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Recent attempts by AIG CEO Ben Benmosche to repurchase assets the Federal Reserve is currently holding from the bailed out insurance behemoth in a vehicle titled Maiden Lane in a not-so-private purchase have been rebuffed. Instead, the Federal Reserve opted for an open auction of these now=valuable assets from yield-hungry investors to determine the real value and perhaps book a tidy profit for the taxpayers.

So far, so good. The first auction drew good institutional demand with solid bidding. The Federal Reserve recently announced it will be holding another two auctions for roughly $1.2 billion in securities.

The attempt and ability of AIG to mount a bid to purchase these estimated $30 billion in assets for $15 billion shows just how far AIG's turnaround has come. Investors seeking yield may wish to look to AVF, AIG's exchange-traded debt, sporting a 7.7% coupon and currently yielding close to the same.

Off to other matters ... The Tea Party lives; the wheels of progress and that of our government will not grind to a halt. While both sides claim victory, and I guess they should, keep in mind both sides fought tooth and nail to find 1.5% in spending cuts from a budget that is running a $1.4 trillion deficit. Woo hoo!

While these past few weeks and the threat for a government shutdown provided good theater, that was merely the opening act of what’s to come. Congressman Paul Ryan has thrown down the gauntlet with his proposed budget cuts of $6.2 trillion over 10 years. The curtain goes up and negotiations begin, publicly anyway as soon as the ink is dry on the present year budget. The fight for the White House has officially begun.

The market continues to garnish a Kevlar-like coating to any and all external shocks. We’ve witnessed a near nuclear meltdown that should have roiled global markets and the third-largest economy took a near-crippling hit. We’ve also experienced a virtual financial reality TV show in the Portugal saga. We had divorce, deception, denial and finally capitulation. These last few days Portugal formally took the arm of the EU and walked down the aisle towards austerity. I can’t wait for next season, as I hear we move our view finders to Spain.

Finally, we shift our focus closer to home and watch the drama play out in Washington and a potential shutdown. Let’s see ... what is a hot button? Yes, how about they threaten to not pay our soldiers should the government shut down? No American in good standing could be for that. I’ve wondered what the response would have been if they threatened to not pay our fearless leaders?

All this and the market at best seems to get a brief bout of indigestion before reclaiming the high ground. Investors are still, even this late in the rally, underinvested as evidenced by the trillions sitting in money market funds and cash equivalents. Fundamentals remain favorable. Strong revenue and earnings growth coupled with (finally) an expanding work force introduces potential new customers and sales into the market forecasts that need to be adjusted higher.

The fly in the ointment -- and it’s a big one -- is oil, which topped $111 at Friday’s close of business and pushes us closer yet to $4 a gallon at the pump. We most certainly do not need to give more of our discretionary dollars to the bloated oil companies and/or countries that would wish to do us harm. We’ll need some meaningful progress made on our explosive budget deficits to help restore confidence in the strength and stability of the greenback. A stable dollar should allow for any temporary global instability and fears of supply disruptions to play out and the $20-40 risk premium currently reflected in the price to drain.

Disclosure: I am long AIG, AVF.

Additional disclosure: I may own for my clients shares of AVF. Before making any investment decisions please do your own due diligence and consult your investment professional or myself directly.

Source: AIG's 7.7% Yielding Debt Looks Tempting