While reading a nice article at the Pragmatic Capitalist called "FDIC PLANNING FOR HUGE BANK FAILURE?", (now why would I be reading something like that?) I found a doozy of and article in the foot notes by J. S. Kim at The Underground Investor called US Bank Shares - The Pump is Almost Over, Get Ready for the Dump. Oooh, even better! You know I could not resist a title like that.
Kim has written an article that helps explain a lot of things. Mainly, why the banks are so overvalued. This really has flipped a switch for me as to when the pump will end and could be a great road map to playing and timing the market turn. The post also adresses ideas like, "Bank of New York Mellon Corp., Capital One Financial Corp., U.S. Bancorp and BB&T Corp. will sell shares to repay U.S. aid after stress tests showed they don’t need additional cushion against a deeper recession. If there is a better example of an oxymoron, I don’t know one." You know, some things are so obvious you just miss 'em, and this simple thought flew right over my pea brain.
Kim summarizes, "In a pump and dump scheme, there is always a phase II. Note the urgency of many financial institutions to complete their secondary public offerings of stock and debt as soon as possible. This urgency is a classic sign of a pump and dump scheme as it signifies that the rapid rise in current bank share prices have been built on zero fundamentals and is thus unsustainable. Now that the pump scheme is largely in play already or in some instances, has even been completed, get ready for phase II - the dump." The classic sell high buy low move.
Finding the top might be as simple as waiting for all the secondary offerings to be completed. As each offering is completed I would assume the stock should peak or flatten off till the group is finished, thus creating really some good shorting opportunities IMO.
UPDATE: This is not a P3 event IMO. Just a possible cause for a much needed (manufactured) correction of the run off 667. Earnings manipulation will continue for a quarter or two for the financials and this action may create another short squeeze opportunity. IMO of course.
Hi, Shanky, thanks for the post. A question though, how long do you think that those banks need to finish the secondary offerings?
ReplyDeleteCobra, thanks for the visit and the note. Not sure where to dig up that info, but I'll be monitoring and following as closely as I can. The post does mention time is a critical element. Since TA and EWT are pointing to a possible top near the SPX around the 200ma, it is possible that these two come together at such a point. I'll post here and leave you some notes in your blog if I see anything significant. I really like your work. Probably the most concise and best presentation of TA on the web. I use you, Dan and Kenny (with my stuff as well) to generate a pretty good game plan. Thanks for all your hard work.
ReplyDeleteOh come on Shanky. This wasn't obvious to you?
ReplyDeleteShame shame.
This is a 1987 replay. I think it will happen in days, not weeks. Got some signs of the cracking already.
There will be a trigger event, yet unknown. I'm sensing it will be a political event, such as an FBI or CIA arrests of government and FED officials for collusion.
If true, then its got to be Bernanke cuz who else has the kind of ammo needed to pull off a pump of this magnitude?
ReplyDeleteThis would explain why the lady at the congressional hearing had no clue or would not disclose where two trillion went.
It's disgusting to see crystal clear how the Obama administration is just as corrupt as the previous one.
Remember something like 4 of the last 6 governors from Illinois are in jail. The O is from the most corrupt state govt system in the country (at least the ones who got caught, NJ and NY are probably the most corrupt). You actually think the SEC or CIA or FBI would actually go after a govt official? They have no worries when they control the system.
ReplyDeleteThank you, Shanky, please keep me informed.
ReplyDeleteAt some point, the fund managers will get their fill of banks, insurance companies, credit card issuers and the last ones to show up to market offering stock will have to trade so far in hole, that the deal won't get done. When reigniting an equity issuance market, the best companies are brought to market first, then mid tier and finally, the unfinaceable give it a shot. Nice job Shanky
ReplyDelete