Thursday, August 20, 2009

Crazy Little Thing Called AIG

AIG jumped 21% today after new CEO Robert Benmosche halted the auction of the firm's investment advisory unit and made some very aggressive statements in an interview on Bloomberg TV.

What did he say, you ask? According to Yahoo Tech Ticker,

"We believe we will be able to pay back the government and we hope we will be able to do something for our shareholders as well," Benmosche told Bloomberg TV in an interview from Croatia, where he owns a vacation home."

How the hell are they going to pay back $180 billion? But no matter. Here's AIG's daily 6-month chart. It strongly reminds me of the chart of Shanghai Stock Exchange Composite index, that I posted a few days ago.

AIG, as far as I know, is virtually broke (just like Fannie and Freddie, with Ginnie joining fast). Its price/volume action is probably 3 or more standard deviation away from the norm, i.e. it no longer reflect the underlying reality. I do see a negative divergence, twice. The last one led to a spectacular 2-month crash.

The trade here, if I were brave, would be to short the stock with the target below $14 and stop at today's high of $35, counting on the negative divergence to do the same work as before. But I am not brave, and this stock is pure casino.

By the way, the high of the day at exactly $35 makes me suspicious that it was a market maker's ramp-up job.

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