Market refuses to go down

OMG, you don't have margin accounts, you call yourself a trader.

 

Sure the Fed is printing money and buying up sh*t but all they are doing is maintaining asset prices, that's all they can ever do.

Say we found a rock [house, MBS or ABS]and wanted to bid up the value and sell it to a sucker. I sell to you for $1 you sell back to me for $10....etc... and we say, ok $1MM is high enough. Let's say that we were able to find some one stupid enough to buy that rock and we receive $1MM from it.

Does that create inflation? Did we just create wealth? NO. We diverted capital from some where else. The only way it does create inflation is if a BANK loaned [created that money out of thin air] the funds. All money is is potential.

Imagine that millions of people did this very thing with other rocks and there is a margin call and/or the debt is defaulted on.....

 

So true.

$180B?
Never.

Nice to hear some talk here in ET about fair value.

 

They (the gov) has already shown they will not let any more major institutions fail.

They will make news laws, create new programs, do whatever is necessary to keep the average Joe Moron sitting on their couches in their homes watching American Idol.

China and the rest of the world needs us to buy their crap so they will continue to buy our shitty paper. The government will print until there isn't a drop of ink left on earth.

There will be another big correction at some point in 2010. Buy the drop and sit back while inflation ramps everything to obscene levels.

 

I trade forex. I wish I had a margin account for EQUITIES. Please re-read my comment and process.

 

In 1999 I had a good job received raises annually with a solid pension. My neighbors were building their home (next door) and my neighbors (other side) had a second home in the mountains.

2009 I'm still with the same company and moved up several rungs so I did OK, but this aint 1999. I no longer have the pension, it was cut more than 50% and now frozen so no more building on it, I'm on my own now. Cut in pay 2008 again in 2009 and drastically reduced health benefits. Not complaining, frankly I'm thankful for the job.

My neighbors were foreclosed (job loss) and house is vacant 2008. Neighbors with second home sold second home and struggling daily here.

This aint 1999. :eek:

 

Investors trading 3 stocks that may be doomed

Aug 27, 5:12 PM (ET)

By DANIEL WAGNER

WASHINGTON (AP) - Investors are still trading common shares of Fannie Mae, Freddie Mac and American International Group Inc. by the billions, even though analysts say their prices are almost certain to go to zero.

All three are majority-owned by the government and are losing huge sums of money. The Securities and Exchange Commission and other regulators lack authority to end trading of stocks in such "zombie" companies that technically are alive - until the government takes them off life support.

Shares of the two mortgage giants and the insurer have been swept up in a summer rally in financial stocks. Investors have been trading their shares at abnormally high volumes, despite analysts' warnings that they're destined to lose their money.

"People have done well by trading them (in the short term), but when it gets to the end of the road, these stocks are going to be worth zero," said Bose George, an analyst with the investment bank Keefe, Bruyette & Woods Inc.

Some of the activity involves day traders aiming to profit from short-term price swings, George said. But he said inexperienced investors might have the misimpression that the companies may recover or be rescued.

"That would be kind of unfortunate," he said. "There could be a lot of improvement in the economy, and these companies would still be worth zero."

The government continues to support the companies with billions in taxpayer money, saying they still play a crucial role in the financial system.

Fannie and Freddie buy loans from banks and sell them to investors - a role critical to the mortgage market. They have tapped about $96 billion out of a potential $400 billion in aid from the Treasury Department.

Officials have said AIG's failure would be disastrous for the financial markets. Treasury and the Federal Reserve have spent about $175 billion on AIG and AIG-related securities. The company also has access to $28 billion from the $700 billion financial industry bailout.

But analysts say the wind-down strategies for the companies are almost sure to wipe out any common equity, making their shares worthless.

"There are some folks that believe that somehow that 20 percent (of the stock) that's out there in the public market might be worth something someday," said Daniel Alpert, managing director of the investment bank Westwood Capital LLC. But he said the three companies are doomed because they are "massively indebted," and the values of their assets are declining.

The stocks remain in circulation mainly for two reasons: They've violated no rules on the New York Stock Exchange, where they are traded. And no regulator has the power to suspend their trading without evidence securities laws are being violated.

Alpert said no regulations exist to deal with cases where the government props up unsustainable companies.

By contrast, regulators were able to warn investors about stock in the "old" General Motors, which also sits on a mound of government debt. The SEC and the Financial Industry Regulatory Authority, the brokerage industry's self-policing group, have issued alerts and taken other steps to prevent investor losses on that stock.

In that case, the SEC could act because GM acknowledged the stock was headed for zero in a restructuring plan filed with the SEC.

The SEC says it has no reason to suspend trading of stocks that still technically meet its standards, which include filing timely financial reports and disclosing events that could affect share values.

The NYSE's rules include maintaining minimum numbers of shareholders and market capitalization. But they give the exchange full discretion over which stocks are listed - regardless of whether a company meets those listing standards.

FINRA has jurisdiction over NASDAQ-traded stocks and over "pink sheet" stocks, which are worth too little to be traded on a major exchange. It has no jurisdiction over stocks on the NYSE.

Shares of Fannie, Freddie and AIG - along with their trading volumes - have jumped this summer, when activity normally fades as traders take vacations. Fannie shares have more than tripled since the end of July. Their volume soared to 360 million shares Thursday from 6.45 million shares on the last day of July.

Freddie and AIG shares have surged threefold since then. Freddie's volume jumped to 191 million shares from 4.5 million. And 148 million AIG shares changed hands on Thursday, compared with 5 million on July 31.

By comparison, the trading volume of General Electric Co.'s common shares fell to around 63.7 million shares Thursday, compared with 109 million shares July 31. The stock price rose 5.3 percent in that stretch.

AIG shares rose $10.15, or 26.9 percent, to $47.84 Thursday. Analysts speculated the company might be reconciling with former CEO Maurice "Hank" Greenberg, who could help bring private capital and other business benefits to the company.

A reverse stock split in early July raised the price by a factor of 20. In a reverse split, a stock price is increased, and the number of shares are reduced by a similar proportion. It has no effect on shareholders' equity.

Fannie shares closed up 3.8 percent at $1.92 Thursday; Freddie shares rose 10 percent to $2.24.

Fannie and Freddie's government owners haven't announced their plans for the companies. That means there's a possibility - however remote - that their shares could retain some value. But the administration is expected to announce in February that the companies will be wound down, merged into a federal agency or have their bad mortgage assets split into a new government-backed company.

All those possibilities are almost certain to eliminate any remaining shareholder equity, analysts said.

Lawrence J. White, a professor at New York University's Stern School of Business, said the higher trading volumes might reflect speculation about the government's February announcement.

With the share prices still so low, White said investors are willing to bet on the outcome of the government's announcement. He said trading volume is likely to grow further, with even sharper price swings, as February approaches.

Still, Freddie Mac Chairman John Koskinen said the price fluctuations were hard to understand.

"I have absolutely no idea what that represents," he said.

Representatives for Fannie, the SEC, AIG, FINRA and the NYSE declined to comment. Spokeswomen for Treasury, which owns most of AIG, and the Federal Housing Finance Agency, which holds Fannie and Freddie in conservatorship, also wouldn't comment.
__

AP Business writers Alan Zibel in Washington and Stephen Bernard in New York contributed to this report.

 

I was referring strictly to the market comparison. You're right, it's not 1999 from an economic perspective or even from the way that markets are necessarily trading range-wise, but it is similar in the sense that total pieces of garbage like AIG are trading higher than they should be. This happens from time to time in the market, that was my main point. I bet that lots of people are shorting this sucker for fundamental reasons, and then getting killed on short squeezes...

 

S&P 500 Approaches 200-Month Moving Average: Technical Analysis


By Robert Tuttle

Aug. 27 (Bloomberg) -- A decline in the Standard & Poor’s 500 Index below its 200-month average would probably signal an additional slump of as much as 6.5 percent, according to Chicago-based Technical Analytics Inc.

The measure finished at 1,028.12 yesterday. That’s 1.2 percent more than 1,015.58, its average close on the 26th day of the past 200 months, according to data compiled by Bloomberg. Falling below that level would presage a drop to about 990, said Al Bicoff, the president of Technical Analytics. If that is breached, the S&P 500 might slip to 950, he added.

The S&P 500 plunged 25 percent from the start of the year through March 9 before rallying 52 percent in the steepest advance since the Great Depression. The index has traded higher than its 200-day moving average since July 13 and rose 17 percent above it yesterday, the most since April 1999. That distance has increased the importance of the 200-month average, which is less studied by analysts, Bicoff said.

“You have to look at the bigger picture now,” Bicoff said. “You are way above the 200-day now. The 200-day doesn’t have any significance at these price levels.”

The S&P 500’s current 200-month moving average is also significant because it’s near 1,014.14, the so-called 38.2 percent retracement level for the bear market that began in October 2007, Bicoff said. Fibonacci analysts, who use a system pioneered by 13th-century mathematician Leonardo Pisano, make forecasts based on how an index performs when it recovers 38.2 percent or 61.8 percent of a retreat.

 

The goverment gave out alot of loans that will need to be repayed if true realized profits are not there and the fake profits from the loans dies out will it mean another deep recession/correction for the market? Im looking for a market top and Im just counting distribution days and fund cash flows from equities to fixed. please feel free to reply.