) -- Recently, a handful of

troubled financial stocks have run up tremendously. Some investors are sure to make a killing, but those basing their bets on a belief that fundamentals have improved quite as remarkably stand to get burned.

Since the start of the third quarter, mortgage-finance giant

Freddie Mac

has more than tripled in value, while sister company

Fannie Mae

has more than doubled. Both firms are 80% owned by the government, as is

American International Group

(AIG) - Get Report

, whose market value has surged 62% quarter-to-date as of Wednesday's close.


(C) - Get Report


Bank of America

(BAC) - Get Report

, the two most troubled banks in the country, as measured by bailout support, have also had an impressive run, jumping 56% and 35%, respectively, since June 30.

All of those stocks were jumping higher again on Thursday - particularly

AIG - without much news to support the climb. What did support the climb was speculative day traders hoping to turn a quick profit while much of Wall Street flitted away the fleeting days of summer away from trading desks.

The overall market has improved, with the Dow Industrials up more than 1,000 points, or 13%, since the start of the third quarter, and volume up nearly 10%. The broader S&P 500 Index shows similar trends.

However, Fannie, Freddie, AIG, Citi and BofA comprised 40% or more of the trading volume on the New York Stock Exchange over the past few days, according to market data sources. The more troubled the firm, the more active the trading, with volume in Fannie is 42 times what it was on June 30; Freddie 26 times higher; AIG 30 times higher; Citi seven times higher; and BofA down slightly.

Bulls argue that there is a good case for improved fundamentals, as the housing market and credit markets have shown signs of recovery. Some major banks like BofA,

Wells Fargo

(WFC) - Get Report


JPMorgan Chase

(JPM) - Get Report


Goldman Sachs

(GS) - Get Report

, that were on life support less than a year ago have posted seam-splitting profits in the first two quarters. AIG is moving ahead with its restructuring plan, and even Freddie was back in the black last quarter.


a growing chorus of bears argue that the market has lost sight of the problems that still exist -- deteriorating loan quality, rising unemployment and toxic assets that have yet to find an antidote. Those piling into the likes of Fannie, Freddie, AIG, Citi and BofA may want to take heed of those warnings.