RiskTrade

Which Banks Will Survive?

This article omits most of the facts - AIG sold its 10 year deal on the basis of reverse inquiry i.e. investors asked for the issuance. The reason they asked for the deal is because AIG spread is indicative of a single B rated bond. AIG debt is great value for 4 simple reasons:
1. You are buying a AA rated credit at mid B levels.
2. AIG's business model is not at risk.
3. Leadership and operating performance have been weak but both are being addressed via new leadership and attempts at cleaning up the balance sheet.
4. Eventually, CDO's and other structured instruments will find a floor and a bounce will occur. I don't know when that will happen. I do however know that once a floor is found you will see that previous write downs were too conservative and hence AIG and others will actually record a mark to market gain on some of these assets.