Brokers Recalling Loaned Shares in Citi

Since this morning Bloomberg reports that major brokerages have been calling in the loaned shares that have been used for legitimate short sales in Citigroup.

This in part explains the rally in Citi today, as the shortsellers cover their positions ahead of a 2:30 PM deadline today by which they must return the borrowed shares.

It does seem rather calculated, particularly its conjunction with the Federal Reserve announcement.

We have not seen this in the general news, just on the Bloomberg TV analyst reporting.

There is the implication that this is a calculated market operation being conducting among big traders and the major brokerage houses who hold the shares for borrowing from customer accounts. Marketwatch seems to imply that this is being precipitated by 'the authorities.'

Nice timing to help bolster the financials after the FOMC announcement. This has the Larry Summers/Robert Rubin touch.

It would be a good thing indeed if the Obama Adminstration did something meaningful to curb naked short selling and enforce the existing regulations. But if they are doing so for only their favorite companies, then this is not market regulation, it is crony capitalism and insider trading.

Seeking Alpha

Citigroup Inc. – Shares are being squeezed once again today and the company has a valuation some 23% higher today with shares stretching above $3.00.

Intrigue continues in the June 5.0 strike options where arbitrageurs are using conversion plays that typically land a credit to take advantage of the squeeze. The volume in that line has more than 150,000 contracts trading both sides today with puts bought and calls sold when investors can position long of the stock.

Earlier in the week rumors did the rounds that the authorities might be on the hunt for hard-to-borrow stock certificates in select financial names.

This in itself has created a surge at AIG and Citigroup as desperate short-sellers try to cover their positions. The conversion trade could be established earlier in the week for a credit of 20 cents, but given the near-panic buying in the stock has shifted to a 1.10 cost to traders.

The Obama Team's Economic Performance Is Pathetic

Wouldn't it be nice if one day the Obama Administration came up with a change, an innovative reform for the financial system that made us sit back and say, "Wow, that's great! That's exactly what we have been looking for."

So far it has been one misstep, one fumble, one tired old Henny Youngman routine after another. The Clinton Administration retread meets the road, and falls apart.

Things went badly beginning with the appointment of Larry Summers as key economic advisor.

Larry was one of the three man miracle team of Greenspan, Rubin and Summers that turned the Asian monetary crisis into the tech bubble after a smoke and mirrors economic recovery while the industrial base of the US continued to slide into the Pacific.

We have seen nothing that speaks of the promise that we felt when America said "enough" and voted for a change in the fall of 2008.

And after the Summers disappointment we received the the Rubin protege, Tim Geithner, with the thinnest of financial backgrounds, who while at the NY Fed helped to help transform the housing bubble collapse into the bailout bust.

His position at Treasury is such an obvious, glaring mismatch that he cannot even staff key jobs in his own department. Who would want to work under such an obvious, embarrassing failure?

This is not a poor performance. This is an abject, incompetent inability to address the most critical issue facing this country.

This is Obama's Iraq: a morass of crippling failure brought on by horrible advice from key advisors with their own agendas.

President Obama throws rhetoric at the problem from a distance, like he is still campaigning against something. He leaves the impression of a more articulate Bush, inspiring no lasting confidence, giving no impression that he is in charge, on top of the situation, in control with a well thought out plan. He can make you feel good while he is speaking, then reality sets in and you realize that there is nothing there. Where are the management skills to back up the rhetoric?

Don't get us wrong. This is still early in the game. But the Democrats are losing the early rounds, as the situation grows more dire.

Well, Mr. Obama, you are President now, and even though you have only a short time in the office, so far you have shown us nothing. Your shepherding of a stimulus bill through the Congress was a nightmare, made worse by Nancy Pelosi who is a mediocre House Speaker at best, but appears a dynamo in comparison to Majority Leader Harry Reid.

Tired old solutions, inbred beltway thinking, old boy insider dealing.

Embarrassing. Unworthy. Amateurish. Pathetic.

You are failing, and we see it, and the anger, and sense of quiet panic, is building.

Time to get serious, to get it together. Time to step up to the job and take command. Time to show us your best stuff, find the levers, roll up your sleeves, and step down from the pulpit.

Nasdaq 100 Futures Hourly Chart Into the Close

The market went out on its highs suggesting that we will get a strong opening tomorrow for the FOMC announcement at 2:15 PM EDT.

As a reminder, this Friday is the 'triple witching' option expiration. The markets are frequently volatile as the big players squeeze the overleveraged option speculators.

Adobe reports tonight after the bell.

To say that the better-than-expected housing start numbers ignited hopes for the economy and triggered today's rally is ludicrous rationalization.

This was a short squeeze for option expiry week, pure and simple.

Alcoa and Nucor announcements show how dire the economic situation has become.