Tag Archives: AIG and Google

It’s A Truth Or Dare Stock Market

Hi Dave, I purchased a box of silver eagles on SD Bullion today! I also did the 250 strike on Amazon! Great report on Amazon! I’m really excited about the coins! Thanks for the help! I feel like I have taken a big step in protecting my family!  Thanks, Jeff

I received that email yesterday from a subscriber to my Short Seller’s Journal.  He made a $7500 profit on AMZN puts that I had recommended.  He took the profits plus part of his original capital and bought a box of silver eagles from Silver Doctors (SD Bullion is the best source to buy silver eagles based on price and reliability of service – I receive no benefit from saying this but I’ve been buying silver for over 15 years and I know how to differentiate between good and bad coin dealers).  He rolled the rest of his capital from the original AMZN put trade into the January 2017 $250 puts, which could end up being a home run.

There’s a rumor floating around the market that Google is looking at buying AIG. Remember AIG?  AIG is the big insurance company that was taking insane risks in the subprime mortgage derivatives market.  It blew up in 2008 and, in the process, had technically blown up Goldman Sachs.  Ex-Goldman CEO, Henry Paulson,  was strategically inserted into the Treasury Secretary post specifically to make sure that Goldman was bailed out when this happened.

AIG was also saved by the taxpayers.  It’s businesses were reinflated by the Fed’s QE and it’s stock ran from $20 to a recent high last of $64.  Carl Icahn, the quintessential stock operator took a stake in AIG in October and had been trying to force a break-up of the company.  The stock is down over 18% since Carl announced his position in the stock.  The Google rumors started flying around about a day ago. It has to be one of the most retarded ideas I’ve seen floated in quite some time.  It reminds me of the “clicks and eyeballs” analysis to justify the bloated valuations on internet stocks back in 1999.

Carl Icahn makes mistakes.  I took other side of one of his mistakes in the late 1990’s when he decided that taking control of the badly failing Stratosphere Casino in Vegas was a good idea.  His idea failed miserably and I made a lot of money for Bankers Trust from shorting the daylights out of the Stratosphere first mortgage bonds, which ultimately were worth zero after trading as high at $110 (110% of par value).

My point here is that something not being mentioned anywhere is going with AIG’s financial stability.  The credit default swap rate on AIG bonds has mysteriously shot straight up:

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I have no idea what has the CDS market spooked. But I know from 1st-hand experience that credit markets tend to have information and “see things” well before the stock market sees it. Accounting disclosure, by design, has become catastrophically opaque in the financial sector. Anyone who has only access to the SEC-filed financial documents is seeing no more than a sliver of the truth about what is going on at AIG, or at any financial company for that matter.

Whether or not this will turn out be big mistake for Icahn remains to be seen. But anyone who is jumping on AIG because there’s a rumor that Google should buy it is ignoring the signal being broadcast by the CDS market.   Often rumors designed to juice a stock are “coincidentally” floated at a time when someone privy to inside information decides that it’s time to get out of Dodge and needs an influx of “dumb” money to buy the stock so he can exit.  The CDS market is suggesting this could be the case with AIG.  We know Icahn is dumping AAPL right now…

This is the type of analysis and insight that subscribers to my Short Seller’s Journal receive on a weekly basis. At some point I will wade knee-deep into AIG’s financials and see if I can figure out why the CDS market is so spooked because I know the original factors which sunk AIG the first time around have likely reappeared, in a different form, and AIG could well be an epic short opportunity.