Tuesday, March 9, 2010

"Fannie, AIG Jump: Short Sale Ban?" (AIG; C; FNM; FRE)

Take out the papers and the trash
Or you don't get no spendin' cash...

UPDATE II: "Federal regulators debunk rumors of short-selling ban" (AIG; C; FNM; FRE)"
"Citigroup: ‘Shares no Longer Toxic?’ and Smart Money Buying?" (C; AIG; FNM; FRE)"
Original post:
From Barron's Stocks to Watch Today blog:

It’s beaten-down Ward of the State day, as shares of Fannie Mae (FNM), Freddie Mac (FRE), American International Group (AIG), among firms with substantial government involvement, are lifting on a rumor spreading among traders that the government may take steps to limit short selling in shares of stocks in which it holds a stake.

Fannie shares are up 8 cents, or 8%, at $1.09, Freddie is up 11 cents, or 9%, at $1.30, AIG is up $3.50, or 12%, at $32.60, and Citigroup (C) is up 24 cents, or 7%, at $3.80.

According to one source I’ve spoken to, who was dining at lunch with financial types, although the rumor has boosted confidence in the names but seems to have little to substantiate it.

Look out below?

The writer Tiernan Ray used to help out at Tech Trader Daily, now it looks like he's running the show at STWT.

Here's more detail from Bloomberg via BusinessWeek:

AIG, Citigroup, Fannie Mae, Freddie Mac Shares Surge (Update1)

American International Group Inc. surged, leading gains by financial companies bailed out by the U.S. government, on speculation the insurer will sell more assets after raising $51 billion through deals.

AIG jumped 14 percent to $33.16 at 2:43 p.m. in New York. Citigroup Inc. advanced 7.6 percent to $3.83 as Charles Gasparino of Fox Business said the U.S. may sell its stake in the bank within three months, without saying where he got the information. Fannie Mae climbed 11 percent to $1.12, and Freddie Mac increased 12 percent to $1.33.

“You don’t know what the government might do across the board, good or bad,” said Anton Schutz, who manages $225 million of financial stocks at Mendon Capital Advisors Corp. in Rochester, New York. “And anybody who chooses to short these things can really get squeezed.”

The government saved AIG, Citigroup, Fannie Mae and Freddie Mac after Lehman Brothers Holdings Inc.’s collapse intensified the credit crisis in September 2008. AIG has agreed to sell two divisions this year as it seeks to repay the U.S. Citigroup has repaid some of assistance it received, and the government plans to sell its remaining stake in the next year. President Barack Obama has said his administration is still trying to sort out what to do with Fannie Mae and Freddie Mac.

Short Selling

Short sellers closing their bearish bets may also be driving up the stocks. For AIG, 26 percent of its shares available for trading were sold short as of Feb. 12, according to data compiled by Bloomberg. If it were still in the Standard & Poor’s 500 Index, it would be the third most-shorted among the measure’s 500 companies. With Fannie Mae and Freddie Mac, short sales comprise more than 11 percent of their float. The ratio is 2 percent at Citigroup....MORE