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Confounded

For All Those Who Still Have Faith In The Equity Markets

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http://market-ticker.org/archives/1077-We-...ooneyville.html

When a market rally drags a firm's stock that has declared bankruptcy, and which has filed a plan that will result in the effective total destruction of its common stock, into the green by 20%, you know we live in looneyland.

That would be GM, which opened down at 50 cents but now is trading at 90, up fifteen cents from Friday.

Note that the common is worthless; the prepackaged bankruptcy and Section 363 sale will strip all of the value from the current GM and transfer it to the new GM.

The "old" GM will have a negative net value, which means the common stock (which represents "old" GM) is worth exactly bupkis.

Yes, this is all daytraders playing around - I get that.

But I'd like anyone to explain how GM's common stock has any value in it whatsoever, and is trading on anything more than pure hype on a big up day.

Good luck with that analysis.

Disclosure: No positions material to this idiocy.

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http://market-ticker.org/archives/1077-We-...ooneyville.html

When a market rally drags a firm's stock that has declared bankruptcy, and which has filed a plan that will result in the effective total destruction of its common stock, into the green by 20%, you know we live in looneyland.

That would be GM, which opened down at 50 cents but now is trading at 90, up fifteen cents from Friday.

Note that the common is worthless; the prepackaged bankruptcy and Section 363 sale will strip all of the value from the current GM and transfer it to the new GM.

The "old" GM will have a negative net value, which means the common stock (which represents "old" GM) is worth exactly bupkis.

Yes, this is all daytraders playing around - I get that.

But I'd like anyone to explain how GM's common stock has any value in it whatsoever, and is trading on anything more than pure hype on a big up day.

Good luck with that analysis.

Disclosure: No positions material to this idiocy.

I would think it's short positions being closed as opposed to day trading.....

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I would think it's short positions being closed as opposed to day trading.....

Anyone left with large short positions unclosed will be desperate for shares

and will be glad to pay over the top for them.

Thus, it will be worth buying at the bottom and selling to shorters.

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Guest DissipatedYouthIsValuable

Is QE money over here just being used to stop collapsing shareprices of Mandelson approved businesses?

Edited by DissipatedYouthIsValuable

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I think you're thinking of the old bankruptcy. This is the 'new' bankruptcy - it's just like going to a spa to recuperate.

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http://market-ticker.org/archives/1077-We-...ooneyville.html

When a market rally drags a firm's stock that has declared bankruptcy, and which has filed a plan that will result in the effective total destruction of its common stock, into the green by 20%, you know we live in looneyland.

That would be GM, which opened down at 50 cents but now is trading at 90, up fifteen cents from Friday.

Note that the common is worthless; the prepackaged bankruptcy and Section 363 sale will strip all of the value from the current GM and transfer it to the new GM.

The "old" GM will have a negative net value, which means the common stock (which represents "old" GM) is worth exactly bupkis.

Yes, this is all daytraders playing around - I get that.

But I'd like anyone to explain how GM's common stock has any value in it whatsoever, and is trading on anything more than pure hype on a big up day.

Good luck with that analysis.

Disclosure: No positions material to this idiocy.

what, you mean the markets are NOT supported or underpinned by solid fundamentals & free market trading. :o:o

:lol::lol:

Edited by grumpy-old-man-returns

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I think you're thinking of the old bankruptcy. This is the 'new' bankruptcy - it's just like going to a spa to recuperate.

:lol: Bankruptcy = stop paying the people you owe money to (so they too could go bankrupt ) and start again...why would anyone soon bother to repay debt...borrow spend then live again. ;)

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Well Confounded, you've got me this time. Haven't a clue.

BTW, if a company goes bust then shorters don't actually need to buy the shares back.

All helped get the DOW/S&P above it's 200 day average (although I think that GM has already been removed from the DOW)

What do you think will happen now the 200 DAY has been breached? I felt that was what they were aiming for with the strange burst very late on Friday and the pump today.

From what I have read it appears the fund managers have been sitting on their hands in disbelief of this GS pumped rally (sorry had to get it in :rolleyes: ) and the view was once the 200 day moving average was broken the bullish of bull signals they will have to buy in.

I always had 9000 as the target for this market phase but could they now have ignited fireworks and we get to 10000?

10000 will be a mere 20 from the point the credit markets first tremored in March 07 (before the 2000 point pump up on M&A's that never happened :rolleyes: ) that is spectacular work by the guys in charge 2 years into the supposed biggest financial crisis since the 1930's. Surely even you would be a bit bemused about this result?

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All helped get the DOW/S&P above it's 200 day average (although I think that GM has already been removed from the DOW)

What do you think will happen now the 200 DAY has been breached? I felt that was what they were aiming for with the strange burst very late on Friday and the pump today.

From what I have read it appears the fund managers have been sitting on their hands in disbelief of this GS pumped rally (sorry had to get it in :rolleyes: ) and the view was once the 200 day moving average was broken the bullish of bull signals they will have to buy in.

I always had 9000 as the target for this market phase but could they now have ignited fireworks and we get to 10000?

10000 will be a mere 20 from the point the credit markets first tremored in March 07 (before the 2000 point pump up on M&A's that never happened :rolleyes: ) that is spectacular work by the guys in charge 2 years into the supposed biggest financial crisis since the 1930's. Surely even you would be a bit bemused about this result?

http://zerohedge.blogspot.com/2009/06/zero...ate-street.html

Zero Hedge Exclusive: Is State Street Trading For Federal Accounts?

Posted by Tyler Durden at 9:54 AM

Zero Hedge has always been fascinated by the behemoths of securities lending (or not so much lately) State Street and Bank Of New York: these firms, which allegedly had just marginal toxic exposure, were in the front lines for the TARP bailout and have traditionally been handled with velvet gloves by the administration. In fact, many would say the custodian firms are in a league of importance much higher than even Goldman or JP Morgan as with their repo activity, security lending and cash collateral reinvestment, they are the de facto center of the shadow banking system.

A Cliff notes version of the stock lenders' Modus Operandi, sent in compliments of a reader:

In the securities lending arb, stocks and bonds are lent out by custodians and investment managers. The loan is collateralized by the borrower with cash, the lender promises the borrower a return on that cash and then invests the cash in repo and short-term debt at a spread to that promised rate of return. The sec lending market is in the trillions. This market is basically rolling overnight repo right now as it tries to dig itself out of the MTM/liquidity hole.

Many of the Fed/Treasury balance sheet efforts have been basically attempts to supplant securities lenders. Sec lending funds were the biggest buyers of 1-3yr FRNs (hence, TLGP). Lenders were also the biggest buyers of AAA cards and autos (read TALF 1.0). They were the second-biggest buyers of ABCP after 2a7 funds (ergo AMLF). Indirectly they were the largest funder of LT2 bank debt (via SIVs MTNs). They're large repo counerparties, and did everything from short-dated CDS to liquidity put options on Canadian levered super-senior CDOs.

Many stock lending funds, which have similar accrual accounting regimes to '40 Act money-market funds, have broken the buck but are still trading at $1. for example see the section beginning "We may be exposed to customer claims" on p.11. What does this mean? Not only are certain securities lending providers opening themselves up to significant litigation risk but, importantly, clients in stocks can't reallocate to bonds (or vice-versa), since the sec lending funds aren't letting them out (except in-kind). Finally, of course, as long as sec lenders remain hurt but unsupplanted, they stay short duration, which extracts hundreds of billions of $$ in term financing capacity out of the market. Fed won't act as a lender of last resort since they're still smarting from the AIG sec lending bail-out they didn't see coming.

It is no surprise that in order to incite a return to pre-Lehman economic levels (the administration's #1 goal bar none), not only the stock market would have to much higher from its March lows (a task largely accomplished through market increases on disappearing breadth, liquidity extraction by the likes of Goldman Sachs, and assorted last minute inexplicalbe ramp ups in the various futures and ETF markets), but also the shadow system would have to be back with a vengeance. And while new mechanisms to achieve this such as securitization replacement alphabet soups have yet to prove their efficacy, the real heart of the shadow banking system Frankenstein is and has always been the repo market.

Which is why we were greatly troubled when we learned recently on good authority that Federal representatives may have opened multiple undisclosed-type accounts with none other than State Street Global Advisors over the past few months. All of these accounts are allegedly handled by one single trader, who is cocooned and isolated from interaction with other partners.

Zero Hedge can, as of yet, not vouch for this being 100% factual and is asking readers who may have additional knowledge of the situtation to please come forward and share their views (tips@zerohedge.com). If, indeed, the Federal Reserve or other derivatives of the administration, are now directly involved in trading, managing repo terms, stock lending, collateral distribution and other liquidity-crucial aspects of what was once an efficient market, then indeed this rally could be written off not merely as the biggest short covering rally of all time, but one that has been explicitly orchestrated by those who should be most impartial to an efficiently working market.

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