DOW to Close by 50 points or More on Previous Day Say Gamblers
65 percent of gamblers Wednesday morning believed that the DOW would close by 50 points or more from Tuesday's close according to the intrade.com prediction market.
That market also gave a close UP by 100 points or more on the previous close a 28 percent chance of occurring as of 9:30 am Eastern Standard Time Wednesday.
Wall Street has been in a tailspin following the closure of Lehman Brothers on Monday along with the acquisition of Merrill Lynch by Bank of America.
Meanwhile, there was yet another bailout Tuesday.
American International Group (A.I.G) will get an $85 billion loan from the federal government in exchange for an 79.9 percent stake in itself.
The deal calls for the U.S. Federal Reserve to lend up to $85 billion to AIG for two years in exchange for that 79.9 percent equity stake. AIG will pay interest at a steep 8.5 percentage points above the three-month London Interbank Offered Rate, making the current rate equal to about 11.4 percent.
This gives AIG a big incentive to embark on a massive asset sale program to pay back the loan quickly. The deal also severely dilutes existing shares of the company.
Index futures pointed to a higher market open on Wednesday after the news.
Former Allstate Corp CEO Edward Liddy will be named the new chief executive of AIG, replacing Robert B. Willumstad.
AIG had been racing against the clock to avoid a bankruptcy filing on Wednesday, making efforts to work out a deal with the Federal Reserve to shore up its finances.
But analysts believe there is more to come.
Washington Mutual Inc., the biggest U.S. savings and loan, tumbled 27 percent in New York trading earlier this week on concern it won't be able to find new capital or a buyer to keep the lender in business.
60 percent of those placing bets at intrade.com believed that Washington Mutual would fail before the end of this year. That number was up from 30 percent Monday.
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Jagajeet Chiba, Gambling911.com
