The so-called “bailout” of American International Group!

The U.S government is taking a viable company with a short-term liquidity squeeze and using that as an excuse to almost completely destroy shareholder value. The Fed could have simply issued a “bridge loan”; but instead, they insisted on a complete takeover. And small investors are getting SCREWED again.

Lehman Brothers. Merrill Lynch. AIG. The financial system is near total collapse. And the market could crash all the way down to Dow 8,000. AIG got caught in the “perfect storm.” I’m talking about the most successful insurance company on the planet, caught in the maelstrom of the subprime mess.

In the long term, most of AIG’s assets are fine. But short-term – as is happening throughout the financial industry – no one really knows how to value all the derivatives on its books. And if no one knows what they’re worth, government “mark to market” rules demand that these assets be valued at virtually nothing.

That’s why AIG’s credit ratings got slashed, which sent carrying costs soaring and pushed the company to the edge of bankruptcy. So in stepped the government – and wiped out billions in shareholder value.

It was a Sunday night massacre on Wall Street!

Lehman Brothers filed for bankruptcy. And the venerable Merrill Lynch was taken over by Bank of America.

Bank of America? What a joke! That’s just another house of cards that could come crashing down at any moment. After all, these are truly desperate times. Analysts now admit that subprime losses will eventually total up to $1 TRILLION —and not even half that amount has been written off so far.

Frankly, this could be the end of the banking system as we know it. But it’s not just the financial sector that’s weighing on the stock market. The entire U.S. economy is riddled with risk. The retail sales numbers for August just came out. They fooled all the experts, who were looking for a 0.3% gain. They fell 0.3%, instead. What’s more, the July numbers were adjusted to a miserable minus 0.5%.

I won’t bore you with all the charts and graphs. But PLEASE, do take a moment to look at this one. Your wealth depends on it. It shows a rapidly-increasing percentage of companies are hitting the skids, in regards to sales. And if sales are dropping...earnings will follow them down...and so will stock prices.

That’s not a pretty picture.

What’s more, latest research shows:

• Companies can’t borrow money. The credit crunch is turning into a death grip.
• Companies are slashing capital spending to the bone.
• Companies aren’t hiring. Good luck if you expect the American consumer to turn this ship around. No jobs. No equity in their homes. Maxed out on credit cards. Forget about any soft landing to this CRASH.