Tuesday, September 16, 2008

Financial Meltdown Continues....But Wait We're Rallying

The amazing swings on Wall Street are truly historic.

A) AIG is in serious trouble as a result of liquidity issues. They have lost nearly $180 BILLION of market cap as result of the recent sell off. AIG was the biggest company that you had never heard of. They are the largest commercial insurer in the world, the largest aircraft leasing company, an enormous re-insurer, etc, etc. AIG had the best minds in creative financing in the world and they were rewarded handsomely as a result.

Hank Greenberg was just on CNBC and that caused a 25% run in the stock (from $2 to $2.45) but this name is going to be in play all day.

* Full Disclosure - I worked for AIG in the mid-90's and was always impressed by the firm.

B) It seemed like only a matter of time until Goldman was put on the spot and today seems to be the day. The stock is off $13 and with a price still over $120, it seems like there will be lots of trading around this name.

C) The best news out there is the complete collapse of oil prices. Lehman and other financial firms had a number of commodity related trades that had to be sold this week. As a result oil is absolutely collapsing - down to $91/barrel (remember in JULY! it was $147 so we're down $57/barrel!!). The collapse of oil has lead to other more margin calls and more sales, so oil is falling for the same reasons it rose in the spring - more financial selling than buying. For an idea of what this means globally - Russia's stock market is down about 12% right now on the day (after falling more than 20% initially). The Russians and sovereign wealth funds have been sources of liquidity for the US. As this money dries up, it could lead to another leg down.

This saga continues....

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