THE SHORT SQUEEZE RALLY IS BACK
One of the most evident characteristics of the recent 50% stock rally has been short squeezes. Skepticism regarding the quality of the rally kept the shorts confident that stocks would retrench. And day after day we got short squeezes in the banks that generated market rallies. As summer rolled around the trend appeared to die and the financials went through a 3 month lull. That has all changed in the last 4 weeks, however, as 5 (mostly meaningless) stocks dominate NYSE trading. BofA, Citi, Fannie, Freddie and AIG have accounted for more than 30% of NYSE volume in the last month and are again generating overall stock market optimism today as all 5 stocks rally on no news or news that is totally irrelevant to the rest of the market. Will the shorts ever learn their lesson?
TPC – whats your rationale on todays rally?
Short squeeze in the banks. That’s the only thing that has driven it. I hate to sound conspiratorial, but the move in these 5 names sparked the entire move….
X:
I think he just explained the rally . . . though the rationale is another matter.
Note the big dollar drop after starting slightly higher. I guess the dollar bulls took it in the shorts (I thought there weren’t any).
Seems the dollar carry trade fuels the liquidity.
Going long AIG, FRE, C etc. makes sense for my portfolio. It is simply a deep OTM call with no expiration date for a low premium. Sure, it would take the market to get back to its old highs for AIG common to be worth much, but there is a positive prob that this will happen. With that as backup, I can do other things that will more likely make $$$.
I’m long FRE pref. and C, but not AIG, unfortunately.
For a good laugh !!!!!!!!!!!!!!
August 26, 2009
Goldman Sachs Practices Relating to “Huddles”
To our clients:
On Monday, August 24, 2009, The Wall Street Journal published an article entitled, “Goldman’s Trading Tips Reward Its Biggest Clients.” The article suggests that “huddles”, which are formal meetings among analysts, traders and sales people, result in the distribution of “tips” to a selected group of clients. The article also invites readers to think that the information that comes
out of the meetings may be at odds with the published research views of our analysts. We would like to clarify some important points.
The purpose of the meetings is to facilitate controlled, supervised dialogue between clientfocused professionals about investment ideas, news flow and market events so we can better serve our clients. A “huddle” is not a forum for sharing stock or sector “tips.”
We offer some of our clients customized services, including calls to provide market commentary. But none of our services include information about changes in our fundamental research views prior to its dissemination to all clients, nor are such changes discussed in meetings among analysts, traders and sales people.
Our analysts are required to have one fundamental view of a given stock. Our policy states that any event that causes an analyst to change his or her view of the rating, price target, or earnings forecast, must be published and made available to all of our clients prior to being discussed either internally or externally.
The article cites two examples of company-specific ideas that came out of huddles. In each case, the analyst had published a 12-month price target that was above the price of the shares at the time the huddles were held. The comments made during the meetings were entirely consistent with the views expressed in previously published research.
Our first business principle states that our clients’ interests always come first. Our experience shows that if we serve our clients well, our own success will follow. We believe this and practice it every day.
TCP: Explaining this bank stock behavior as a short squeeze is reasonable and is likely true, yet the scientist in me seeks more. What differentiates these moves that they are identified as short squeezes? Without an independent datum, this explanation might be a post hoc interpretation. Thanks.
Come and join the squeeze on OSIR. Grossly undervalued and a 18% short interest. Big FDA announcement coming first week of September. If favorable stock goes from 14 to 25. If negative, stock goes to 10-12. Great risk/reward profile.
Going long the dollar is a very good move here, imho.