http://www.billakanodoodahs.com/2008/09/bullish-case-for-junk-bonds/

Would’ve been really nice given that the post make SA. Would’ve thrown me some traffic and let the readers know who I am.

I can’t fault them for owning AIG securities, given the speed of that failure, but holding LEH and FNM/FRE pfds? Do insurance companies even get to categorize GSE pfds as equity capital like banks? If not, why would you hold a noncumulative preferred from a firm who the market predicted would be nationalized since July 4?

Also, when AIZ says that reinsurance will cover claims from Ike at the $95 M limit, does that mean that AIZ likely has $95 M in claims, but anything above that goes to the reinsurer? Should I think of $95M as the “deductible” for the reinsurance policy?

Also, the silence from AIG on the EDGAR site is deafening. The excellent NYT Dealbook had a ton of questions about the structure of the deal:

http://dealbook.blogs.nytimes.com/2008/09/18/aig-so-many-questions/

I ask because I’m wondering to what extent “forced selling” by insurance companies due to Hurricane “???? whatever-his name” to settle claims was another straw on the camels back to the liquidation caused by LEH, CDS collateral calls, credit ratings downgrade calls, etc.

Naturally it’s impossible to ‘prove’ that the hurricane exacerbated the selling in equities and corporate bonds but looking back on the charts, there seems to be a correlation with the few expensive hurricanes and negative/zero returns in the SPX. Just something to keep in mind for the future.

Cheers.

PS and yes, LQD/corporate bonds still looks to good to be true.