Thursday, August 27, 2009

Citigroup (C) Surges on John Paulson Investment; AIG (AIG) Jumps on.. Anything

The surreal life in the subsidized stock market continues. I will say in the old market activities like we are seeing now would make me so contrarian... but it's a new paradigm. Government sponsored stocks is a whole different animal.

Via the Wall Street Journal
  • Since Aug. 5 — when we saw names like Fannie, Freddie and AIG reawaken — trading in those three stocks, plus Bank of America and Citi, has averaged about 31.5% of the NYSE consolidated volume. At their peak on Monday, these five stocks accounted for nearly 43% of the NYSE consolidated volume.
5 stocks, all government supported... 30-40% of the US stock market action (NYSE). And I am sure countless smiles in Washington D.C. that they "succeeded". You ask me how healthy of a country we live in.


John Paulson is taking too big to fail to heart, pushing massive amounts of money into the two largest benefactors of US government largess in the commercial bank space - first Bank of America (BAC) [Aug 12, 2009: John Paulson Makes Bank of America 2nd Largest Holding after Gold] and now Citigroup (C)
  • Hedge-fund hotshot John Paulson has been quietly snapping up shares of beleaguered Citigroup in recent weeks, sources tell The (NY) Post.
  • Paulson was said to have acquired a roughly 2 percent stake in Citi -- below the 5 percent threshold that would require him to disclose his investment stake in a securities filing, according to one source.
  • Although it's unclear what the hedge-fund master's rationale is for buying shares of the nation's most troubled bank, of which Uncle Sam holds a 34 percent stake, sources think that Paulson believes Citi's assets are undervalued. One source said that Paulson sees Citi's shares trading closer to its book value of $5 to $7 a share, and that he has been scooping up shares in the bank over the past several weeks.

As I wrote in the Bank of America piece

Considering we have 4 major financial oligarchs who dominate US financial commercial bank assets (plus BAC via their own operations + Countrywide shares an oligopoly in the mortgage market) as long we are sure the US will happily provide cover (which they have made it clear they will) I concur with these banks as long term "sure things". Even too bigger to fail, if you will.

As some have said, you literally have Bernanke and Geithner lobbying for you on a daily basis. The balance sheet is still a black hole but balance sheets don't seem to matter anymore because of the above mentioned US taxpayer providing backstop on all future losses. So, much like some of my investments are plays on the government using taxpayers money to support certain industries or companies, Paulson is utilizing the same idea - in a much bigger way.

Full on corporate socialism looks like it is succeeding in the U.S.

And despite owing the United States of Socialism $180 Billion ... AIG is surging day after day. Let me remind you this company was in default in 2008 and required 3 bailouts. It is still trading why SEC?

Today's news? The old CEO will help the new CEO - well that is worth a 30% gain. I assume if the company paid back the US the $180B, AIG would have some profits to call its own sometime around 2132. But nevermind that - its basically ponzi scheme trading at this point; now really reminding me of NASDAQ 1999 - just don't be the last one out when implodes. Except these Pets.coms are government backed and secured. Look you can either complain as a taxpayer or become rich off your fellow taxpayers and join the party - jump in!
  • The shares of insurance giant American International Group Inc (NYSE:AIG - News) rose nearly as high as 33 percent in morning trading, buoyed by the firm's improving relations with former long-time CEO Maurice "Hank" Greenberg.
The other 2 wards of the state are only up 2-5% - poor Fannie and Freddie. Well they are just resting up - after all they were jumping 30-50% a day last week. Go team USA.

No position

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