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Cramer’s Advice to AIG

American International Group’s stock “has been powering higher and higher,” Cramer said, after investors shrugged off a Government Accountability Office report on the insurer’s ability, or lack thereof, to pay back the government. While the stock later declined on speculation of a secondary offering, Cramer urged the company to sell new shares anyway.

“AIG’s management needs to take advantage of the move that ended today while it still can,” Cramer said. “That way the company won’t have to fire sale meaningful divisions that could be worth much more if people believed AIG wasn’t in short-term trouble.”

AIG’s share price is up because both former Chairman and CEO Maurice “Hank” Greenberg and present CEO Robert Benmosche, formerly of MetLife , have been hyping the company. This has caused a “brutal short squeeze,” and Cramer recommended selling 20 million shares tomorrow to take advantage of it. Worst-case scenario, the squeeze is broken, but AIG still gets the money.

Or, Cramer said, “Maybe the government, meaning the taxpayer, has finally a shot at getting some of its money back.”

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