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.

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