AIG, Fannie Mae and Freddie Mac Rise From the Dead

(Updated with closing stock prices.)

NEW YORK (TheStreet) -- It took more than 28 days, but the so-called "zombie" stocks have started to show signs of life.

American International Group (AIG Quote), Fannie Mae (FNM Quote) and Freddie Mac (FRE Quote) each enjoyed huge run-ups in their stock prices since Wednesday.

AIG catapulted more than 70% higher at times on Wednesday, eventually closing up $8.48, or 63%, at $22. Fannie and Freddie both sailed more than 40% higher Wednesday, eventually closing up more than 30% at 74 cents and 80 cents, respectively. Their movements on Thursday, however, seemed to prove that the zombie-stock run-up is unreliable, with each stock starting to cool suddenly by late morning after gaining more than 15% early in the session. AIG closed up 2.4% to $22.53, Fannie was up 6.8% to 79 cents and Freddie was up 5% to 84 cents.

"These things all feed into each other and when you have these positive feedback loops, those gains generally aren't permanent," says Len Blum, managing director of the investment bank Westwood Capital.

Against the Grain: Sell AIG!

The government owns roughly 80% of each company, leading traders to refer to them as "zombies" since they are private in name only and largely controlled by the government. The run-up in their stocks on Wednesday seemed to be driven by speculation that their fiscal health may be stabilizing -- if not improving -- only heightened by pessimistic short sellers scrambling to cover their bets as prices began to soar.

Night of the Living Recession

The stocks of AIG, Fannie and Freddie fell off a cliff last fall after the government stepped in with massive bailout plans and placed Fannie and Freddie into conservatorship. Since that time, the government has funneled about $70 billion into AIG, and $85 billion into Fannie and Freddie.