AIG group: The red-headed step child

American International Group, Inc. (Public, NYSE:AIG), is one of a select few special situation stocks that have received welfare money from the government.

The only difference between AIG and the others is AIG shares have yet to move. During Thanksgiving week, Citigroup (C) shares jumped 76%; Fannie Mae (FNM) is up 251%... even Ford (F) was up 93% on the outlook of a bailout. AIG shares have gained only 40% in the recent rally, by far the red-headed step child of the group.  Of course, most of these stocks had their gains wiped out in Monday’s 679 point smack-down. But that's another story.

Will AIG see a bounce?

The short answer is… probably not any time soon. The problem is, AIG has nothing going for them.  The Citi deal makes sense in many ways. The government will insert $20 billion into the company and act as a guarantor of 90% of losses stemming from $306 billion in toxic assets. In return, the government will receive $27 billion of preferred shares paying an 8% dividend and warrants, giving the government a potential equity interest in Citi of up to about 8%. The Citi board should get some props for insisting on a deal that both preserves jobs and benefits taxpayers.

AIG, on the other hand, is going to be so burdened with interest payments to the government on their 5-year, $60 billion loan that they are going to spend the next 20 years trying to pay that off.  Unless they are able to sell the parts of the business they are trying to sell, but what does that leave shareholders with? A lemon, and that’s about it.

Stockmasters, unless you’re looking to throw the dice and gamble your money away, steer clear of AIG Group.

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