Luminent Mtg Cap Inc (fka LUMC)

[leebret]

Here is a short theory of mine.

We know that Goldman heavily shorted the mortgage business. We know that luminent was/is heavily shorted by someone. Maybe some individual investors but with that many shorted there has to be a major institution(s) involved or even several of them.

I'm thinking institutions don't want luminent or other mortgage companies on their books at year end. So they have liquidated their positions and have shorted these stocks. Once the new year rolls around they will want to begin buying back into the viable ones.

Whoever has the heavy short position can show an enormous profit/cash position for the year end on their books. So the idea for them is to make sure this stock doesn't run (block the upside) until the new year when they can begin covering their short position allowing small moves to the upside. Unless of course luminent lets loose with some awesome news causing millions of shares to be bought driving the price up in large increments.

And that is why I've stated that this will be a first quarter story. In addition we will have the 10Q released on or before Jan 20th 2008 giving us all a much better picture of where we stand on loses and estimates of earnings going forward.

It would appear that luminent is preparing to take advantage of the same crisis that took advantage of them (with Arco and the new available cash infusion) having stabilized their own portfolio. You can bet that the shorts are having uneasy feelings about their short positions. When they shorted this they believed luminent would disappear and exit with bankruptcy. Now they can clearly see that isn't going to happen. Especially in light of the new capital and the overwhelming commitment Arco has shown. So, they know they have to cover and buying back 12 million shares won't be easy without driving the price up incrementally. There only hope is to frustrate longs into capitulation and hope they sell their shares, while they cover their positions.

I remember when we had good news awhile back and in the after-hours we went up, only to have the market sell it off the following morning. Well low and behold the next couple of days this stock went ballistic and climbed up on heavy volume. Will that happen next week, like happened before? Depends on those who's agenda it is to keep it down and under the radar of any major advances list.

Well I don't know for sure what will happen next week. This I'm sure of! We are oversold and ridiculously priced at the moment. We have a heavy short position and a desperate naked short position. Meaning shares are scarce and hard to come buy. I liken it to a volcano that hasn't erupted in years. Silently it builds up pressure day by day and then all of the sudden the pressure is so great that "bam" "bam" it explodes.

Good news + 12 million shares short + Naked short + Arco + 10Q due out + More good news coming and the bad news priced in = A VIOLENT ERUPTION.....:)

Hope you're enjoying the weekend. I'm at peace with luminet and confident of its outcome!