AIG lunacy

August 27, 2009

American International Group is a $50 stock. Yeah. Sure. But that’s what the market says it is today so it must be.

Shares of AIG are soaring today in part because the insurer’s new CEO Robert  Benmosche tells a Reuters reporter that he doesn’t intend to conduct a firesale of the company’s divisions. He also says he’s been seeking guidance from former AIG CEO Hank Greenberg–the former Wall Street titan who just doesn’t know when to go away.

This is a great scoop for my Reuters colleague Adam Tanner. But come on. In my book, a CEO who jets off for a vacation to the Adriatic coast to a massive villa just days after taking over AIG doesn’t have a lot of credibility. So nice of Benmosche to take time out from his Croatian siesta to field phone calls from a reporter and reportedly wine and dine Greenberg.

At middday the stock was up nearly $11. Nearly 92 million shares have been traded already–more than four times the normal trading volume.

And it’s nearly doubled since AIG conducted a 1 for 20 reverse stock split in July. Shares have risen 71% since Benmosche took over on Aug. 10. Over the past two weeks, it’s been quite common for more than 100 million shares to change hands each day.

But does that “news” coming out of AIG really justify an nearly 30% pop in the stock on higher than normal volume? (There is some speculation of Greenberg putting together a bid to buyout AIG, but it is too ludicrous to repeat.)

What’s going on with AIG is more than just short covering, or mere speculation. It was easier to speculate in AIG when it was down in single digits–not at these levels.

It seems AIG has become a big momentum play for daytraders, hedge funds and of course–high-frequency traders.

To be sure, the surge in AIG shares is great news for the federal government, which effectively owns the insurer that needed a mega emergency bailout last fall. But what’s going on in AIG shares is beyond the pale and really calls for some sort of investigation, in light of the federal government’s big hand in managing the company.

This surge in AIG is making a mockery of the federal government’s intervention in the insurer and makes it appear that Wall Street has learned nothing from last fall’s events.

What a great way to mark the upcoming anniversary of Lehman Brothers’ collapse.

9 comments

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If you were smart, you’d do a lot less complaining and make some money of this stock. What’s there to investigate? Last time I checked this is a free country and we can invest our money in whichever stock we like.

Posted by Mac Skiba | Report as abusive

[...] Putting the rally in AIG (AIG) into perspective.  (Bespoke, Daily Options Report also Matthew Goldstein) [...]

Go ahead and gamble. Play with big money. Do it with complete abandon, after all none of this can hurt you and you can’t be held accountable for being a sleaze. Tax each trade at a small number and see if that makes some of the weirdness evaporate. .01% makes good sense, painless really if you aren’t too close to the bone. Tax compensation at 90% on anything over $1,000,000 and make sure to include all forms of compensation. Company has too much cash? Put it in the hands of the work force. Trickle up and velocity will continue to make some people fabulously wealthy. I just happen to think that if you are not heavily vested in your work place boards have no business robbing the stock holders by making kings of individuals devoid of conscience or benevolence.

Posted by DanO | Report as abusive

Sleaze? your not going to make me feel guilty for making money. My investment in the company is helping out the taxpayer(seeing as we want the company to be around to pay back what it owes), it’s providing jobs for thousands of people, and best of all I have a good time listening to people like you complain.

Posted by Mac Skiba | Report as abusive

How many taxpayer bailout dollars has AIG returned? How many taxpayer bailout dollars is AIG using to manipulate their market?

The current market gives those at AIG who worked to create the financial meltdown another chance to take any remaining unearned profits. The AIG buzzards didn’t reap/rape enough profit (no amount is enough), and now they see a chance to double-dip (without consequences).

Of course there will be no Federal investigation; the govenment will praise AIG for any profit reported, even if the profit is only in the minds of those who can take advantage of it.

Nothing has changed, except the understanding that taxpayers can be conned into giving up everything to support AIG’s bribes to GS and government representatives.

Nothing will be done. Taxpayer money will continue to support any risks the rich traders at AIG want to take advantage of.

Our govenment has been bought and everyone involved in the scheme is glad to receive the financial benefits offered.

There will be no investigation. The previous investigations were so ineffectual that no one believes that anything can be done. We’re helpless (so AIG and our goverment want us to believe).

The apathy of the American public to this criminal travesty is the greatest boon that AIG and the Federal government have seen since WWII.

Posted by Carla | Report as abusive

AIG only repaid a small amount but nevertheless its better than nothing.

AIG is more than just the Financial products division, majority of AIG employees had no hand in the financial meltdown.

Though I am not happy that some of these retards who are actually responsible for this mess are rewarded we really
don’t have much of a choice now that AIG has been given the
money.

Our best chance at getting repaid is for AIG to succeed.

Posted by Mac Skiba | Report as abusive

Good news don’t sell…must report bad…

Posted by CD | Report as abusive

AIG (at least the brand) is toast. It will now carry the same connotation as Madhoff, Enron or Ponzi.

Just how many decades would it take AIG to pay back over $100 million + interest? It ain’t gonna happen.

Daytraders & HFTs – that pretty much nails it. Shares in the old GM are still bumping around out there too.

Posted by StevenKs | Report as abusive

Who are the Idiots here? The people that gave AIG our money in the first place. So if you are angry about this blame your government. Nobody was angry when AIG tanked because they insured dumbass mortgages that everyone knew should not have been approved.

Posted by Tony D | Report as abusive

RE: 10:07 comment

That should have been $100 BILLION + interest.

I still have a hard time making myself realize the actual numbers. I mean, we’re talking Trillion$ in deficits for the next few years.

Chestnut paraphrase but: A few hundred billion here, a few hundred billion there, after a while it adds up to real money!

Posted by StevenKs | Report as abusive

[...] companies. Shares of AIG (AIG) surged 27% after the company’s CEO told Reuters that he doesn’t support a fire sale of the insurer’s assets. Other financial shares on the move included Freddie Mac [...]