Ricard

Valuing Assets: The Clueless Cadre

This is a rather strange article.

Regarding your Hartford Steam Boiler pickle, I'd say that it's AIG liquidating assets to conserve cash. Remember, Cash is King in recessionary times like this. Actually, Cash is King during all times, and AIG is sorely in need of a lot of cash. Why did AIG liquidate what I assume is a perfectly good company for less than it paid for it? Read Ben Graham's "Security Analysis," or any Economics 101 book. Institutions (or individuals for that matter) in financial trouble have a huge demand for cash, and are willing to give up the family jewels to do it.

Which brings us to your second pickle, bank stocks. Banks these days have one word attached to them - insolvent. That means they lack cash. Remember again - Cash is King. They have no cash. They thus have no value. Why did they run out of cash? Because they used it to buy Campbell's Alphabet Soup (TM) for $47 trillion dollars. Can you spell CDO, or MBS, or AIG? Well, banks couldn't, so they went out on a mad spending spree to get hooked on phonics. Now we all know how to spell "bankruptcy". Just ask Lehman and Mr. Fuld (fooled?).

Well, I hope this helped. If you're still looking for value, look for companies that are cash-rich, whether it be in actual cash sitting in an account, or large, unaffected profit streams. The former would explain companies like INTC, MSFT, and CSCO getting hit far less than their other tech brethren, and the latter would explain the fact that MCD and WMT have actually risen through all this.