AIG, Citi... From Chatter to Technical Move (AIG, C, FNM, FRE)

American International Group, Inc. (NYSE: AIG) is seeing a significant trading event today.  Today’s news is rumor-driven on top of related news-driven trading.  What is odd is that there is now potentially more to this meets the eye.  If you can believe it, AIG now looks like a technical breakout.  The 50-day moving average is $27.11 and the 200-day moving average is $30.47.  Today’s $3.79 gain to $32.89 in 4-times normal trading volume puts this well above the most crucial 200-day moving average.  What is happening here is partly tied to Citigroup Inc. (NYSE: C), at least indirectly.  Also lumped in, most likely by mistake or ill-founded hope, today is the crazy move in Freddie Mac (NYSE: FRE) and Fannie Mae (NYSE: FNM).

The talk is that Uncle Sam is in talks to exit its stake in Citi.  Charlie Gasparino has been talking this notion up on Fox Business News.  Dick Bove was also positive on the company’s turnaround plan and CreditSight was noted by MarketWatch as talking up its debt and equity.  So why note AIG?  Simple.  AIG has sold units for more than $50 billion in the last two weeks as it sold off international operations.  These may have represented the crown jewels of the company, but if this will pay off a huge chunk of the total debt owed to Uncle Sam (or more lile ‘we taxpayers’) then AIG could be one step closer to being its own company again.  Imagine if AIG could get its billions paid off…

The NYSE has asked AIG to comment on today’s unusual trading activity.  The company will not comment.  An NYSE press release on its said, “In view of the unusual market activity in the stock of American International Group, Inc. (NYSE: AIG), the NYSE has contacted the company in accordance with its usual practice; the company stated that its policy is not to comment on unusual market activity.”

Today’s AIG trading has marked the highest levels seen since November.  The breakout is on hope and rumor today, but if this stock can hold above $30.50 to $31.50 the breakout may move to more of a technical event.  Stay tuned.

Citigroup shares are up over 7% at $3.83 on almost 1 billion shares.  Citi is offering $2 billion in trust preferred shares according to reports today.

All this activity has even gotten the most euphoric of the bulls excited that Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) will even benefit.  We’d suggest far less conviction here on this notion of the GSEs.  Fannie and Freddie are under conservatorship and are being kept alive so that they are not directly counted on the Federal balance sheet.  Fannie is up almost 10% at $1.09 and Freddie is up almost 10% at $1.30.

JON C. OGG