Largest Orchestrated Short Jam in History

The last three weeks has to go down as the largest orchestrated short jam in the history of the markets. It has been incredible to behold as the government has taken every step possible to jam equity prices higher. Of course there won't be any congressional hearings, any investigations, any screaming about manipulation. Why? Because this type of manipulation is approved. Is looked upon favorably.

After all market participants have been through, today may take the cake. Wells Fargo announced "record" first quarter profit. Actually, they did not announce a record first quarter profit. They pre-announced a record first quarter profit. They don't announce until April 22nd!!!! Let that soak in for a minute. What is today? Maundy Thursday. The day before Good Friday which is a holiday for Wall St. The day after the Jewish passover has already started. All this means a large swath of Wall St. will be gone and volume will be negligible (I will be surprised if the NYSE trades over 1 billion shares today). So you pre-announce your earnings that will make headlines all weekend into a market where the shorts won't be able to get out if they wanted to because of light volume causing your stock price to soar??? Not only that, the pre-announcement doesn't really have anything useful in it. There will be no call, no 10Q filed, no discussion because of the "quiet period", no additional information for two weeks!!! So if your short you have two weeks to wait to see to determine what you should do. This is highway robbery on the other side.

I am short banks but I am not short Wells Fargo so not talking my book here and to be fair shorts have been fairly warned. I have said on this blog Q1 numbers for banks will be good, I mentioned I bought a large amount of XLF calls to hedge that exposure, and Meredith Whitney has been warnings Q1 numbers will look very good for banks on the surface.

There is a couple of ways to look at this. The cynic in me thinks Geithner gathered the major banks in a room to draw straws to see who would get to pre-announce strong numbers. Another part of me thinks Wells Fargo has the strongest upside surprise and so where chosen to pre-announce. You already got the cream filling.

The most amusing aspect of this is the comments in the press release about Wachovia. They don't amount to much and if your short Wells Fargo the main thesis probably centers around Wachovia. So you have very little to go on to really understand what is going on with Wachovia.

So enjoy the short jam. My guess is April 22nd may be a good day to short Wells Fargo. Buy the rumor, sell the news.