Stop Trading!: Is AIG 'Indictment City'?

A legal review of AIG’s December 2007 analyst meeting would be “indictment city,” Cramer said during Wednesday’s Stop Trading!

Among other assurances, AIG said then that its losses would total $500 million.

“I think they left off three zeros,” Cramer said.

AIG’s situation grew so dire that the U.S. government had to step in, taking an 80% in the company in exchange for $85 billion.

Unlike other investments the government might make as part of its $750 billion bailout plan, the stake taken in AIG probably will never show a return.

“We are so on the hook to AIG, that will prove to be an unbelievable black hole that will last forever,” Cramer said. “I don’t which was worse, taking them over or letting Lehman fail.”

Martin Sullivan, AIG’s CEO at the time of that analyst meeting, could be on the “hot seat,” Cramer said, with U.S. attorneys.

As for stocks that are working right now, Cramer likes the natural gas sector. While natural gas prices are the same as they were last year at this time, the sector’s stocks have been cut in half or by two-thirds. Cramer thinks that either Wall Street expects the price of nat gas to drop to $3 from about $6 or the stocks have been misvalued.

UPL is one of Cramer’s top nat gas picks. The company operates with such low costs that natural gas could drop as low at $5 and UPL should still make money.

State Street might have been the next bank targeted by short sellers, Cramer said, were it not for the deal reached Monday between Washington and a few major U.S. banks.

That deal should put a stop to bear raids in the financial sector, but it looks like the shorts have moved on to retail. Macy’s is down to $9 from $19.46 just a month ago.

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