"Free" Markets....HAHAHAHAHAHAHAHAHAHA. ...This is GUBMINT
intervention EXPOSED, people. Oh I forgot, your little minds are
being entertained right now with Batman. Lol.
Financial companies are desperate for capital but their stock prices
are so low that any issuance would be dilution death for the
companies. The government is desperately trying to keep the financial
system together. Add that up and you get the possibility of a great
manipulation.
How would the government engineer a rally in financial stocks so that
these companies can sell stock to raise capital at a reasonable or at
least palatable dilution level?
It might go something like this. Since financial stocks are in such
trouble they have heavy short interest; this is natural and well known
and can be used to their advantage. A clever =93berry=94 might think to
introduce confusing rules that raise the cost of borrowing short stock
and tem****arily confuse shorts into covering and not shorting more.
And this is precisely what the SEC did.
It seems innocuous to most folks, but it put stock loan desks and
dealers in complete disarray. New short sellers could find no stock to
borrow and many existing short sellers were forced to cover as the
technical rules forced allocation of loans at much higher costs.
For example, the rebate rate on Fannie Mae (FNM) the day before the
SEC announcement was 1%; the day after it was -5%. Many who were short
the stock were forced to cover, thus driving the stock price up.
But this alone would only drive stock prices up so much. The clever
berry needs a catalyst, one that would force panic buying into now
truncated supply.
It just so happened that the new SEC rules came conveniently the day
before many of these financial companies were to re****t earnings. If
just some how these earnings were really good the match would be lit
on the kindling.
So far banks have miraculously come through on their end of things.
Wells Fargo (WFC) and JPMorgan (JPM) re****ted better than expected
beaten down earnings. Things must be getting better just as the
companies need capital.
What a coincidence.
But if you look at how the banks =93beat=94 their earnings the coincidence
becomes clear. WFC took the unprecedented step of extending charge-off
acknowledgment from 120 days to 160 days. This allowed the bank to
move less capital to loan loss reserves and re****t better than
expected horrible earnings. And JPM was even more aggressive. It
actually lowered its loan loss reserves quarter to quarter.
The list of financial companies where shorting regulations are being
enforced/enhanced is precisely the banks and dealers (and FNM/Freddie
Mac (FRE)) that have access to the Fed's balance sheet (dealers
through the PDCF and FNM/FRE through the recently-allowed access to
the discount window). So we can speculate on the nature of the
''coincidence'': Perhaps the Fed is getting worried about the value of
all that collateral these dealers have posted to the Fed balance sheet
and must boost the capital of these companies to protect that value.
And now on cue FRE, a $5 billion market capitalization company wants/
needs to issue $10 billion in new stock? Doesn=92t that sound a little
crazy? Well get ready for others to do the same because the banking
system needs capital desperately and the government is there to help.
