davelj you pretty much have it down. AIG has a ton of diversified assets, but the important question is what could those assets bring in a quick sale to boost AIG’s immediate liquidity problems. What their books say they are worth and even what third party estimates of asset values are do not answer the specific question of immediate valuation by prospective purchasers. In fact, we are indeed given a clue as to valuation in relation to risk assumption by the lack of scavenging of AIG’s assets, which speaks volumes.
No offense to anyone but I do business with AIG and I can assure that things are not “fine”. This massive beast has been ravaged in the market and I certainly would not characterize their loss of 95% of their market value as an indication that things are fine. They have diversified assets but again they must be sold to raise funds and where are the buyers? I do think AIG will survive, with assistance, but things are not fine.
As for a FFR cut, I still believe we will end up at 1.5% before the Fed begins tightening but I’m not so sure we will see a cut this year. The typical strategy has been to mix jawboning with some actual tangible intervention to keep things propped us as best they can. I do think we will see things get dire to point where the jawboning and intervention will not be enough to stave off a capitulation spiral, which is when the cuts get thrown at the problem. I quess we’ll see. No question there’s going to be alot more bad news coming.
