Bad but not that bad

May 5, 2009

AIGAIG’s shares rose 15 percent when investors learned that the insurer would post a loss in the first quarter but it would not be as large as the hit it took in the last three months of 2008.

Adding to the “good” news: the loss would not trigger yet another tweak to the rescue package that has propped up AIG as it sorts through its affairs.

Of course, AIG’s mountain of red ink reached new heights in the fourth quarter, as it posted $61.7 billion in losses, the largest in U.S. corporate history.  The government owns a nearly 80 percent stake in AIG. And AIG owes taxpayers some $85 billion in TARP funds and loans.

Maybe AIG’s fourth quarter loss set a new standard, sort of a reverse watermark on how low things can sink. And maybe now the bottom will have to fall out yet again for people to get shocked.

Still, one must wonder what investors are thinking. It will be bad but not that bad, so buy AIG? 

(Photo: A security guard outside AIG’s headquarters in New York on Sept 15. REUTERS/Brendan McDermid)

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