On the one side, AIG is like, well, we're still in business, so it's business as usual. The "performance" part of the bonuses was based on a Panglossian assessment of the profitability of the credit default swaps. (Jack Adamo of Forbes has a nice article on this.)
It sure makes the government look bad to be completely behind the curve on this. Congress knew about the bonuses for months, but only acts once the public gets upset.
Is AIG stock a candidate for a short sell? I'd say so. The stock more than tripled in price recently, going from a low of $0.35 to a high of $1.28 today. The short interest is currently 5.9%.
A former student sent me a note asking about AIG - is it a good idea to invest in it, since it seems like the government is behind it, so it can't fail, right? I said it was extremely speculative, since AIG is sitting on God-knows-how-much in liabilities, but in the short term, I expect the stock to rally to $1, making it a good play if you have the stomach for the risk.
At this point, I expect the rally to take the Dow to 8300 before resuming its downward course, and I expect AIG will be punished by the market soon.
And yes, I try to only list my good calls...
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