NAV20
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AIG On The Skids? Is This 'The End' For Now?

Tue Sep 16, 2008 12:28 pm

Up to now, governments (particularly the US Government) have been pumping taxpayers' money into the 'system' to keep the big institutions afloat. But, just today, the news stories appear to be suggesting that even the various governments are running out of 'liquidity' - meaning yet more 'spare' hundreds of billions that they can readily 'inject'.........

Particularly now that one of the largest 'institutions' in the world - AIG - has joined the chorus of Wall Street 'giants' crying poor and begging for government money:-

(Excerpts)

"The insurer, American International Group, faces a cash crunch that grew more severe last night when the major credit-rating agencies warned investors that the company could have greater difficulty in meeting its obligations. It was unclear whether the downgrades by the agencies would force AIG to post additional collateral at a time when it is having difficulty raising money.

"Investors sent the Dow Jones industrial average plunging more than 500 points, or 4.4 percent, for the biggest point loss since the Sept. 11 terrorist attacks seven years ago. About $700 billion in shareholder value disappeared in a single day of trading.

"The wrenching reshaping of Wall Street -- which over the weekend included the demise of one big firm and the sale of another -- also pushed the value of the dollar lower. It sent the price of crude oil below $100 a barrel for the first time since Feb. 15 as traders bet a global downturn would reduce the demand for energy.

---------------

"In the meantime, Treasury Secretary Henry M. Paulson Jr. signaled yesterday that taxpayer funds could still be used broadly to "maintain the stability and orderliness of our financial system" but that he was pressing healthier Wall Street firms and commercial banks to join together to assist in rescuing individual firms -- much like the purchase of Merrill Lynch on Sunday by Bank of America.

"Goldman Sachs, for instance, was asked by the Federal Reserve Bank of New York to help AIG, a $1 trillion-asset insurance company that serves 74 million consumers in 130 countries. AIG had been heavily involved in the business of issuing complex insurance contracts to investors in securities backed by mortgages, and the collapse of subprime and other home loans threatened to hobble the company and trigger a chain reaction in the financial system.

"J.P. Morgan Chase, which is serving as AIG's financial adviser, was seeking support for a credit line of $70 billion to $75 billion that would involve multiple lenders, spreading the risk, according to two sources familiar with the discussions. They spoke on condition of anonymity because the talks were private.

"New York's governor, meanwhile, said his state would allow AIG to use $20 billion from its own insurance subsidiaries to ease a financial crunch. By posting the assets as collateral, AIG can borrow money to run its day-to-day operations, Gov. David A. Paterson (D) said. The move required special dispensation from state insurance superintendent Eric R. Dinallo, who is responsible for protecting the stability of AIG insurance companies in New York and their policyholders."


http://www.washingtonpost.com/wp-dyn.../AR2008091500637.html?hpid=topnews

Had a call from a friend (and ex-client) today, asking what she should do. Even though she knows I retired years ago. For her part, she's on the verge of retirement - like within months of it.

I asked for some time, and did some googling and checking. Then, I'm afraid, I felt that I had to ring back and tell her to get every cent she could out of the hands of the 'institutions' and hedge funds and pension funds she's been investing with, and either deposit it in ordinary 'high street' banks (at equally 'ordinary' rates of interest) or buy gold with it..........

Maybe I'm just being 'alarmist.' Though I was sufficiently energised by how serious things are beginning to look to start giving an ex-client free advice, which I haven't often done before.....  

What does anyone else think? Me, I reckon that maybe things have finally got 'a bit serious.' Especially for anyone, like my ex-client, who is reckoning on retiring in the next year or so........  

[Edited 2008-09-16 05:31:07]
"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
 
Dougloid
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RE: AIG On The Skids? Is This 'The End' For Now?

Tue Sep 16, 2008 1:16 pm

I was doing a little reading on this subject, yr lordship, and here's what I found.

Let's say that Shanahan the mechanic and Gallagher the carter have themselves what you would call a little side bet. Shanahan agrees to give Gallagher a bit of his paycheck iviry Friday over t' Dooley's saloon fer the benefit of Gallagher's poor impoverished relatives in the ould sod, the sort that are known as investors, who have advanced their pennies to Gallagher for divers purposes.

While this is going on, Gallagher and Shanahan are watching the representations of McFadden the man from the brewery, O'Reilly the meter reader from th' gas works, and Wong Sun from th' laundry what does the linens for Dooley's foine establishment.

If it appears that Dooley has stopped paying his bills, Gallagher delivers the keys to his car and his house to Shanahan in fee simple absolute to the eternal discouragement of his wife and young 'uns.

And that, yr honor, is the story of AIG and credit default swaps and why they're in the news these days.

With apologies to Finley Peter Dunne.

http://books.google.com/books?q=Finley+Peter+Dunne&btnG=Search+Books
If you believe in coincidence, you haven't looked close enough-Joe Leaphorn
 
Pyrex
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RE: AIG On The Skids? Is This 'The End' For Now?

Tue Sep 16, 2008 1:29 pm



Quoting NAV20 (Thread starter):
Maybe I'm just being 'alarmist.'

I wouldn't say alarmist. I would just say that you are an optimist in regards to the financial health of the so-called "main-street banks".
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Aaron747
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RE: AIG On The Skids? Is This 'The End' For Now?

Tue Sep 16, 2008 1:31 pm



Quoting Dougloid (Reply 1):
And that, yr honor, is the story of AIG and credit default swaps and why they're in the news these days.

The only difference between reality and your parable is that if Dooley stops paying the bills and Gallagher feigns somehow losing possession of the car and house on the way to wee Shanahan's, then Shanahan can send some goons to rough them both up till he gets the skinny. The CDS market is relatively unregulated and given the incomprehensible sums on the table, is as close to the Wild West as we've ever come. Most people have relatively little formal experience or knowledge with how CDS works, but it could very well be the defining acronym of this nasty little saga.

Don't take my word for it though...

http://online.wsj.com/article/SB1221...02636197.html?mod=special_coverage

One sliver of optimism for AIG last night was that much of its exposure is related to credit default swaps, insurance contracts tied to corporate defaults. AIG's counterparties on these instruments include many Wall Street firms, which may have an incentive not to demand more collateral so as not to trigger a wider panic. Such collateral could come in the form of cash or a liquid asset such as a municipal bond.

But many of AIG's counterparties are based in Europe and Asia and may have less interest in helping to prop up the firm. The market for credit default swaps is immense, trading against about $62 trillion of debt. Many participants in the largely unregulated market worry that the default of a major player such as AIG could trigger chaos.


Let's just hope the could in the latter sentence is later coulda...
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ogre727
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RE: AIG On The Skids? Is This 'The End' For Now?

Tue Sep 16, 2008 1:32 pm



Quoting Pyrex (Reply 2):
I would just say that you are an optimist in regards to the financial health of the so-called "main-street banks".

AIG is not a bank and this makes their situation completely different!
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SInGAPORE_AIR
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RE: AIG On The Skids? Is This 'The End' For Now?

Tue Sep 16, 2008 1:51 pm

The former CEO and Chairman is on CNBC US and CNBC Europe right now being interviewed by Maria Bartiromo.

It doesn't look pleasant for AIG.

The Moscow market is down 11%. The UK market is down about 4.x% with one major bank down ~33%.....
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sv7887
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RE: AIG On The Skids? Is This 'The End' For Now?

Tue Sep 16, 2008 2:03 pm



Quoting NAV20 (Thread starter):
Maybe I'm just being 'alarmist.' Though I was sufficiently energised by how serious things are beginning to look to start giving an ex-client free advice, which I haven't often done before.....

What does anyone else think? Me, I reckon that maybe things have finally got 'a bit serious.' Especially for anyone, like my ex-client, who is reckoning on retiring in the next year or so........

I wouldn't call it alarmist at all honestly. I think you're spot on. When my father passed away I looked over his 401Ks and they were alarmingly invested in very aggressive mutual funds. I made the decision to dump half of it in relatively safe bonds and refused to invest his life insurance payout in the market and kept it in a money market account.

The deposits are FDIC insured up to 100K so I wouldn't hesitate to invest there. We do our banking with Bank of America and if their Countrywide + Merrill gamble pays off they might make out like bandits..

Integrating these mergers are going to be a pain in the butt though.
 
Dougloid
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RE: AIG On The Skids? Is This 'The End' For Now?

Tue Sep 16, 2008 2:04 pm



Quoting Aaron747 (Reply 4):
Most people have relatively little formal experience or knowledge with how CDS works, but it could very well be the defining acronym of this nasty little saga.

I think you're absolutely correct.In retrospect it was a hell of a bet to make given that the bedrock that underlies the whole financial edifice was a bet on mortgages for all regardless of their ability or willingness to pay, which in turn was premised on eternal property appreciation of ten per cent per annum, world without end, Amen. That is what you call a classic Ponzi scheme.

It looks like a lot of people bet the ranch on that notion. I think you will probably find when this story is written that the smart money bailed out of the mortgage backed securities trade starting around the end of 2006. The system was showing signs of weakness in the underlying mortgages by the last quarter of 2006, if you study an upward trend in mortgage defaults.

In the end, it could not have continued.

I'm in mind of a story about Bernard Baruch, the financier. Early in 1929 he was on his way to his office and had his shoes shined as usual. The shoeshine boy gave him what he promised was a hot stock tip. Baruch thought about that for a while and realized what it meant to the market when shoeshine boys were flogging hot stock tips, and then started quietly liquidating his holdings.
If you believe in coincidence, you haven't looked close enough-Joe Leaphorn
 
baroque
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RE: AIG On The Skids? Is This 'The End' For Now?

Tue Sep 16, 2008 2:13 pm



Quoting Pyrex (Reply 2):
Quoting NAV20 (Thread starter):
Maybe I'm just being 'alarmist.'

I wouldn't say alarmist. I would just say that you are an optimist in regards to the financial health of the so-called "main-street banks".



Quoting Ogre727 (Reply 3):

Quoting Pyrex (Reply 2):
I would just say that you are an optimist in regards to the financial health of the so-called "main-street banks".

AIG is not a bank and this makes their situation completely different!

Assuming Nav was recommending main st banks in Aus, he is likely correct. Their capital adequacy provisions appear to be more rigorous than those for US banks. They declared total interest in Lehman "enterprises" at about 400 million for the four largest banks. There have been some previous clean out of dubious loans including some to private equity.

BTW the yield on shares in most of the Aus big 4 banks is now over 6% with the grossed up yield (after tax imputation credits are taken into account) to Aus shareholders being over 9% in some cases.

As for AIG, I am not sure the operations in 130 countries make it more or less likely to be rescued. Many of those countries will not be happy if AIG does go under.

There seems to be some sort of an undercurrent that Lehmans are the sacrificial lamb and now "we" (whoever "we" are) need to get down to a real bit of rescuing. If that happens, there will need to be some explanation of why Lehmans struck "lucky"!!
 
Flighty
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RE: AIG On The Skids? Is This 'The End' For Now?

Tue Sep 16, 2008 2:31 pm



Quoting NAV20 (Thread starter):

Gold and banks have been a poor investment since the crash of 1987. The time will come to buy back into the global commercial share market. When will that be?

When will stocks be cheaper than they are now? Since they will be the thing to buy going forward. You have to tell us a time when things will be cheaper. Otherwise somebody who cashes out today might be just guilty of "sell low" which hasn't been a good strategy during big crashes. It is too hard to predict. Better to ride it out -- avoiding withdrawls -- and stay within the equity market. Or else buy some appreciating asset with it.

This is a buying opportunity, not a selling opportunity. JMO. And I'm much younger than you so that may be clouding my judgment.
 
NAV20
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RE: AIG On The Skids? Is This 'The End' For Now?

Tue Sep 16, 2008 2:50 pm

Quoting Pyrex (Reply 2):
I would just say that you are an optimist in regards to the financial health of the so-called "main-street banks".

Pyrex, unless things have changed radically, high-street banks (pretty well world-wide) are required by law to maintain a minimum liquidity ratio - from memory, they have to keep at least 8% of their liabilities in the form of readily-available cash. Also as far as I know, due to 'clever' structuring, most of these Johnnie-come-lately, Mickey-Mouse 'investment vehicles' have no such obligation.

Just listening to the BBC World Service - the 'It's whizz-kid speculators who've sown the wind, governments should stop 'intervening' and let the bastards reap the effing whirlwind' movement appears to be gaining ground.

I'd entirely agree, if that was actually the problem. But, unfortunately, the bastards haven't been stupid enough to use their own money..........they've used ours instead....

[Edited 2008-09-16 07:52:06]
"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
 
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Aaron747
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RE: AIG On The Skids? Is This 'The End' For Now?

Tue Sep 16, 2008 2:51 pm



Quoting Dougloid (Reply 7):

It looks like a lot of people bet the ranch on that notion. I think you will probably find when this story is written that the smart money bailed out of the mortgage backed securities trade starting around the end of 2006.

They should've gotten into commercial urban development trusts in India around that time, like I did. Haven't done too badly with Big Aussie Metals either since their China boom got going.

Quoting Dougloid (Reply 7):
Baruch thought about that for a while and realized what it meant to the market when shoeshine boys were flogging hot stock tips

Now that's sardonic. But moreso a timely warning than anything and a damned good story as a result. Too many coulda, woulda, shouldas on the shine stoop from the fellas upstairs, lest they be correctly interpreted by the shineboy.

Quoting Baroque (Reply 8):
There seems to be some sort of an undercurrent that Lehmans are the sacrificial lamb and now "we" (whoever "we" are) need to get down to a real bit of rescuing. If that happens, there will need to be some explanation of why Lehmans struck "lucky"!!

As quoted in the other thread:

http://www.rgemonitor.com/emergingma...unday_without_a_bailout_how_novel_

To be eligible for a bailout, firms must also demonstrate a particular genius for screwing up. Before it went bust, Bear Stearns had a monstrous $33 of debt for every dollar of capital, and hedge funds it owned destroyed hundreds of millions of dollars of clients' cash. It got a bailout. Lehman Brothers, which has taken painful measures to reduce its risk, is perversely less likely to get direct government help.

Don't know whether to laugh or cry...but in light of all those who lost their jobs at Lehman, the majority of which were honorable, I'll choose tears. Bias revealed - good college buddy of mine is clearing out his stuff from their offices as we speak.
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baroque
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RE: AIG On The Skids? Is This 'The End' For Now?

Tue Sep 16, 2008 3:15 pm



Quoting Aaron747 (Reply 11):
As quoted in the other thread:

http://www.rgemonitor.com/emergingma...unday_without_a_bailout_how_novel_

Interesting, had missed that. Suggests that AIG is more likely to be in the lucky basket. Does anyone know if Paulson (or W come to that) has a dartboard in his office?

Is Hewlett Packard shrinking anything to do with all this, or is that coincidence?

How much is GE money linked to the sub-prime? Back in April 2007 - yes SEVEN - GE was listing losses on the sub-prime. It seems to have had some of the more dubious practices such as self certifying income. What were these folk thinking about?
 
Flighty
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RE: AIG On The Skids? Is This 'The End' For Now?

Tue Sep 16, 2008 3:18 pm

It's a good question Baroque. GE shares took a massive beating (for GE) yesterday.


But if GE went down to say $15, that would be a full blown cataclysm. People say Goldman has a good reputation. But really GE is the high temple of prudence and financial style. If they are fu**ed then... then i don't know what to say. There has been little news -- either way, on GE.
 
baroque
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RE: AIG On The Skids? Is This 'The End' For Now?

Tue Sep 16, 2008 3:39 pm



Quoting Flighty (Reply 13):
It's a good question Baroque. GE shares took a massive beating (for GE) yesterday.


But if GE went down to say $15, that would be a full blown cataclysm. People say Goldman has a good reputation. But really GE is the high temple of prudence and financial style. If they are fu**ed then... then i don't know what to say. There has been little news -- either way, on GE.

It is really odd. If you Google GE and the sub-prime, you get a heap of hits from 2007, but ?nothing from this year. Back in 2007, they were heavily into sub-prime - third or fourth IIRC largest - and I cannot see how they could have exited in the year.

Also they are selling parts of the business, and earlier this year made a great fuss of concentrating on building things.

It does seem odd.

I don't know enough details of the US economy in the past 15 to 20 years to be able to figure out what is going to happen next, but it seems a far cry from the 70s when FDIC apparently meant something. Since then savings and loans should have been enough warning.

But I can manage a joke. It relates to one of our (Aus') more spectacular bankrupts of the 80s, Mr Alan Bond, also famous for winning the America's cup. The joke relates to him losing god knows how much buying and then selling a TV station back to the original owner for a heck of a lot less than he paid for it.

Question: How do you get a small business.

Answer: Buy a large business and get Alan Bond to run it.

Probably should be rewritten for 2008 and the US.
 
oly720man
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RE: AIG On The Skids? Is This 'The End' For Now?

Tue Sep 16, 2008 3:58 pm



Quoting Baroque (Reply 14):
It is really odd. If you Google GE and the sub-prime, you get a heap of hits from 2007, but ?nothing from this year. Back in 2007, they were heavily into sub-prime - third or fourth IIRC largest - and I cannot see how they could have exited in the year.

They bailed out in July 07

http://business.timesonline.co.uk/to...ing_and_finance/article2068285.ece

General Electric (GE), the US conglomerate, confirmed today that it is offloading its sub-prime mortgage business as American-based banks increase the number of foreclosures (or repossessions) on homeowners with a poor credit history.

GE announced the sale of WMC Mortgage Securities as part of its second quarter trading statement that revealed an increase in sales to $42.3 billion, above $39.9 billion recorded in the same period last year and above market estimates of $41.7 billion.
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baroque
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RE: AIG On The Skids? Is This 'The End' For Now?

Tue Sep 16, 2008 4:01 pm



Quoting Oly720man (Reply 15):
They bailed out in July 07

Ah well, just in time. Someone had worked something out! Three gold stars and a koala stamp!

Still seems a bit odd. GE money is still quite busy in Australia.
 
Dougloid
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RE: AIG On The Skids? Is This 'The End' For Now?

Tue Sep 16, 2008 4:09 pm



Quoting Baroque (Reply 16):
Still seems a bit odd. GE money is still quite busy in Australia.

That was a clear sign of the smart money bailing out. I figure they sold their portfolio of bum mortgage securities to the hedge fund of Chump, Rube and Mark.
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MadameConcorde
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RE: AIG On The Skids? Is This 'The End' For Now?

Tue Sep 16, 2008 6:27 pm

Game over.

Shares in U.S. insurance giant and Manchester United sponsor suspended after 74% plunge
16th September 2008

http://www.dailymail.co.uk/news/arti...d-sponsor-suspended-74-plunge.html

Shares in giant American insurer AIG were suspended on Wall Street today after a 74 per cent crash in its stock indicated the business is spiralling toward collapse. The writing appeared to be on the wall for the sponsor of Manchester United, which is also the the third-biggest insurer for life and personal accident in Britain.
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oly720man
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RE: AIG On The Skids? Is This 'The End' For Now?

Tue Sep 16, 2008 6:44 pm



Quoting MadameConcorde (Reply 18):
Game over.

The Mail story must have changed....


The future of the world's biggest insurer was hanging in the balance last night as AIG was given 24 hours to find the cash to stay afloat, or sink.


Still trading

http://finance.google.com/finance?q=aig
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Pyrex
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RE: AIG On The Skids? Is This 'The End' For Now?

Tue Sep 16, 2008 7:49 pm



Quoting NAV20 (Reply 10):
required by law to maintain a minimum liquidity ratio - from memory, they have to keep at least 8% of their liabilities in the form of readily-available cash.

Not quite that simple. They have to maintain equity capital (which is not the same thing as cash) of 8% of risk-weighted assets. You can bet if right now depositors rushed to withdraw 8% of any bank's commercial deposits they would be pretty much screwed. And "main street" banks did some pretty stupid things as well, Lehman were not the only ones doing stupid things.

Quoting NAV20 (Reply 10):
Also as far as I know, due to 'clever' structuring, most of these Johnnie-come-lately, Mickey-Mouse 'investment vehicles' have no such obligation.

Not that simple. "Mickey Mouse" investment vehicles were what the "main street" banks were doing to get out of capital requirements. Broker-dealers (aka Lehman and all) never had significant capital requirements to speak of.

Quoting Baroque (Reply 14):
it seems a far cry from the 70s when FDIC apparently meant something. Since then savings and loans should have been enough warning.

During the 70s the FDIC never meant much (in the S&L crisis it eventually needed to dip into the Federal Government's pockets) - for now at least the FDIC still has money. If you think banking regulation is bad know you should have seen back then.
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stasisLAX
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RE: AIG On The Skids? Is This 'The End' For Now?

Tue Sep 16, 2008 8:44 pm

Why there is no mention of the credit rating agencies being involved in AIG's death spiral? Isn’t a primary reason that there is a liquidity issue because the credit rating agencies are downgrading the company’s credit rating which then allows the counterparties in the derivatives contracts to require a greater amount of collateral? In turn, this earns them further credit rating degradation, and then further collateral requirements … why isn’t this in the news? Seems like if the collateral requirements (or very large margin calls) were paused for a certain period of time, a leaner version of AIG might survive.

One thing to keep in mind: AIG holds the one of the largest (if not the largest) government insurance contract for Iraq Contractors (DBA). It covers Americans going to work for Halliburton and Kellogg Brown & Root - along with their numerous shell companies. What will happen to the insurance coverage of those civilian contractors in Iraq? If AIG falls, what insurer will be willing to hold the contract? I think the Treasury Department will be painted into a corner and forced to inject cash into AIG.

[Edited 2008-09-16 13:45:05]
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QANTAS077
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RE: AIG On The Skids? Is This 'The End' For Now?

Tue Sep 16, 2008 10:54 pm

now they need a $100 billion in 24hrs to survive...no financial institution in their right mind is going to lend them that type of money.
 
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stasisLAX
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RE: AIG On The Skids? Is This 'The End' For Now?

Tue Sep 16, 2008 11:42 pm

http://www.nytimes.com/2008/09/17/bu.../17insure.html?_r=1&hp&oref=slogin

The Federal Reserve is about to announce a deal to provide AIG with $85 billion USD in funding - and in return now owns 80 percent share of the world's largest insurance company.

[Edited 2008-09-16 16:53:42]
"Those who would give up essential liberty to purchase temporary safety deserve neither liberty nor safety!" B.Franklin
 
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Aaron747
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RE: AIG On The Skids? Is This 'The End' For Now?

Tue Sep 16, 2008 11:50 pm

Probably a sensible move given that they are well-capitalized in their bread and butter business units. Still, we need to take a serious regulatory look at CDS and I'm not sure how that plays now that the threat won't be fully realized.
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NAV20
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RE: AIG On The Skids? Is This 'The End' For Now?

Wed Sep 17, 2008 1:03 am

Looks as if any loan may be 'secured' by the Fed taking up to 80% ownership:-

"Sept. 16 (Bloomberg) -- American International Group Inc., the biggest U.S. insurer by assets, has been offered an $85 billion U.S. loan in return for an 80 percent stake in the company, according to a person familiar with the situation.

"The Federal Reserve was persuaded to offer the loan because of the risk that an AIG failure would threaten the stability of world financial markets, according to the person, who declined to be identified because negotiations were confidential. Efforts to find a private-sector solution failed because the company is too big and a long-term fix was needed, the person said."


http://www.bloomberg.com/apps/news?p...601087&sid=aghHCX_rMJD0&refer=home

Odd to reflect that this is probably the most aggressive and rapid programme of 'nationalisation' that any government in history has undertaken.  Smile Lenin and Co. 'started small,' at the bottom of the economic pyramid, with workers' soviets taking control of local businesses and farms. The postwar British Attlee government largely contented itself with taking control of specific (ailing) strategic industries, like coalmining and the railways.

Bush may be a 'late convert' to Marxist doctrines (public ownership of the means of production, distribution, and exchange) but now he's got started, he's definitely exhibiting good old-fashioned American 'get up and go.' Last week he virtually 'nationalised' everyone's mortgage loans; this week, he's after their insurance policies.

What's next - the car industry, iron and steel, oil.....?  Smile
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TUNisia
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RE: AIG On The Skids? Is This 'The End' For Now?

Wed Sep 17, 2008 1:11 am



Quoting NAV20 (Reply 25):
What's next - the car industry, iron and steel, oil.....?

According to McCain the country isn't in any trouble, and the fundamentals of our economy are great! VOTE GOP!!!
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stasisLAX
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RE: AIG On The Skids? Is This 'The End' For Now?

Wed Sep 17, 2008 1:15 am



Quoting NAV20 (Reply 25):
What's next - the car industry, iron and steel, oil.....?

The Detroit automakers are next, IMHO. And the Bush administrations support of capitalism and the reign of free markets - what a damn joke. We only have large company CEO capitalism. I say that we should let the chips fall where they may. The financial markets will continue to be critically ill until we have a very healthy barf, otherwise they will never be allowed to heal. I've had just about enough of the privatization of business profits and the nationalization of business losses. The bail-out of AIG cements the nationalization of the financial markets. First it was the mortgage industry with Fannie Mae and Freddie Mac - and now the insurance and financial instruments credit industry with AIG. Socialism is now what the Bush administration is practicing!
"Those who would give up essential liberty to purchase temporary safety deserve neither liberty nor safety!" B.Franklin
 
ltbewr
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RE: AIG On The Skids? Is This 'The End' For Now?

Wed Sep 17, 2008 1:32 am

AIG has had major problems for years - the mortgage crises was just the final hit. 4 years ago they got caught by the Attorney General of the State of New York (then Elliot Spitzer, later NYS Governor and supporter of call girls), who regulates their insurance businesses, doing a shady financing/reinsurance deal with companies owned by Warren Buffett to make their books look better than they were. After they got caught, they had to do a $4+ Billion rewrite of their financial records, then they had to fire most of the top executives including the Greenberg family members who controlled the company.
Add to that huge insurance/reinsurance losses with Katrina, the Tsunami in Asia in late 2005, and probably Ike this week, then not sufficiently pricing premiums as to risk on their insurance/reinsurance side then buying too much in risky mortgage risks and they were in deep trouble for a while and it is only to get worse.
Now the USA government will own 80% of AIG (or certain parts of it). Let us hope it turns out like the loans to Chrysler in 1980 where the government made money, High paying union jobs were saved, it gave Chrysler a good financial run in the 1980's and until the late 1990's.
 
sv7887
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RE: AIG On The Skids? Is This 'The End' For Now?

Wed Sep 17, 2008 1:49 am



Quoting TUNisia (Reply 26):
Quoting NAV20 (Reply 25):
What's next - the car industry, iron and steel, oil.....?

According to McCain the country isn't in any trouble, and the fundamentals of our economy are great!

I guess you missed the 3.3% GDP growth, recovering dollar, lower energy prices, 6.1% unemployment rate (5.5-5.7% is natural rate), record exports, etc etc etc.

Isn't a depression....We had this one a long time coming..
 
baroque
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RE: AIG On The Skids? Is This 'The End' For Now?

Wed Sep 17, 2008 2:13 am

Let us see where 3.3% GDP growth looks in three months time, oh yes that is after the election so it does not count.

And then recalculate the GDP figure to allow for capital losses and see how cheerful it looks then.

Fairly pointless to cling to a statistic that:

A. may well be wrong, and

B was never set up to measure the current problems.

Sheesh!
 
baroque
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RE: AIG On The Skids? Is This 'The End' For Now?

Wed Sep 17, 2008 2:18 am

On the current ABC news, it seems AIG is to be rescued. So Lehman might just have been a single lamb and even then it appears that Barclays has snapped it up for 2 billion, and will take on up to 9k employees, but does not include the real estate derivatives, however that might work.

Also as a footnote, it appears that AIG Aus is a separate legal entity that meets Aus financial obligations and is "safe" whatever safe might mean these days!
 
sv7887
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RE: AIG On The Skids? Is This 'The End' For Now?

Wed Sep 17, 2008 2:30 am



Quoting Baroque (Reply 30):
Let us see where 3.3% GDP growth looks in three months time, oh yes that is after the election so it does not count.

And then recalculate the GDP figure to allow for capital losses and see how cheerful it looks then.

I get your point, but I only mention this to say it isn't a Depression economy. It's a likely recession and we've had worse.
 
baroque
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RE: AIG On The Skids? Is This 'The End' For Now?

Wed Sep 17, 2008 2:50 am



Quoting Sv7887 (Reply 32):
Quoting Baroque (Reply 30):
Let us see where 3.3% GDP growth looks in three months time, oh yes that is after the election so it does not count.

And then recalculate the GDP figure to allow for capital losses and see how cheerful it looks then.

I get your point, but I only mention this to say it isn't a Depression economy. It's a likely recession and we've had worse.

I will fall back on the Chinese re the French Revolution - TOO EARLY TO TELL!  eek 

Or in other words, how the hell would I know when all the super paid suits in the US who caused the bloody problem do not seem to know either, or if they do are too scared to tell us!!
 
NAV20
Topic Author
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RE: AIG On The Skids? Is This 'The End' For Now?

Wed Sep 17, 2008 5:37 am



Quoting Baroque (Reply 33):
how the hell would I know when all the super paid suits in the US who caused the bloody problem do not seem to know either, or if they do are too scared to tell us!!

Trouble is, Baroque, this time they really DON'T know - because they bought a lot of 'pigs in a poke,' junk mortgages that no-one analysed or checked.........

Previous 'downturns' have always had identifiable causes; usually a widespread conviction, particularly among small investors, that 'whatever goes up will go on going up.' This is worse - it's a case of a lot of people (who, I agree, should have known better) asuming that what they'd bought (mostly, of course, with OUR money) was worth what the seller said it was worth........

A considerable coincidence - just listening to 3AW Radio, Melbourne, and they're interviewing (of all people) Kenny Rogers. He probably gave speculative share dealers the very best advice, all those years ago..........  Smile

http://www.youtube.com/watch?v=D8o6Os0xQf8
"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
 
baroque
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RE: AIG On The Skids? Is This 'The End' For Now?

Wed Sep 17, 2008 6:33 am



Quoting NAV20 (Reply 34):
Previous 'downturns' have always had identifiable causes; usually a widespread conviction, particularly among small investors, that 'whatever goes up will go on going up.' This is worse - it's a case of a lot of people (who, I agree, should have known better) asuming that what they'd bought (mostly, of course, with OUR money) was worth what the seller said it was worth........

Ah well there we might both be wrong NAV, listen to Phillip Adams for Monday at about the 25 minute mark for the whole program OR.

http://www.abc.net.au/rn/latenightlive/stories/2008/2366369.htm

Which is just the relevant segment, "Bankers House of Cards". Worth listening to. Pity LNL does not have transcripts.

A couple of memorable bits with about 10 k sellers of mortgages in Florida being approved when it was known that most had previous fraud convictions. The other one is that those perpetrating the scams assumed they could clear out in time, probably some have and the ones caught have just "mistimed matters" as it were.

Yours ever

Gladys
(You need to listen to P Adams to know who Gladys is)
 
NAV20
Topic Author
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RE: AIG On The Skids? Is This 'The End' For Now?

Thu Sep 18, 2008 10:28 am



Quoting NAV20 (Thread starter):
either deposit it in ordinary 'high street' banks (at equally 'ordinary' rates of interest) or buy gold with it..........

Don't think I've ever quoted myself before, but this is a bit of a special occasion!

That ex-client of mine rang back today. Among other things, after talking to me earlier this week, she hauled some money (not sure exactly how much, but around $A200K) out of a building society she had it placed wtih, and bought gold with it. The deals apparently 'took effect' at midday Wednesday Australian time.

(Excerpts)

"Gold surged the most, in terms of percentage, in nine years yesterday as investors sought the safety of precious metals on concern that the credit crisis will deepen, leading more financial institutions to fail.

-----------------

"People are worried about money being safe in a bank," said Ron Goodis, a futures trading director at Equidex Brokerage Group Inc. in Closter, N.J. "With paper assets in question, gold represents the textbook storehouse of value."

"Gold futures for December delivery gained $70, or 9 percent, to $850.50 an ounce on the Comex division of the New York Mercantile Exchange."


http://www.newsday.com/services/news...gold185847559sep18,0,5187536.story

So she made getting on for $A20K in 24 hours...... Smile Around seventeen months' worth of what the 'buildsoc' was paying her.........

Didn't stipulate any fee 'up-front', and wouldn't dream of accepting one now, even though it was offered - 'Them's the rules.' Though I suspect that a case of what, in my opinion (and I hope Baroque agrees!), remains highly-placed among Australia's best dry reds (Wynn's Coonawarra Cabernet Sauvignon) may soon arrive on my doorstep by express courier, 'as if by magic'....  Smile

Did have second thoughts though, after I rang off. I don't know whether anyone else on here has had experience of 'bringing up' animals? I have, not from preference, just that all my kids loved ANY kind of animal, from pet mice to horses. So, among other things, I clearly remember how much, and how quickly, kittens and puppies changed character once you started feeding them on meat and fish instead of milk and biscuits......

I DID begin to wonder, from some of the things she said, and a sort of basic 'change of tone,' whether - in the space of a couple of days, without meaning to - I'd managed to transform a quiet, worried, elderly, un-ambitious, widowed lady into a potential stock market 'carnivore,' who having once 'tasted blood' in the form of a 9% capital gain in less than 24 hours, wouldn't be able to resist the temptation to try to do it again - and again - and again........
"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
 
QANTAS077
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RE: AIG On The Skids? Is This 'The End' For Now?

Thu Sep 18, 2008 11:34 am

^ did you hear PM this afternoon, worlds central banks are chipping in to the tune of $180 billion to try and unlock the markets, crazy shit!
 
Dougloid
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RE: AIG On The Skids? Is This 'The End' For Now?

Thu Sep 18, 2008 2:11 pm



Quoting Baroque (Reply 35):
Ah well there we might both be wrong NAV, listen to Phillip Adams for Monday at about the 25 minute mark for the whole program OR.

An excellent analysis of the roots of the current financial crisis and the extent of exposure in other places besides the US. I liked the critique of reregulation. Regulation's always ten or fifteen years behind the smartie pantses from the Harvard Business School.

The world's a different place than this time last week, that's for sure.
If you believe in coincidence, you haven't looked close enough-Joe Leaphorn
 
baroque
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RE: AIG On The Skids? Is This 'The End' For Now?

Thu Sep 18, 2008 2:40 pm



Quoting Dougloid (Reply 38):
The world's a different place than this time last week, that's for sure.

Not wrong. Question is what will it be like next week at this time. You would think someone knows how and where to insert the plug! Gurgle gurgle gurgle.

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