Government Intervention: the "Dash for Trash" Continues
I always laugh at my landlord and my roommate the Chinese heart surgeon when I catch them in our kitchen talking about Citigroup. They can't seem to get enough of $C U Next Tuesday and I can't seem to stop making fun of them for it. Hey whatever, it's not my portfolio, right?
In late August's quiet trading, four troubled financial companies have accounted for a big piece of total volume on the New York Stock Exchange, in what one analyst referred to as a "dash for trash."
Citigroup (C), Bank of America (BAC), Freddie Mac (FRE) and Fannie Mae (FNM) have dominated trading recently as each has more than doubled in price from 2009 lows.
On Monday and on Tuesday morning, the four accounted for more than 40 percent of composite volume on the NYSE. Some attributed this to bets on hoped-for economic improvement and ongoing government support, but others said the volume was due to speculation in popular names with low share prices.
"We've been referring to the heavy volume on these as the 'dash for trash,'" said Jon Najarian, the co-founder of Optionmonster.com in Chicago. "No one is buying them based on their fundamentals, they're buying based on what the government might do to keep them alive."
Citigroup should have been shot out back like a racehorse with a broken leg months if not years ago.
Bank of America may make it out alive but things don't look promising at this point, especially if they continue getting snagged by the same bear traps along the way.
As for Fannie and Freddie, these disgusting monsters should have been tranquilized and put down 8 quarters ago. If it weren't for the threat of Chinese retribution if they were to lose how ever many bazillion$ in FRE/FNM securities we conned them into taking on, we'd have put them out of their misery a long while ago.
Oh and then there's some real tin foil hat stuff here that could be inferred about the invisible hand propping up markets and all that but I'll leave that be for now. Make your own inferences if you wish.