The Small Trader

GM: Trading on Bankruptcy Expectations

This is the typical case where unexpected factors can kill a good idea.

The author analysis was correct, GM finally filed Chapter 11, but at the end there were too many June puts open. This was a great incentive to MMs to manipulate the stock price and drive it above $1 untl expiration. It is aroung $1.60 right now, and it looks that June $1 puts will expire worthless.

The right move would have been to buy Jul $1 puts. The bankrup procedure schedule probably will stop trading 6/24. Jun puts expires on 6/19, so they'll become worthess just for 4 days. The perfect move would have been a calendar spread, buying Jul puts and selling Jun puts.

I am losing some money with this trade, althought I bet properly for the bankrup.

Four Reasons Stock Market Hope Will Overcome Despair

Let me summarize your reasons:
1) World Govs will save us
2) US Gov moves were brillant. Mark-to-market acctg is part of the problem.
3) There is still frantic consumption
4) We are still in debt, but if we consume again all will be ok.

Well, this is the irresponsible view that has bring has near to the brink.
Well let me comment some of them:

1) For sure world Gov want to avoid a depression. Problem is that they not necessarily can. The G20 met this weekend. Result: Good will declaration only. Setup a target date by April to come out with recommendations. We are assisting to a shift in power, and the G20 new financial plan preparation will not be a collaborative analysis group, but a battlefield of economical power. Don't be so sure that cooler minds will prevail.

2) I won't argue about brightness of US financial officers' decisions. I personally think they were and are plain wrong. They are not working to add transparency via toxic papers clarification, but trying to hide the garbage behind the carpet. Future will prove who's wrong.

(Interestingly, now the bright Paulson has discovered that the UK plan to buy stocks on banks is a better strategy, compared with his initial plan of just buying toxic assets at near-to-face value that he strongly supported before the US Congress.)

In your article, what is wrong is blaming the mark-to-market accounting practices. They are here to prevent Enron-like frauds. If that alarm is now sounding in almost all the financial system... well, that is indicating a major problem in the system, not that the alarms are wrong.

3) Frantic consumption, based on debt. That means that the US comsuption patterns have not changed.

4) Consuming more than you can afford will lead you to more problems, it is not the solution.

You are looking the world through rose colorated glasses.

Anatomy of a Buying Panic

"Panic buying". Sounds like a contradiction. You don't buy with fear, but with greed. "Anxious greed" would be a better label.

These buyers are bottom pickers, buying (literally!) the story of "once on your life opportunity" to buy cheap stocks, "buy and hold" and "invest for the long term" WS speech.

All bear markets have frantic rallies because of the above. This is the WS vacuum cleaner aspiring the last buyers before resume the down trend.

The Real Cause: Current Account Deficit

You are absolutely right.

Current policy makers are desperately trying to apply Greenspan's recipe, but is no longer working. They are winning weeks, months at most, but the unavoidable is going to happen.

Our fate is knocking insistently the door, but they prefer the next administration opens it.