TUES. SEP. 16- Is AIG Next?

Throughout the first part of this decade, American International Group (AIG) was the premier insurance company on the planet. The company had its hands involved in every imaginable aspect of the insurance business from auto to home to car…to mortgage insurance. And that is where they lost their way. They put much focus into their mortgage securities and collaterized debt obligation division- putting faith in a host of esoteric and arcane financial instruments that the brightest minds in the world cannot figure out. The firm lost $13 billion through June 2008 and it is ostensibly impossible to tell where the company’s balance sheet stands now because so many of their financial holdings are ostensibly unsellable. On Friday afternoon, S&P announced a negative outlook for AIG’s credit and the company suddenly faced a need for $20 billion after this report. Over the weekend, there were rumors that the company has sought a $40 billion bridge loan from the government. Yesterday, the governor of New York paved the way for the company to borrow money from itself so to speak, i.e. to borrow from the good to fund the bad. This only buys the company time, however. If adequate financing cannot be obtained, this company will default. The bankruptcy would dwarf anything we’ve seen so far as the company has a near unfathomable $1 trillion balance sheet. The unwinding of this process will take months if not years to fix by anyone’s estimate. This will be the situation to monitor for the duration of the week for day traders as this will likely be the new ‘LEH’ for traders to monitor.

As this is being typed a bit after 11PM ET, most Asian markets are violently lower with Hong Kong down over 6% and Tokyo approaching 6%. Futures are indicated sharply lower again with the Dow down 140 and the S&P about 1%. Today will hinge on GS first when it reports, what the Fed does at its meeting 2nd, and how AIG does. GS may lead the way in the morning, but AIG will lead by the end of the day in all likelihood.

Reiterating-If the whole story is not there -
If something is good, assume either a short thru unchanged or an A-B-A2 based on direction of the market unless specified

If something is bad, assume either a buy thru unchanged IF THE MARKET OPENS WAY DOWN AND RALLIES, an A-B-A2 based on direction of the market unless specified (particularly if the market opens higher), or a short if the market is strong yet the individual stock is weak.

Good-

Everything looked at closed weak so none today.

Bad- GS- due out with earnings. Stock was down 19 yesterday. Had a bizarre close…it ticked to 140 on the NYSE and then closed at 135 ½ in another weird twist- all after-hours. If it has decent earnings and opens down, look to buy thru unch. MS- will follow GS after finishing down 5 plus yesterday MER- unbelievably, managed to finish up once cent on the day after thinking that it’d be close to 29 based on the BAC deal. Also had strange print on closed, falling 50 cents. If it opens at or near there- particularly below 17 and begins rallying, buy thru unch otherwise A-B-A2. BGCP- horrible daily; looking for A-B-A2 to downside if market opens weak and keeps going. CIT- horribly weak yesterday, closing at its low down nearly 25%.

LPX- closed at a low; very weak close.

MTG- down 20% plus at a low.

MPG- wretchedly weak down 20% plus on a low.

SLM- may follow FNM/FRE if market begins falling hard.

WB- everyone wonders if this is next to fail.

JPM- closed on a low, but gapped over a dollar on close. If stocks opens at 37ish or below and market begins rallying this will be one of the highlights to upside.

WFC-gapped down 1 ½ on close. If it opens at 31ish or lower and market rallies, this will likely go with JPM hard to the upside.

BAC- terribly weak on the heels of the MER buyout. Spread on deal widened all day.
Good luck today.

GNW- closed horribly weak.

PRU- closed horribly weak, down 10%.

PLD –gapped into close. Last sale was two points down from before close. If it opens at 38 ½ or south and market rallies, it is a buy thru unch.

BXP, VNO, SPG- all gapped amazingly hard into close…SPG fell 10 points on the last tick! If they by some miracle open near their lows, looking to buy any of them in any rally particularly thru unch.

ICE- closed terribly weak.

LM- closed on its absolute low.

CVC- closed terribly weak.

OSK- down 10% and closed weak.

FSP- gapped down over a dollar on close. Stunning move. If it opens 11.25 or lower and market rallies, buy thru unch. If it opens higher and market sells off, short thru 11.25.

XOM- yes, even XOM gapped over a dollar into close. With oil down again, if it opens weak and oil rallies, buy thru unch.

NUE- closed on its low despite pre-announcing earnings to the upside! Looking to buy if it opens flattish and market rallies.

BBY – earnings due out this morning.

GOOD LUCK TODAY.


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