it's intriguing. those mar 35s seem rather pricey for AIG...closed at 1.10 today i think. 10 more points down would be another 22.5 billion in market cap gone. i would like to do a little more research but it seems very interesting.
just doing some more thinking on AIG... it looks like the estimate of US CDO exposure is around $62 billion for AIG. that does not mean it is all worthless it just means it is worth a lot less than the original $62B. before today the stock had been weaker than the market so you have to wonder whether these announcement whispers had been out on the street. basically, AIG has gone straight from 55 to 45 which accounts for about $25B in market cap. additionally, i think the rumors of larger write downs at AIG started when the stock was around 60 so that is another $12B-$13B in market cap cut down. so what i am saying is that you have already figure a lot of exposure has already been taken out of the stock price. just by VERY VERY CRUDE guessing you have to figure the market has already written down this CDO exposure down to at least 50 cents on the dollar. some of the major bear rumors are saying this stuff is worth only 15 cents on the dollar so you have to figure it is probably somewhere in that wide range. if these things are valued at that worst case then we probably have another $5-$6 in stock price that could be taken out of AIG. again this is all just conjecture because i have seen AIG CDO exposure from $62B to $78B so who knows. just trying to do some thinking on this subject because it is an interesting one.
AIG? Ugh! Multiples of 10 seem to provide support. Nibble on some at $40.01, limit-or-better. Short-sell the $40-puts instead of the 35's. If it's gonna trade $40, it has to get past your "line in the sand".
It says PE 7.8 on my screen. Also, don't forget we are in a bear market. You should give AIG more slack on the downside.
More slack? ~$43 is the low from 2003. ~$35 is the low from 1998. Don't be suprised if Buffett emerges as a BIG buyer at these levels. We'll see.