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LivingFractal
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Not a small fish, and not a big fish; I am just another fish in the sea. I seek to increase my capital to realize the American dream, and retire in peace.
  • Flipping the Switch of Wall St. Sentiment 0 comments
    May 4, 2009 7:02 PM | about stocks: AIG

    Today's action on AIG is telling.

    Consider the following:

    There's an apparent disparity between the people who voted for the current administration and those who pull the purse-strings of Wall St. 

    On the one hand, you have a majority of people who have the popular vote and succeeded in putting their man in the Big Chair.  On the other, you have a minority of people who have, or control, the majority of the money and assets, which is the lifeblood of this country.  And though we might like to idealize the situation, the truth is that the monied minority in this country has the power to steer us off a cliff if they so choose. 

    That said.. up until recently, I felt that we were being driven towards that cliff.  I felt, and I believe most did, that the monied majority was formed up in a phalanx in front of the administration, absolutely defying it to pass.  But something has changed.  Some kind of metaphorical switch seems to have flipped, at least for now, and there are holes forming in the phalanx.  For now, the monied minority has shown signs that it is willing to let the administration through.

    You might be thinking, "Well, the administration wasn't just allowed through, they broke through."  In some senses, you would be right.  But I am not talking about the government seizing specific institutions, or the stress tests or new laws on credit cards.  I am talking about the fact that the majority of the money in this country has been sitting on the sidelines for months, resting on its laurels, waiting until it caught a glimpse of light at the end of the tunnel.

    And this is what I saw today in the action with AIG, which at the time of writing, is up 8.9% in AH trading.

    AIG, a company that was essentially nationalized; rescued four times by the government who has a 56% stake.

    AIG, a company that represents the worst thing big money can imagine:  socialized government.

    AIG, a company that today showed signs of life in not requiring more government capital to survive.

    This is significant.  It shows that Wall St. is finally willing to work with the administration, and this is also supported by the fact that the administration is negotiating with the banks in the stress test.   It shows that we are no longer in a state of stolid standoff.  The two sides are actually starting to mesh and work together.  And it's obvious to me that the only way we can move forward is to work together.  If either side refuses to work with the other, things can only get worse.

    So, at least for now, the light at the end of the tunnel is getting brighter instead of dimmer.  There may yet be a way out of this.

    Jerry Garcia of The Grateful Dead once sang, "What a long and strange trip it's been."  Indeed. 

    Disclosure:  I own May $2 Calls for AIG, and am long on the USA.

    Stocks: AIG
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