Tuesday, July 29, 2008

Real buying vs reel selling

Last week, we were told that the rally in the financials was just a "short squeeze." Remember this nonsense story that was bandied about after the stocks pulled back and we were told that the shorts had exhausted themselves?

So why did BAC jump jump $4.22 to $32.22 today? Or WFC jump $2.53 to $30.46. Or JPM jump $3.09 to $40.75? Or C jump $1.02 to $18.45? Was it just because these were the companies that got behind Paulson's covered bond plan?

Or was it because the buying was real.

And because the selling of the shares is just reel. As in Hollywood. Fake shares, shorted shares, non deliverable shares. Not real life, but reel life. Wall Street's reel movie without real shares!

No one says it's a problem, because it's a multiple trillion dollar problem. And it's a bet going against the naysayers and the bears. That's why it's not a problem, because it is such a problem.

There is $666 billion short on the NYSE alone.

The shorts have had their way with the stocks.

And now it's the bulls turn.

The bears will argue that there is nothing good going on in the economy, housing can't rebound, and there is nothing new in technology, blah blah blah...

How about the free money available in the stock market, courtesy of the shorts who bet on Armageddon?

Tomorrow, I think we'll have an expansion of the short selling rules, and the market will take some more out of the hides of the bears.

And maybe the shorts should learn a lesson from Mother Merrill. Yesterday, I thought you could pick up that number at 25.

I suppose I was the only one on the street that didn't know about the CDO sale and capital raise, until after it happened. Ever think that was why the shorts were so aggresive in pounding the financials with their reel shares?

But think about this. Merrill Lynch fell from the 80's to 22, because they burned thru $47 billion of losses. But they are still in the game.

What is going to happen to the shorts when they try and cover their multi-trillion dollar bet?

Will they still be in the game?

We know how this movie ends.

We'll get back to real prices, which will be at levels that will end this reel selling, and it will put them out of the game.


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