Thursday, April 16, 2009

Greed is Back

Fear dominated for awhile, and still does amongst many individual investors. But greed is back. I'm seeing lots more speculation now. There is an epic battle amongst bulls and bears of financial and real estate-related stocks.

Let's look at some of today's action:

-Commercial real estate giant General Growth Properties filed for bankruptcy protection.

"A Citigroup research report in February described the company by saying, "General Growth is a good company with good assets, just an unfortunate capital structure that has too much debt coming due too soon."


Yes, this is partially true. But any company that takes on that level of debt relative to assets isn't really a good company is it? They may have good assets, but they likely overpaid for them, and most certainly over-borrowed. These types of structures are what caused the current crisis. It happened on a large scale with corporations, all the way down to consumers who bought more than they could afford.

-Rosetta Stone IPO surged 42%. I don't have anything against the product, but to me, 9 times out of 10 IPO means "It's Probably Overpriced."


The way I see our current situation is that this rally is likely to continue, even though on a technical and fundamental basis it should not. The banks are in control as the government has basically thrown out the rule book (which is kind of interesting considering how much talk I hear about this being about a lack of regulation). Banks will take advantage of this to turn large profits, and most people (or the government) won't be able to figure out how. There are a lot more foreclosures coming due, but Wall Street is ready for that.

I'm not happy with the way we've responded to this. I can understand why many Americans were protesting yesterday. As an aside, the Republicans shouldn't be trying to take responsibility for these protests, they are just as much of the problem. Our government is not held accountable, and it seems that voters have lost the means to hold them accountable.

Enough politics. I didn't trade at all today, as hard as that was. I've sold some profitable positions, and have dabbled into Natural Gas. Other than that, I'm waiting it out for a bit.

Disclosure: Long UNG.

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