Tuesday, September 16, 2008

AIG to get loan

It looks like AIG will receive a Barry Bonds sized, syringe-filled liquidity injection from the govt tomorrow. Just in case this week's market action has left you cowering in your Financial Armageddon Bomb Shelter (FABS), the following briefly explains the core of AIGs liquidity issue.

[Moody's] cut AIG's rating two notches to "A2" from "Aa3" Monday, while Fitch Ratings cut its rating two notches to "A" from "AA-minus."

The downgrades mean that AIG's trading partners can require the insurer to post an additional $14.5 billion of collateral, and make $5.4 billion of payments if some contracts are terminated early...

This isn't the same liquidity issue that de-balled the likes of BSC, LEH, MER, etc. but it's all related. I also believe 'saving' AIG is far more important than doing so for LEH. The implications of AIG filing bankruptcy would be magnificent.

Look for a short-term market rally but don't be fooled - we likely haven't seen the lows of the year.

Check out the 10 year Fibonacci's on the DJI - right at the 50% retracement level. If it gives way.... 10,000 will be the next likely target.


No comments: