by Jack Lee
In a radical move the feds have block short selling on most financial stocks. A short sale takes stock out of action and holds it why the buyer waits for the price to come down and then when the time is right he completes the sale and reaps whatever the difference was, this is precisely how it works but it’s the most easy to understand version.
The market reacted by suging nearly 700 points in the first two days of trading. Currently the market today is up 300 points almost at the start and TD Ameritrade website, like many other discount brokerages, is so busy customers are having trouble logging on. I’m pleased to make profits, make no mistake about that, however there is always a downside when you artificially direct the course of the stock market. Exactly what that means remains to be seen.
The U.S. government can’t let Washington Mutual fail and likely won’t let Wachovia take over Morgan Stanley, according to Dick Bove of Ladenburg Thalmann.
“(WaMu’s) borrowed $58 billion from the federal home loan system so it can’t be allowed to fail,” Bove, a widely followed financial investment analyst, said early Thursday on CNBC.
He said the best move would be a takeover for WaMu [WM 3.78 0.79 (+26.42%) ], by either Wells Fargo [WFC 39.86 2.86 (+7.73%) ]or JPMorgan Chase [JPM 45.57 5.27 (+13.08%) The government would need to probably assist the transaction, he suggested.
At the same time, the government should be expected block any sale of Morgan Stanley [MS 27.40 4.85 (+21.51%) ] to Wachovia [WB 19.04 4.54 (+31.31%). “I cannot imagine that the Federal Reserve would allow that merger to occur because if it occurs then the FDIC has to pick up all the problems related to Morgan Stanley,” he said.
He pointed out commercial banks are doing pretty well in the current environment and that investors interested in the financial sector should take note.