AIG, the equity market and a perplexing disconnect

On Monday, AIG announced that it would sell foreign life insurance business Alico to MetLife for $15.5 billion. Last week, AIG said it reached an agreement to sell its Asian life insurance giant AIA for $35.5 billion.

The two recent pending sales total $51 billion that AIG said will eventually be used to pay down its debt to the government. So far, the U.S. government has given AIG $136.5 billion, of which AIG owes roughly $102 billion.

Since 2009, AIG has been working to sell off its smaller, non-core assets however to date; AIG has received just $5.6 billion as a result of those sales. On another note, AIG reported a $9 billion loss in its most recent quarter.

Each time AIG announces a sale agreement of their assets, the equity market and of course CNBC are giddy. The stock prices moves up several percentage points and CNBC runs the repetitive story Ad nauseam.

Grandpa’s head scratching disconnect:
The Quant fund, robot, dark pool traders don’t care about anything resembling fundamentals however what is to be said about the rest of the “investors”? The stock price goes up when income producing assets are sold.

Let’s say grandpa owns a publicly traded restaurant chain and we owe the lender a fair amount of debt. In an effort to pay off this debt, I need to authorize and implement the sale of assets. How is my business worth more money (i.e. stock price rising) when I sell my refrigeration units, stoves, mixers and tableware?

Silly grandpa, the answer is simply market manipulation. The Cheetos eating Red Bull drinking gamers commence with short squeezes and we are off to the races. After the robots have squashed every last existing short, they commence shorting and ride the pony across the finish line and then they off to the next track. You are so old school...