I need to follow up with the AIG story. When you start seeing stories like this then you know we are getting close. Patience is required.

Charlie Gasparino over at Fox Business News reports a rumor that the government may be looking to dispose of its 27% Citi stake at some point over the next 3 months. Logistics aside, presumably somehow this means that even more bankrupt companies like AIG, FNM and FRE are probably next in line for offloading the taxpayer stake into the hands of hapless hedge/sovereigns funds. We hope it is not the same hedge funds that have recently received subpoenas and C&D orders from ever shorting the euro (i.e., going long the dollar).As a reference point the gov't owns 27.01% of Citi which has a hilarious market cap of $108 billion, and owns 80.66% of AIG with its $23.5 billion capitalization (and $107 billion in debt). This explains why the government is now actively pulling the borrow: gotta sell at the highest possible price.

The U.S. government, looking to unwind its investment in the banking system following the near-collapse of the financial system in 2008, is discussing plans to sell its massive stake in Citigroup, possibly as early as this spring, FOX Business has learned.

Previously, federal officials, including Herbert Allison, who heads the Troubled Asset Relief Program, have said that they plan to unload the government’s 27% stake in Citi over the next year. But FBN has learned that in private meetings with Wall Street investment bankers, the federal government is discussing the possibility of doing it sometime over the next three months.

Meanwhile, Doug Kass reports that a rumor of "new stringent short-selling rules is causing a squeeze in heavily shorted names this afternoon."

Last but not least, here is the rumor as reported by Seeking Alpha.

So yes, it appears we are back to the joyful days of late spring 2009 when the rumorsphere drove crap financials into the troposphere, even as nobody knows anything, and rumors are generated simply to explain massive short squeezes.

 

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I guess I must be looking at the glass half empty. I mean with quality stocks like AIG leading the way, how can you not be bullish on America? Right back into a mindless bubble after we supposedly had fallen out of one. Is this our comfort zone?Are we not comfortable unless we are in a bubble? Seems Helicopter and Turbo know no other options. This will end and once again people will say that they should have seen it coming.

The ravenous algo has just sniffed out AIG. Because now that the firm has no relevant core assets to sell, it surely merits a 10% spike in several minutes. Or is there merely a rumor that there is a rumor. Hopefully the government isn't back to its old trick of rolling buy-ins in financial firms. All's fair in love and getting the market higher, higher, higher. READ MORE

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Some solid, big-pictures perspectives from David Rosenberg, comparing then and now:

The media are all over the fact that today is the one-year anniversary of the 12-year low in the stock market reached on  March 9, 2009, when the S&P sagged to that diabolical 666 level. (Funny how nobody celebrates October 9, which is the anniversary of the 1,565 high set back in 2007.) A lot has changed over a year, and that includes the factors that have supported the recovery in the equity market:

• The VIX was 50, not 17.
• The yield on the 10-year Treasury note was 2.9%, not 3.7%.
• The budget deficit was $900 billion, not $1.5 trillion.
• Baa spreads were 540bps and tightening, not 260bps and widening.
• The market was 20% ‘cheap’ as per Shiller P/E ratio, not 25% overvalued.
• The DXY was at 90 and depreciating, not 80 and appreciating.
• Oil was at $47/bbl, not $82/bbl (we can see $80+ crude being good for the Saudi market; we’re not sure how it fits in bullishly to the S&P call).
• Equity PM cash ratios were at 5.5%, not 3.6%.
• Market Vane bullish sentiment was at 32%, not 53%.
• Real GDP was -6.4%, not +5.9%; and the ISM was 36, not 57 (we were in the basement looking up, not on the rooftop looking down).

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Yesterday we reviewed the employment situation in the US economy. Today, we’re looking into the stock markets.

The first and only thing anyone needs to know about this market rally begun March 2009 is that is was entirely fueled by “funny” money. It was not fundamentals, economic underpinnings, earnings, or even technicals (we’ve seen the markets violate numerous key technical signals only to completely reverse on clear ramp jobs).

No, this market is all about funny money. This is why we had a near perfect 100% inverse correlation between stocks and the dollar for most of 2009. It’s why the correlation between stocks and commodities is at a 20 year high. It’s why most of the market’s action occurs almost entirely at key times (over the weekend, during the futures night session, options expiration). READ MORE

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At 112.8 million shares traded, the SPY just recorded its lowest volume day for 2010. One of the possible reasons for this: mutual funds are rapidly running out of cash to buy stocks. As

notes, "equity mutual funds are burning through cash at the fastest rate in 18 years, leaving them with the smallest reserves since 2007 in a sign that gains for the Standard & Poor’s 500 Index may slow. Cash dropped to 3.6 percent of assets from 5.7 percent in January 2009, leaving managers with $172 billion in the quickest decrease since 1991, Investment Company Institute

show. The last time stock managers held such a small proportion was September 2007,

" 

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Russell 2K

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Remember this Ticker from a few days ago?

I am constantly amused by those people who claim there is some vast "conspiracy" in this country when it comes to banks, balance sheets, and fraudulent lending and accounting.

There is no conspiracy.

It is, in fact, "in your face" fraud.

Well, one of the people on the forum emailed The FDIC to ask about what I had alleged.  This was their response:

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With all the looting that has taken place in America over the past 2 years, it is amazing that we have not seen the civil unrest that we are witnessing in Europe. Are we too sophisticated? Will we wait patiently for the elections this fall? Maybe we need a catalyst similar to the one that the market has been waiting on to bring us all back to reality. It is my belief that the fuse will be lit IF they end up shoving healthcare down our throats. I believe that this could be the game changer for everything, including the markets. Don't get too complacent. Things may get interersting...soon.

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Are we crazy? How can we not be bullish? Markets are as perverse as I have ever seen. Politicians too. I can't wait to throw them out this Fall.

The Center on Budget and Policy Priorities has released a report "State Tax Changes in Response to the Recession" in which the center notes that "national recession has had such a devastating effect on state finances that states took in $87 billion less in tax revenue from October 2008 through September 2009 than they collected in the previous 12 months. This 11 percent decline, the steepest on record, resulted from the impact on tax collections of lost jobs, reduced wages, and lowered economic activity." And here we are, missing the forest for the Greek tree, and discussing evil CDS speculators' role in Greece barely able to make a €5 billion bond auction, when we should be all over the evil Municipal CDS speculators wreaking havoc in our own back yard. 

And it actually gets worse: as we have pointed out, states are now running on fiscal fumes, as record unemployment insurance claims bleed the vast majority of state not only dry, but well in credit to the Federal government. "At the same time, the recession has driven up the number of people needing various state services. This, along with the requirement that states have balanced budgets, has increased the pressure on states to deal with the unprecedented revenue shortfalls in a variety of ways. Nearly all states have cut spending. In addition, most have opted for a balanced approach that includes revenue."

So while Obama is about to break all campaign promises about taxing everyone, let alone those who make under $250,000, individual states have already raised taxes by substantial amounts in an unprecedentedly short period of time. READ MORE

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The Global Perspectives Update team invites your comments here on the featured audio courtesy of GoldSilver.com, "Jim Rogers Discusses Greece's Fiscal Woes, Euro".

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