. March 17, 2009 SouthAmerica: Another Suckerâs Rally and another opportunity for traders to ride the stock market up and down. On Friday March 6, 2009 Citigroup stock started trading as a penny stock at $ .97 cents per share and the situation got really desperate â it was time to try a new strategy â hype with no substance.â This strategy works well on Wall Street the sub-prime garbage is a good example of such strategy â over the weekend a memo is leaked out to the mainstream media about how the figures for the fist 2 months of the year look great â the revenues and income before expenses, and write offs. The revenues and income looked great and knowing Wall Street nobody is going to scrutinize if there are expenses, and massive write offs that should off set these revenues and income for the same period.. Never mind that Citigroup operates subsidiaries in over 100 countries around the world, and in the first 2 months of the year many countries were going through a financial and economic meltdown â I guess this new global financial and economic meltdown will not affect Citigroupâs subsidiaries and will not create even more massive write offs for Citigroup â at least according with their wishful thinking memo published by that bank. This desperate strategy did work for Citigroup at least for the duration of this suckerâs rally and Citigroupâs penny stock went up from $ .97 cents per share - and 10 days latter traded as high as $ 2.68 per share on Monday March 16, 2009. It seems to me that Citigroup, Bank of America, many other financial institutions, and many members of the US government including Ben Bernanke started on Monday March 9, 2009 a coordinate effort to hype the US economy and the stock market responded accordingly. Ben Bernanke has been saying that the current recession is going to end before the end of 2009 â I guess the companies that went out of business such as Lehman Brothers, many hedge funds that imploded, and many other companies such as GM, Ford, Chrysler and their suppliers are going to start hiring again, and the people who lost their jobs because they were outsourced to other countries or replaced by technology are going to get their jobs back. The best news is for the real estate industry despite a massive over supply of real estate around the country and foreclosures skyrocketing millions of people are going to go back to work in the construction industry and build an even bigger inventory of houses and commercial real estate. For all practical purposes Ben Bernanke has run out of bullets at the Fed and he has been reduced to hype the US economy and nothing else. At the same time Ben Bernanke has been hyping that the current recession is going to end before the end of 2009 the latest issue of The Economist dated March 14, 2009 had an article about John Paulson the hedge fund guru who has been making a ton of money during this massive financial meltdown that we had in the last 2 years. Mr. Paulson manages a fund that holds $ 30 billion dollars and his hedge funds have had a superb crisis. They clocked up triple-digit returns in 2007 betting against subprime mortgages, netting him $ 3.7 billion personally. Mr. Paulsonâs funds continued to do well last year. The article also said: âJust as markets used to hang on Mr. Sorosâs every move, they are now keen followers of Mr. Paulson. He does not see the economy reaching bottom this year and is still a net short-seller of financial firms.â Ben Bernankeâs hype about the US economy is based on wishful thinking and nothing else. Mr. Paulsonâs forecast that the US economy is not going to reach bottom in 2009 has been backed by actual action and he has been placing his bets of billions of US dollars where his mouth is. .
. March 17, 2009 SouthAmerica: Reply to Hoffmanw It's just another Suckers Rally - before the US stock market continue its descend to new lower levels. The US economy will continue to loosing jobs at an accelerated rate for the rest of 2009 and in the process making the entire economic and financial mess even worse with the official unemployment rate skyrocketing into double-digits, millions of new foreclosures, including massive all kinds of new write offs for financial institutions and so on⦠The US economy lost millions of jobs during the current down turn, as I drive around here in New Jersey I can see all over the place empty store fronts from businesses that went bust and had to be closed â retailing lost more than 1 million jobs and retailing space has been closed in many areas around the country. We have a major banking consolidation that is underway in the US, and many states are in deep financial trouble such as California, New Jersey, New York to mention just a few states that canât hire more people to help create new jobs in the coming months and years. Most county and local government are also in deep trouble since their real estate tax revenues have been shrinking because of declining real estate values and skyrocketing foreclosures. The farming area will not create new jobs as well and to make things worse for the farmers they are losing billions of dollars in farm subsidies from the US government â if anything the employment in that area is going to shrink like everything else. The US consumer is completely taped out and companies are reducing the credit lines available for people to shop or even help them survive the current economic depression. As the real estate prices decline by another 20 to 30 percent it will fuel a further economic down turn and the US economy will continue to implode. Today the real US GDP may not reach $ 10 trillion dollars if you consider the implosion of the US economy in the last 2 years (this figure to be used as a conservative estimate since the real GDP might be even lower by now.) As the global economic situation continues to deteriorate countries from around the world will become protectionist very fast in an effort of protecting local jobs. In the financial area many Americans continue to be completely delusional and they think that the rest of the world are going to continue to send most of their savings to the United States to finance trillions of dollars of US government deficit financing in the coming months and years. There is only one bright area for the US economy â healthcare â since there is a Tsunami underway in the United States related to the population over 65 years old which is snowballing and will cost trillions of US dollars to take care of all these folks. The big wave of baby boomers is here to stay and they are now becoming senior citizens by the millions and it will cost a ton of money for the US government to keep the old buggers alive. Most Americans are still in denial and they have not realized that the new great economic depression is here and it will last for many years to come and we are going to look back to the economic environment of March 2009 and remember it as the old good days when things still going well for the US economy. .
Thanks for the article South America. The part about Paulson is very important and confirms what I believe about the market. I sincerely hope we are not headed for a depression, but it doesn't look good.
. March 17,2009 SouthAmerica: Reply to Nazzdack The stock went up based on hype and nothing else â just wait to see the losses for the year when they make public the actual figures for the year including massive losses and write offs of every kind. At the end of the day you can bet that Citigroup it will be nationalized by the US government and the common stock will be worth Zero dollars. If you made a few bucks in the meantime as the Citigroup management is playing the wishful thinking memo game when a piece of misinformation leaked to the mainstream media as a last resort because Citigroup stock had been trading as a penny stock and probably it would be delisted from the New York Stock Exchange. If you are playing the Citigroup game right now you can bet that eventually you also will be burned and you will lose your shirt on that game. .
It's textbook; sharp, in the 15% to 20% range, and if it fails within a 3 to 6 week period, it's about as technical as it gets. Let's wait for ISM, Jobs and Consumer Confidence reports to trickle out. It's also options expiration week.
What's the degree of accuracy in this prediction? The implicit volatility forward curves for the Q's are showing a sharp drop in volatility for the next 2-3 months. At a minimum the market is discounting sideways action and at best a persistent low volatility rise in prices. Also given the massive number of bullish option trades initiated prior to the beginning of this rally on the financials...I am curious to hear your textbook prediction. BTW, I'm the worst market forecaster and I never attempt to call the next twist and turn. I humbly admit that I simply do what the market tells me to do...and for some strange reason it has been a winning strategy for many years. I also never understood the essence or validity of market predictions.
It was a good trader rally. You really need to watch the market closely, these days it seems trading has become an art. You could try options if you did not have a good day.