Risks in trading C and AIG (and also FRE, FNM, GM)

Discussion in 'Stocks' started by lukasbmw, May 10, 2009.

  1. lukasbmw

    lukasbmw

    Question:.

    I got into C at $2.85 and AIG at $1.00 per share.

    I don't think either company will recover and post a profit anytime soon, but these are both major companies that the government has told us that they will not allow to fail.

    If the government refuses to let these companies fail and will bail them out until this recession is over, what is the risk of buying while these stocks are at all time lows? Eventually they should return to profitability when the economy recovers. Then the stock should return to pre recession prices. The only danger is them not making it through these tough times...and the government won't let that happen. Therefore aren't these companies the BUY of a lifetime?

    Second question:

    Is there a point where government ownership will actually effect our rights as a stock holder?

    FRE and FNM are both being completely run by the government correct? In this case, do stockholders still have ownership of the company? If they do, then these companies also might be a worthwhile investment considering that the government can't let them fail.


    Final Question:

    On the opposite end of the spectrum, the government seems very willing to let GM go bankrupt and does not want to bail them out. Wouldn't this make GM stock completely worthless? With a likely bankruptcy so near, why is this stock still trading at $1-$2.000...shouldn't it be trading at pennies? I think I had some delta stock back in the day when they filed BK and I think that I was completely wiped out.
     
  2. Here are the risks:

    - AIG is worth nothing currently. Lets all be honest.....

    - C could get nationalized at any second thus sending the common equity to zero. They are insolvent currently, all it would take is the truth to come out.
     
  3. lukasbmw

    lukasbmw

    Are FNM and FRE alreay nationalized?
     
  4. GM has assets that are worth something.
     
  5. Your risks are dilution and bankruptcy, either one will probably wipe out 90%+ of your investment.