American International Group (NYSE: AIG) has been garnering a lot of attention for its recent stock increase. But not all of AIG news is good. The Treasury Department even came out with a statement that AIG represents a large risk to the government – that holds an 80% stake in the company.
Now if the government is concerned about its risk, what should an ordinary investor do?
Well there have been two camps within our own organization – many have felt that it should have been shorted 200% ago. And they should be right from a fundamental aspect.
AIG is in the process of selling off its assets to pay off $182.5 billion in government bailouts and the result is that there is less and less of this company actually making any money.
For those equally pessimistic about AIG we suggest buying some puts or even shorting the stock after its recent run up. In fact, the crest we saw on Friday could have represented the high water mark of its “recovery.”
Recently we talked about the possibility of a “blow-off top” and with the markets behaving as they are – with little concession to profits and real earnings – the likelihood of that eventually grows even larger.
We won’t be surprised to see AIG open significantly lower today, and to see that drop increase over the week.
Symbols mentioned in this article: AIG
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2 Responses to “Time to Short AIG?”
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August 31st, 2009 at 11:01 am
I just bought put spreads on AIG. It looks like the euphoria is dying with the stock, and the broader market is rolling over on good news (INTC, DELL, mergers) after a huge rally.
I’m betting the momo investors are only now starting to exit the name and the dip buyers will be crushed.
http://bit.ly/r2gIO
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August 31st, 2009 at 12:08 pm
Nice peace of writing, I bought AIG at $40 and sold it at $50, I had the same inkling as you did that it will fall back down to the $40-$45 range today and under $40 easily by the end of the week.
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