Some interesting things have happened in the economy; macro and micro, in the recent past.

Oil continues its bearish trend on demand concerns and the strengthening dollar. As far as the dollar is concerned, I think we're seeing a confluence of factors. Firstly, the Euro-zone may have started to get a little worried about the power of the Euro. If it got too high, it would have exacerbated some growth concerns by hindering exports. Their central banks may be intervening a little to help weaken their currency to a preferred range. Secondly, I think many international investors look to the US for financial stability; for better or for worse. Our economy does seem to be more resilient on its face than many others; so some folks might be tentatively getting back in the water.

The government effectively nationalized Fannie Mae and Freddy Mac on Monday. Personally, I was suprised by all the enthusiasm (on Wall Street and in international markets) for this move; apparently they all read it as a stabilizing gesture. A very interesting turn of events, but not exactly a surprise; as those two organizations essentially have a promise from the Federal Reserve that they will exist into perpetuity. What happens from here is anyone's and everyone's guess. Literally; everyone is guessing. Hopefully we'll see some kind of hybrid setup where some mortgages are auctioned off and privatized while others remain on the federal balance sheet. At least that way the tax payers don't end up footing the bill. God and anyone who has ever heard of the budget deficit knows we've already been handed a pretty hefty tab. Thank you, government. Sigh.

Also- something interesting for you conspiracy theorists. Yesterday morning, someone mistakenly(?) re-released an article from '02 or '03 about the bankruptcy of United Airlines. This news hit the trading floor, and United's stock went from $11/share to about 99 cents per share in mere minutes. With about 126 million shares outstanding, this represented a loss of roughly $1 billion. Trading on the floor was halted at this level. Once people started to see that the media release was in error, trading was reopened and by early afternoon the stock value was back up in the $10-$11 range. Everything's hunky dory right? I mean, if I held my shares yesterday, it was just an average trading day? Well, yes and no.

The sleight of hand here is in the shares that were traded. Let's say you've got 1000 shares ($11000) at 8am. The market opens, you're at work, things go down the shitter and your sell limit kicks in at $6. You've just lost $5000, and you won't know it until you get home that evening; or possibly later. Now, say a day trader or hedge fund sees this going on as it's happenening, and decides to take a gamble at 99 cents per share, and buys up everything possible before trading is shut down. Let's just guess that they were able to invest $5000 (approx 5000 shares) before the door was slammed shut. Over the next few hours, the truth comes out, and trading resumes. The trader sells these shares in the afternoon for maybe $10 each, turning five grand into $50,000. Nice.

This situation, as you might imagine, has many people demanding the SEC look into who found and released this article, and what their connection is to the investment community. Did United push this out there through a company shill in an effort to drive the price down, so it could snap up shares and sell them later; generating a vast amount of cash for itself? Or was it one of the many powerful but teetering investment banks that did it, to help shore up losses in their real estate portfolios? Or, was it just a giant fuck up? Only time will tell, if ever. The facts as they stand now are that someone was buying at 99 cents; and whoever it was, they're probably feeling pretty good today.

Posted by: shank at 12:57 PM | Comments (8) | Add Comment
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