A Writeoff Could Put AIG Back Into Play

AIG (AIG - commentary - Cramer's Take) is a black hole personified. I am still trying to get my arms around all of the things that are wrong there, as I think management is, too. But what I found to be most interesting about the Wachovia downgrade this morning is that the 2009 earnings estimate of $5 and change says that this company is selling at four times earnings.

Obviously, the estimate for next year is a highball number, not something totally fanciful. But it is July, and it is not too far off to be thinking of 2009, and this estimate makes me think, like Fannie Mae (FNM - commentary - Cramer's Take), if AIG could just write off what it has that is bad and start over, it would be a solid buy because of its core businesses.

Of course, you can't do that without more capital, and if I am a shareholder of AIG at this point, I would still sell it until the company yields five or six or goes to the single digits. I just find it odd that there is some earnings power here out a year that would indicate that this stock is cheap.

Of course the real problem here is that AIG, despite its insistence over and over again of its lack of risk and brilliant underwriting of its financial risk that gave the company comfort to say that it has about a billion dollars worth of exposure -- or less -- back in December -- has a totally unfathomable exposure with no way to figure it out.

That's why, of course, we have the downgrade, which the analyst even admitted is better late than never. His dollar-and-change estimate for 2008 controls, not the $5 and change for 2009, and in that case the stock is, alas, wretchedly overvalued.

Random musings: Intel (INTC - commentary - Cramer's Take) is good. I like Qualcomm (QCOM - commentary - Cramer's Take) better for the out-of-oil-into-tech trade that will most likely continue tomorrow.

At the time of publication, Cramer was long Qualcomm.

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