Tuesday, September 22, 2009

More Evidence that the Market is Broken

WSJ has a lengthy article on trading in AIG, the zombie stock whose CEO admits there is no equity in the company.
American International Group Inc., a symbol of the financial crisis, has morphed into a playground for speculators. At a traders meeting before the market opened on Monday, Scott Redler, chief strategist at hedge fund T3 Capital Management, noted that AIG's stock hadn't moved much for days and was ripe for a breakout. Whether it headed up or down, he said, the traders should be ready.

AIG shares, trading below $40 at the opening bell, climbed within 15 minutes to $41, then above $42. "This thing's going to $45," T3 President Marc Sperling said, watching his six computer monitors. "It's on every trader's radar screen across the country."
Alex Herrera, head of Soldier Capital LLC, a 26-member day-trading firm in Ramsey, N.J., has been among those buying and selling AIG. A former floor trader on the New York Stock Exchange, Mr. Herrera says he often trades blocks of 100,000 shares, using funds he borrows through the firm to make bets of as much as 15 times the size of his portfolio.

On some days during the past month, AIG trading volume topped 130 million shares [the entire float]...

These people need to have their ass handed to them in order for the market to work again. The purpose of the market is to allocate capital to productive enterprises. This type of activity is like a video poker room or a Chinese retail stock brokerage (but I repeat myself).

Bears are patriots right now.


eh said...

Whatever is legal and can turn a profit I guess...

Sooner or later such risk-taking will go kaboom.

CP said...

Nice lurch down at the end of the day!