This has been the most eventful week in Wall Street since the 1929 crash and a once in a lifetime experience for many. Lehman failed, AIG was bailed out, the Bush and Paulson decided to create a 700 billion dollar rescue plan and financial companies were saved from shorting.

I shorted Lehman at 4.00, only to see my stop loss taken out by a end of day bounce, then the company went bankrupt. Could of made a quick grand, instead took a loss. No one is to blame, I’ve learned to always set a stop loss. Why? I shorted Wachovia Bank at 14 only to see my stop loss taken out again. This time the stock would see 9, but now is at 19. Discipline is key to trading, especially in this environment.

Why should the federal government bail out shitty companies? Imagine if your company was about to fail because it made bad decisions, should they be bailed out by the fed? If you made a bad decision that left you broke, should you face the consequences or expect someone to give you money or even a loan. I understand that this is a general assumption and if AIG failed, the reprecussions would be far fetched. However, if this is a free market, why would the fed ban shorting of financials? I’m not hoping banks fail, mortgage companies go out of business and people lose their jobs. But what is so great about the stock market is that it allows ANYONE to make money at ANYTIME. Banning shorting of financials makes it a one sided coin. If your business is flawed, why can’t someone short your stock and make money off of it. Think about the flipside. Would the government ever ban buying of financial stocks if the financial sector were making too much money? That would be absurd. I agree that naked shorts should be banned, but banning shorting manipulates the market immensely, as characterized by the 30% increases in major financial companies on Friday and 100%+ increases in small bank stocks.

What this means is that once the ban is lifted. These stocks that have been pumped so ridiculously high by the federal government will definitely come down. That is almost certain, and I will try to profit off of it.

I wasnt thinking straight on Friday and realized that buying any large financial company over the weekend would be smart since Bush and company are unveiling their rescue plan which will undoubtedly send the markets higher and financials by 20% again. I hope the bounce doens’t happen before the market opens so I can get in but I doubt it.

I was going to pick up a few shares of Lehman but after hearing Henry Paulson say he wont use government to help with the acquisition I couldn’t pull the trigger. Without government backing, Leh will most likely be low balled or at take an extended time to find a suitable offer. However, I don’t really Paulson will just sit back and might just be bluffing to save the government some money. If they save BSC, why can’t they help LEH? Too bad I wont be here to see the conclusion of this because I will be in LA but if anything breaks, I’m willing to dump a little bit of capital into a hunch.

I was talking to my friend who bought shares of Freddie Mac (FRE) at around 4 dollars. He told me he made 30% in around 4 trading days. I told him to take profits but he didn’t and how Freddie is 1 dollar after the government released plans to put it in a conservatorship essentially making its shares worthless.

Now look back a good couple of months with Bear Stearns and Indy Mac. Bear was bought out by JP Morgan making its shares bounce from 2 to 10 dollars immediately. The government didn’t step in this time most likely because JP Morgan said they would buy it out.

Onto IndyMac. IndyMac had a good old fashion bank run that saw its customers withdrawing money to put the company in a liquidation crisis. The shares plunged all the way to 1 cent before anyone could do anything about it and then the government took it over and the shares spiked to about 15 cents at one point.

3 different situations where one could have made or lost serious money because of the govt. So why is IndyMac placed under the govt and the company’s shares soar while Freddie and Fannie are placed in a conservatorship and the shares are worthless? This is the first time I’ve experienced bank failure in my short life and this is what I would have done. I would have shorted BSC after its 1 day free fall to about 10-15 (est), watched that short go to 2 and then back up to 10. I wouldn’t have touched IndyMac because it was way too fast. I would have shorted Freddie and Fannie but not until it ran up another couple of bucks.

But I’ve never seen something like this happen so I didn’t do anything. Maybe I should have

I’m going to give penny stock trading a try as I have been following Tim Sykes’ site for a while and decided to buy a 1 month subscription to his Tim Alerts site. I will keep you guys posted on whether my 1 month of trading generates profits. Note, I’m not going to buy his 300 dollar penny stocking DVD because I’m not totally convinced yet but am willing to try the ‘follow the leader’ approach and just trade what he trades. If all goes well the profits I make will pay for the DVD anyway. I’m mainly trying this because I have 3 more weeks or so till I get started with work and wanted to try something new.

I came across this article on CGW, Claymore S&P Global Water (CGW). I never thought investing in something so basic as water before. Funny how one water ETF (PHO) has actually outperformed all major indexes this year. Anyway, the price movement on water ETFs is low so I’m not recommending buying or selling espeically since CGW is down 10% and PHO up 5% over the year. This is probably due to the 33% investment in US companies in the former and about 70% investment in the latter and as the dollar has strengthened, so has PHO. Also, PHO doesn’t focus on big cap stocks as much as CGW does.