AIG: A stock about to rally or the beginning of the end?
American International Group, Inc. (AIG) was the darling of quant jocks around the financial world. Led by some of the brightest minds in finance, AIG enjoyed many years of profits. Unfortunately, those profits were fragile at best as the housing market imploded. With it billions of dollars in derivative securities markets froze to a halt creating a valuation crash not seen in decades. The unwinding of these complex transactions resulted in balance sheet losses and write downs of assets that continues today.
Earlier this week, AIG had its turn at the whipping post. Announcing a huge loss for the quarter greater than expected, shares of the company plummeted further from already depressed levels. However, the stock rallied over 4% on Friday afternoon. Does the bounce for AIG mean we now finally at a buying point or is it only temporary, making this the beginning of the end for AIG? Tell me your thoughts on AIG and I will report back in next week's Bull/Bear Report.
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dgander![[TypeKey Profile Page]](http://www.investorplaceblogs.com/strategylabopen/nav-commenters.gif)
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It's temporary. But temporary means different things to different people.
Look for this false financial rally to begin to whimper out around 1330 on the S&P's and for a new low to be carved out after the election - dropping in fits and starts until March 2009, when the recession is in full swing. Summer may flatten out a bit and reduce the severity of the plunges. If AIG survives independently - and is not gobbled up in a fire sale by a European concern - then look for the recovery to begin October 2009.
FRE and FNM are going belly up - stocks go to ZERO - as the US Taxpayer becomes the lender of last resort to provide any liquidity to the mortgage market in the US.
If you want to trade AIG on the long side until the US election, there is probably money to be made. After that, it's purely dead cat bounce money.
Posted by
dgander |
August 8, 2008 5:41 PM
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