Hope Springs Eternal For AIG (AIG) Longs

Hope springs eternal for investors in bailed-out insurer AIG (NYSE: AIG). Shares of AIG surged 21% yesterday, and are adding another 5% today, on new hope that the company can some way, some how pay the U.S. government back and/or have its terms with the government modified again in its favor.

Investors seem to be hanging their hat on these comments from yesterday's U.S. Government Accountability Office report on AIG - "AIG's operations, with federal assistance, have begun to show signs of stabilizing in mid 2009..." and "indicators of AIG's repayment of federal assistance show some progress in AIG's ability to repay the federal assistance."

While these comments are clear positives for AIG, the GAO report also found that while federal assistance has helped stabilize AIG's financial condition, indicators suggest that AIG's ability to restructure its business and repay the government is unclear at this time.

In addition to the GAO comments, Bloomberg reported that U.S. representative Edolphus Towns (Democrat) urged a House committee to look at a proposal from former CEO Maurice "Hank" Greenberg to restructure the company's debt. In an e-mail statement Towns said, "I've directed the committee staff to take a look at Hank Greenberg’s proposal to restructure the debt, because I think it is something to which we should give serious consideration." Congress should help AIG recover "and that means looking at a number of options, including restructuring the federal loans," Towns continued. The U.S. rescue of AIG has already been revised three times in the past year.

These new items have emboldened AIG longs to press their speculative bets that the common shares of AIG will have value after everything is said and done. They seem to be ignoring the fact that analysts believe there is "virtually no tangible book value" for AIG.

So as the quote goes, "Hope springs eternal in the human breast; Man never Is, but always to be blest" - Alexander Pope

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