AIG Subprime Debt May Cost $2.3 Billion, Analysts Say

Discussion in 'Wall St. News' started by THE-BEAKER, Aug 2, 2007.

  1. very well thanks.

    long puts on most house and home related stocks.

    cleaned up on beazer yesterday.

    oi oi oi oi oi oi oi oi oi .

    by the way.

    im obsessed.

    i think you are in major denial of a money making opportunity and facts surrounding the whole subprime mess.
  2. Buy puts across the worst of the bunch!!!
  3. Interesting hidden piece of news in this article:
    "In a ``worst-case scenario,'' AIG may lose $2.3 billion from its investments in subprime mortgage bonds as well as loans given to borrowers with poor or limited credit, A.G. Edwards Inc. analysts in St. Louis said today in a report."
    "AIG, which hasn't formally disclosed its holdings, owned about $33 billion of the securities at the end of March, spokesman Chris Winans wrote in a July 23 e-mailed statement to Bloomberg News."

    So the worst case scenario has them losing 7% of their value. Too much? Too little? At a 7% loss rate, how much would other companies be losing?
  4. Also, how much are those mortgage hedge funds leveraged? With a 7% writeoff rate, using too much leverage (Bear Stearns) could kill off a few funds.
  5. they owned $£33 billion of the securities.

    this is the problem they are assuming they will take a hit of $2.3 billion.

    in actual fact these securities are probably worthless.

    the actual hit will probably be $33 billion.

    this is the same assumption everyone else is making including the german IKB loss.

    i quote

    At the start of the week, IKB startled markets by admitting it had racked up vast losses on its credit portfolio – a move that prompted KfW, the German state bank, to underwrite around €8bn ($11bn) of IKB-owned securities. But, on Thursday, it emerged that IKB's exposure to the subprime sector had somehow ballooned to €17bn – many times the total market capitalisation of the group.

    And that is not the worst of it. These staggering problems emerged a mere 10 days after IKB issued an upbeat trading statement in which it hailed “a successful start to the financial year” – and denied that it faced subprime problems. Perhaps this information oversight simply emerged because IKB's own management did not know the scale of their own losses. After all, as we have written extensively on these pages, the value of complex credit instruments has fluctuated so wildly in recent weeks that even experienced hedge fund managers find it hard to measure their losses.

    i rest my case on this subprime mess.

    it will get worse.

    the power of a market that is de leveraging makes losses 50 times worse than people could possibly think.

    hence with IKB.
  6. They can't be worthless since they are back by collateral (houses, land). However, even if the loss is only 2.3B as they say, they could have to put up more money to take hold of the property until they can turn around and sell it.

    The real risk may not be the loss, but the lack of credit needed to avoid an even larger loss.
  7. Precisely where poor securities come into the question right.
  8. S2007S


    I thought I heard today that these sub prime worries were contained...............

    #10     Aug 3, 2007