Friday, September 12, 2008

Everyone - the Party is now at Merrill Lynch (MER) and AIG (AIG)

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Ok locusts, we've fed off the lands of Bear, Countrywide, Fannie, Freddie, Lehman, and Washington Mutual

Time to concentrate our forces and take down AIG (AIG) and Merrill Lynch (MER) - let's get to it.

Who said it's hard to make money in this market? This is like shooting fish in a barrel? Now whose going to start the rumors this time around?

Folks if they ever investigate the coordinated attacks (collusion) and rumor starting that I believe is going on here, I think in 2-3 years time you will see potential jail sentences for some of the things happening. Banks are all about trust - it is the one sector it is so easy to start rumors and cause a run on the bank. Again, I do not think they will investigate because hedge funds have become among the biggest political donors, but just saying... *if* they did. Daniel Loeb is one guy feeling the heat. We'll see if it spreads.
  • Third Point Management fund manager Daniel Loeb told his investors last night the firm is the target of a formal investigation being conducted by the Securities & Exchange Commission. According to Loeb, the subject of the investigation is his communications with other hedge funds.
I would be short Merrill and AIG here folks if we were up and running. Not on facts but on the power of hedge funds to create panic. It will take time but they will use these as their new playings. Can you imagine how rich they just got off Freddie, Fannie, Bear, Lehman, WaMu? All that new money has to go create a panic somewhere new.
  • What happened in March is happening again. Amid the breakdown in shares of Lehman Brothers Holdings Inc., sellers are aggressively hitting financial shares, particularly Merrill Lynch & Co. and American International Group Inc., both of which are enduring double-digit share losses in another active day of trading for those stocks.
  • The trading reflects increasing fear among investors – or attempts by some to promulgate panic, and this is evident when looking at indicators other than the share prices, namely, activity in the options market and in the credit-default swaps market.
  • Merrill options activity would certainly suggest that some are taking disaster bets, or doing so to undermine confidence in the shares. “Once the downdraft starts in one of these stocks people start selling,” said one market strategist, who asked not to be identified.
  • More than 30,000 September put options have traded at the $10 strike price, and more than 17,000 put contracts have traded at the ridiculously low $5 strike price, according to Ms. Darst.
  • Strategists say this is, in part, a vicious circle that has been enhanced by the government’s involvement in Bear Stearns and the government-sponsored entities. Armed with the recollection of how these situations played out — the equity gets reduced to nothing after the government steps in or brokers a rescue — strategists say sellers are shorting these shares in an effort to scare institutional investors out of the stocks.
  • “The investment community is at the point where it believes that failures have been replaced by shotgun weddings,” writes Mike O’Rourke, chief market strategist at BTIG, in a late Thursday comment. “It is apparent that the most feared market on Wall Street is not the bond market or the stock market, it is the credit default swap market. As a result, problem companies are finding themselves targets of rescue mergers. This is the ‘playbook’ for the current market environment.”
Free market capitalism.


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