Casino capitalism has returned to Wall Street with a vengeance.

Lehman shares peaked last week at 32 cents, having spent much of the year at less than 5 cents. When the rally in Lehman began in late August, trading volume soared above 100m shares on one day, compared with virtually no activity earlier in the year.

You read that right - Lehman Brothers.

But it doesn't stop there. Washington Mutual and IndyMac have also rallied hard in recent days.

The rally in Lehman shares has followed explosive rises in the share price of Fannie Mae and Freddie Mac, the two mortgage companies taken over by the US government last year. Shares in AIG and to a lesser extent Citi, two companies with significant US government ownership, have also risen sharply in recent weeks.

Zombies haunt Wall Street these days. They are still dead, but they are hungry and in search of something to feed upon.

"Recent moves up in the stock market are nothing more than manufactured short term gains, with much of the summer trading volume coming from zombie penny stocks such as Fannie Mae (FNM), Freddie Mac (FRE), CIT Group (CIT) and Sirius XM Radio (SIRI) being flipped like coins " he continues, " These are not the type of companies that lead a new bull market and these are certainly not being bought by long term investors."

Fannie Mae and Freddie Mac, to take an example, are beyond merely nationalized and bankrupt. They are a $260 Billion Black Hole.

As of June 30, Freddie said the fair value of the net assets attributable to its common shareholders was negative $122.6 billion. At Fannie, the number was negative $138.1 billion.

For AIG the company's common shareholder equity was negative $35.4 Billion. What investor in his/her right mind would invest in something like that?

These junk stocks have had an amazing run of late. For instance, Gannett Co., which has a "BB" rating, saw its stock rise 135% recently. Eastman Kodak, with a "B-" rating, saw its stock leap 42%.
On the other side of the aisle, investment grade companies like Coca-Cola and Walmart saw only modest increases in stock prices of less than 5%.

Corporate insider selling is at its highest levels since May 2008.

Trim Tabs, a research firm, says that based on filings with the Securities and Exchange Commission, insiders sold $6.3bn ($330m daily) of their employers’ shares in August.
“Corporate insiders do not share Wall Street’s wild bullishness,” said Trim Tabs.
Meanwhile, Trim Tabs’ ratio of insider selling to buying rose to a record 30.7 times in August based on their records, as insiders only bought $210m of shares in the companies they work for last month.