Irrational Markets Part 2

Today, AIG announced a $1.8 billion second quarter profit, it's first since 2007. Bolstered by this "optimistic" news, AIG's share price closed out an impressive week of gains at 27.14 (after opening the week at only 13.18). That means that in the last 5 days, AIG's market value has more than doubled. The chart above, from Yahoo!Finance, shows AIG's weekly share price data.

However, if you dig a little deeper into AIG's financial release, it's clear that this "profit" was completely manufactured through accounting tricks. According to the Financial Times, who did the digging:

• Their profit was driven by lower writedowns on toxic assets, due to improvements in credit markets and changes to accounting rules (i.e. the mark-to-market rule that was eased in April), and not by increased revenues.
  
• According to Ed Liddy (the former government-appointed CEO of AIG), a reduction in credit from the New York Fed would cost AIG $5 billion in future quarters.
• Operating income in general insurance fell 20% as premiums dropped

In addition to that financial turmoil, AIG announced not only a new CEO this week, but also a new nonexecutive chairman. How does financial chaos + leadership chaos = 106% increase in share price?