Monday, October 06, 2008

AIG Conference Call Redux

Last Friday AIG had a conference call designed to bring investors up to date. Many analysts asked supposedly pointed questions. No one is the wiser after the call. The new Chairman and CEO Edward M Liddy maintains that while 61 billion of the 85 billion has been used the business is solid, well capitalized and operating well; except for the liquidity side of things.

No one could get a handle on what was going to be sold. Liddy kept promising that it will not be a fire sale. The political pressure will be to sell quickly. The American tax payer is very suspicious these days. Probably a few things will go for cash just to make it look good and keep the vigorish down.

Watch for a bust up of AIG similar to the Standard Oil bust up a century ago. They will establish several bite size entities where it is possible to do due diligence and come to a view on business prospects. The prospects will be capitalized and spun off allowing the $85 billion lifeline to be repaid. A small rump of difficult to peddle assets will be left over and swept under the carpet within several years.

The shareholders will be induced to look to the spin off’s. Someone with deep pockets and patience will take on the rump and make some quite big profits out of eyesight of the financial press.