Baltbear on Finance markets are like marshmallows

the “testing” of the u.s. banking system having been “completed”, the idea that there is $75 billion hole to be filled was met by the idea that banks ahould sell stock before people realise it’s overpriced.

“U.S. banks are racing to tap equity markets that have soared since early March and may pull back soon, analysts said. Bank of America said it plans to sell 1.25 billion shares to help meet its $33.9 billion equity capital shortfall.

“You have this opportunity to sell equity now, and if you don’t and share prices fall, people will criticize you,” said William Smith, chief executive officer of Smith Asset Management.”

ok. sell stock while its overpriced or get criticised. who are these critics?
probably not the people who bought at the high price.
but then, they are the sheep, and as was noted in the maginicient 7, “of God did not want them shorn, why did He make them sheep?”
how is stealing from new shareholders a duty of an equity? cause cut thru the nonsense and that’s what it is. “sell it before somebody figures out the price is too high.” it is refreshing that an “asset manager” is saying this publicly. so, ask yourself, “is he a potential buyer or a current owner?” ad youmight get a different impulse than to run right out and buy more of anything known to be selling above a fair value estimate.

People playing biotechs and “internet” stocks might wish to be aware that rbs used to be a serious funder of such flyers, but:
“Royal Bank of Scotland, now 70 percent state-owned, fell to a loss in the first three months of 2009 after bad debts quadrupled to 2.9 billion and it took a 2.1 billion pound writedown on risky assets.”

what are “risky assets”? a good place for traders to measure is d/e, and debt terms.
what are creditors willing to take in stock to balance the books? unless you can afford to take more risks than an investment bank, you probably want to pay less than creditors will accept.

that can be done by “trading into accumulation.” it is in fact what many of the ibs do along with their direct involvement to make sure they profit.

Posted under business

i rceived an email a couple ago asking, basedon a conversation elsewhere, what i meant by ” shake and bake” –was i referencing talladega nights?

nope. the termpredates that movie by a decade.
let’s explain:
so, mm’s see a surge tomorrow on ticker abcd:nasd.nm. how? because sallimay, the daughter of the ceo told her sorority sister, the daughter of the hedge fund manager, that she was going to shopping for a new beemer on saturday.
(don;t think that happens? i once had an associate who was chief of security for a rather expensive private college, who did his most successul trades based on whether visiting parents, who were all ceo/cfo/coo/etc types were smiling or somber whe they greeted their daughters.)
the mm can see, on his screen that there are a total of 100k shares hanging in the float wth limit sells, and stop loss orders.
let’s say abcd is trading at 15, and there are stops in all the way down to 10. a stop loss at 13 5/8 will execute at 8, if that’s the clear (the “market”), and there’s a buyer. so.. he offers to buy 80k @ 8, and sell 1k at 12, 1k at 11, 1k @ 10, 1k @ 8 1/16. somebody elsewhere (like me) has a limit buy, 1k @ 8 1/8.
as soon as the “enter” button gets hit, the domios fall, and all 100k of stop losses kick in, looking for a buyer. why? becuase that 1k @ 8 1/15 sell hit my buy 1k @ 8 1/8.
the mm is now short 1k, but, if there are not limit buys in for 99k more between 8 1/8 and 13 5/8, all those stop losses are going to pour into the mm’s account.
and 2 minures later the whole thing is over.
and that’s shake and bake.
think things like that never happen? tat the markets are not that corrupt? that hedger fnd managers are your freinds? that ur broker is looking out for you? that that hypster on a stock board cares about the company? that the regulators will prevent this?
ok. keep beleiving it. or else note:

as stp loss order kick in and the machines talk to themselves

then read the chage in “analysts” lol…”sentiment” today.

Posted under business