American International Group Inc. shares gained more than 5% in early trading Wednesday after its chief executive indicated that the insurance giant's exposure to the ongoing meltdown in mortgage markets wasn't likely to spiral.
The firm's CEO Martin Sullivan said U.S. residential housing exposures at American International Group, Inc was "manageable" given the company's size and business diversification. The CEO said the five-year adjusted earnings-per-share growth target is between 10% and 12%, while return on equity is targeted at a range of 15% to 16% for the same period. Shares of AIG gained more than 4% Wednesday morning as the company held an investor meeting
I am amazed that anybody believes any statement issued by anyone in the financial sector right now. How many times have we seen this type of statement over the last 6 months, only to have the company make "revisions" within the next few months? And yet, the market still believes these guys.
Here's the basic problem. Simply eyeballing all of the estimates about the total cost of the subprime problem, it seems like about $300 billion in total losses is more or less the median figure of total losses. But we've seen at most $80 billion in total announcements. That means we still have a ton of unaccounted for losses out there somewhere on the balance sheets of various financial institutions.
And yet, the street still listens to these guys and bids up their shares whenever a CEO says, "Every thing's fine." It just strains credulity at this point.