-- Posted Thursday, 15 June 2006 | Digg This Article
| Source: GoldSeek.com
Rick’s Picks
Thursday, June 15, 2006
For investors who’d rather be smart than lucky
I have nothing but envy and admiration for the weasels who manipulate shares for a living, especially those of Citigroup, a stock whose seemingly helter-skelter movement on a chart can be as subtly purposeful as the queen’s peek-a-boo antics in a game of three-card monte. Concerning the “weasels,” I use the term affectionately, since I was one of them myself for twelve years, working in the trading pits as an options market maker. It was there that I realized that something I’d always been told – that the stock market is a rigged game – was absolutely true. It really is just a giant carny game, one in which there are only predator and prey, and precious few big winners. Wall Street’s best and brightest may have more teeth and fewer tattoos than carny men, but they employ essentially the same skills in separating the gullible from their hard-earned dollars. Both try to convince us that “Everybody goes home a winner!” even though we know better. We always imagine ourselves winning the big stuffed panda, even though we know we’ll be lucky to take home a pack of Marlboros or a Luke Skywalker keychain.
Like a gaffed carnival booth, the game on Wall Street is so deftly worked that even the hapless pigeon can come to appreciate how skillfully he has been ripped off. As Exhibit ‘A,’ we would proffer the chart above, which shows what Citi has been doing for about the last two months. The key date was April 28, when the stock gapped up nearly three percent in the first hour and never looked back. It was up a little more than a buck-and-a-half that day, there to remain for most of the next six weeks. What the chart suggests is that Citi’s handlers waited patiently until conditions were perfect to effect a powerful short-squeeze. Then, catalyzed by some ostensibly bullish piece of news, they let the stock fly, chased by short-covering fools unwittingly doing the bidding of the stock’s masters.
Late in Game
And fools they were, as the chart makes perfectly clear. Now, their urgent demand spent, Citi has fallen back to exactly the level where it traded before the squeeze. Usually, that’s where the weasels will start buying the stock once again, so that they have “ammo” for the next short-squeeze. But surely they must know, as we do, that it’s getting late in the game for Citi, and that goosing the stock up to new highs will become increasingly difficult as higher interest rates threaten to deflate the housing bubble, perhaps precipitously. Citi will rally many times on its way down to $5, where I believe it eventually will trade. Lest you be tempted to follow the mindless herd into the inevitable head-fakes, pin this chart to your wall.
The foregoing was prompted by a subscriber’s question during yesterday’s real-time Q&A session at Rick’s Picks. "I know you're quite bearish on Citigroup," wrote Bill N. "Can you summarize your reasons why?”
Boom in Reverse
Few seem to recall that Citi nearly died on the operating table during the allegedly "mild" recession of 1990-91. The next recession will be many orders of magnitude worse, causing the credit-mania that nearly all observers have mistaken for an economic boom to lurch catastrophically into reverse. This means that whatever factors have worked in the banks' favor in the last decade or so will be working heavily against them: leveraging, carry trades, docile yield spreads, asset-rich borrowers, rising property values, stable currency markets, etc.
The banks have outperformed nearly all other stock-market sectors in recent years because their cost of "raw materials," i.e., money, has been close to zero. This is an unmitigated plus in a world whose chief business -- by far, in dollar terms -- is financial speculation, not the production of goods and services.
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Learn My Secrets
Would you like to be able to forecast trends and price reversals as accurately and confidently as Rick’s Picks? Have you tried other trading systems, only to find them too complicated or otherwise unhelpful? Then don’t miss my Hidden Pivot Seminar this autumn in New York City. Plans are firming for a weekend session in mid-October, so please let me know via e-mail if you think you might attend. This will be a no-frills version of the course that I gave in Denver, offered at a significant saving over the original price.
There will probably be just one more session offered after that on the West Coast, but that would be the last for a long while. The course includes post-grad mentoring via a chat group that some of my former students have set up. If you’ve been impressed with the accuracy of my forecasts, this is an opportunity you cannot afford to pass up. Let me hear from you soon, since seat space is limited.
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Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2006, Rick Ackerman. All Rights Reserved. www.rickackerman.com
-- Posted Thursday, 15 June 2006 | Digg This Article | Source: GoldSeek.com
