PreMarket - Trader Talk with Bob Pisani - CNBC.com

Asian and European markets, as well as U.S. futures, weaker on the AIG news. Dollar stronger. For the moment, the risk aversion trade (long bonds, short financials) is back on. Oil at new high not helping.

Thoughts on AIG:

AIG

American International Group Inc AIG 44.15 UNCH 0% NYSE

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[AIG 44.15 --- UNCH (0%) ] down 6 percent pre-open, posted a much bigger loss than expected, a loss of $1.41 on an adjusted basis, compared to a loss of $0.76 per share expected. The usual culprits: weak housing and credit markets, but that doesn't quite do justice to what was going on.

If you want to know how tangled this can get, they had huge losses on Credit Default Swaps (CDS) that were written on Collateralized Debt Obligations (CDOs) which were in turn backed by Residential Mortgage Backed Securities (RMBS). Got that?

If that isn't enough, they also had losses in mortgage insurance, consumer finance, and domestic property & casualty. Uh, I think that's everything, and that is a little bit alarming: even the core insurance business showed signs of deteriorating.

With equity down, it's little surprise they announced a capital raising effort of $12.5 billion to shore up their balance sheet.

The question the Street is grappling with is pretty simple: have the conditions that created these losses abated? If they are abating, then a lot of these losses they are taking now might reverse.

Importantly, AIG is much more exposed to the sub-prime market than most other property and casualty insurers, so I would expected the impact to the P&C group to be somewhat limited.

Elsewhere:

1) Sotheby's

Sotheby s BID 27.47 UNCH 0% NYSE

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[BID 27.47 --- UNCH (0%) ] reported a loss of $0.19 for their first quarter; a gain of $0.10 was expected. They blamed a shortfall in commission revenues and higher expenses. A loss is also expected in the current quarter. Their recent auction of Impressionist art seem to have come in roughly in line with expectations. Down 8 percent pre-open.

2) Citigroup

Citigroup Inc C 24.3 UNCH 0% NYSE

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[C 24.3 --- UNCH (0%) ] said they intend to shed $400 billion in assets over the next two to three years. They are talking at a analyst meeting today.

3) Circuit City

Circuit City Stores Inc CC 4.79 UNCH 0% NYSE

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[CC 4.79 --- UNCH (0%) ] is allowing Blockbuster

Blockbuster Inc BBI 2.68 UNCH 0% NYSE

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[BBI 2.68 --- UNCH (0%) ] and Carl Icahn to conduct due diligence. Icahn indicates he may buy CC if Blockbuster can't get the financing. Wattles Capital also reached an agreement with the Circuit City board whereby they will select three of Wattle's director nominees and include them as nominees at the 2008 annual meeting. Circuit City up 13 percent.

AIG, Oil Drag on Markets & Futures - Trader Talk with Bob Pisani - CNBC.com