money? The whole reason they received taxpayer money was because they were insolvent. This means they could not pay out the obligations they VOLUNTARILY entered. An insurance company can't meet its claims, and you blame the policy holders? Nice.

Basically you are arguing they should renege on their contracts on all instances where you, or some ordained oversight committee, deem the counterparty's actions as immoral. This is just another argument to obstruct capital flows under the tireless guise of egalitarianism.

Without the contrarians who were buying these speculative CDS' the bubble would just perpetuate into an even more destructive event.

But to argue that ONLY parties in need of risk mitigation should be allowed to operate in the CDS market is foolish. Plus, this would lead to unintended consequences such as greatly reduced liquidity, which in turn might decrease the effectiveness of the market for those trying to use it for its "correct" intentions.

Naked short selling is already illegal and what should be much more scrutinized. I believe naked short selling to be a violation of property rights and the most effective way to obliterate a company's reputation and share price.

The CDS market is actually quite beneficial and thus far has operated quite smoothly despite all the bad press and hyperbole.

AIG: Details of Its Punishing Bailout

Wow... prison style.

The Greatest Short Sale in History

John Pseudoynm,

Does LEH's BK pose any problems for that ETF? I don't know how that works.

Thanks.

The Greatest Short Sale in History

bearfund,

Yes, and lets have a big circle-jerk and sing songs of love, too.

The Greatest Short Sale in History

Stone Fox, I agree with you about the AIG deal. That should in theory, make a quick and easy profit for the government.

However, this RTC II or whatever its going to be called is EXTREMELY inflationary. From listening to the session with the House committee this afternoon, the plan is to put an artificial floor in housing by having the gov't (us) buy these asset-backed securities for more than they're worth. You know its stupid, because if it weren't then private capital would have already done it. For Hank and Ben to imply that the gov't is being shrewd here is blatantly dishonest.

This plan is both stupid and immoral. The plan will allow huge numbers of financial companies to escape from their mistakes, and keep huge numbers of idiots that bought more house than they could afford from foreclosure.

Neither of these is a good thing and will necessarily lead to much higher inflation.

This "solution" is emblematic of our society writ large. It is the ultimate continuance of an absolute aversion to pain that we have developed. This policy is the equivalent to Little League's that don't keep score, or giving out trophies to kids that finish 6th place. Everyone "wins," there are no "losers" anymore.

Wrong. There will always be winners and losers. Failing to acknowledge that makes all of us lose.

Is AIG a Buy Following the Government Bailout?

As if Fannie and Freddie weren't bad enough, now we will have a GSE insurance company.

Is AIG a Buy Following the Government Bailout?

I just read the Fed press statement and it actually doesn't say anything about warrants. It simply states the Fed now has a 79.9% stake in AIG.

"The interests of taxpayers are protected by key terms of the loan. The loan is collateralized by all the assets of AIG, and of its primary non-regulated subsidiaries. These assets include the stock of substantially all of the regulated subsidiaries. The loan is expected to be repaid from the proceeds of the sale of the firm’s assets. The U.S. government will receive a 79.9 percent equity interest in AIG and has the right to veto the payment of dividends to common and preferred shareholders."

At these levels, its probably still a buy. But its definitely not the opportunity of a lifetime as I previously thought.

More importantly, what is Uncle Sam's motivation to ever let go of their 80% stake? They just sunk their teeth into the biggest insurance company out there for pennies on the dollar and will get paid to do so. It seems inevitable that this will transition into some form of nationalized insurance program.

This is bad.

Is AIG a Buy Following the Government Bailout?

Joe,

I just read the prospectus on AVF and AFF and it says that AIG can defer the dividend for up to 40 quarters without causing a default.

I wouldn't be holding your breath on that 55% yield.

Is AIG a Buy Following the Government Bailout?

Also think about this...

Why on God's green earth would AIG take an 11%+ loan for $85B if they didn't think the company was worth considerably more than that?

Would you take a $500k loan with 11% interest to save your house thats only worth $100k?

I would wager thats the real reason LEH went BK. They realized at that point it was the smarter decision. This is a steep price for AIG to pay, so they most feel very strongly it is well worth it.

Think about it.