AIG: Countdown to Annihilation

Assuming rumors of AIG's (AIG) Q4 results are correct -- $60 billion in losses -- we will have on our hands the largest loss in U.S. corporate history. That is, of course, impressive, but it is the downbound trajectory that has me thinking more. The insurance-company-for-the-uninsurable's losses are mounting rapidly, with a doubling period of a little less than a quarter. Assuming that rate holds constant over the next few quarters, here is what we have to look forward to:

The black hole known as AIG will be eating up a trillion dollars a quarter a year from now, and then all of U.S. GDP in the fourth quarter of 2010 (denoted by an "*"). It will then move on to absorb all of global GDP a quarter later (denoted by "**").

The good news: It puts an outer bound on our current problems. If we haven't settled the current crisis by December 2010 then AIG will simply absorb the world and that will be that.

I'm mostly kidding. I think.

[Update] Tyler at Zero Hedge points out this great AIG cartoon over at CR, so I have added it here as well.

Comments

[Alok Swain]

Good Joke!

2009 Feb 24 11:05 AM

[speculari]

Great post Paul! If only we could get the "Professor's" of the world to turn them telescopes around - and start looking thru the other end.

2009 Feb 24 11:23 AM

[Roger Knights]

Shades of "The Eggplant that Ate Chicago"!

2009 Feb 24 11:47 AM

[Mike Hydes]

The Fed´s last bond auction was 84% covered! Gold is rising!

This is not good. It all tells me somebody is gonna get whacked!

I believe that somebody is AIG come next Monday!

Then Gold will fall and the rush back to treasuries will be back on!

Enabling uncle Sam to oversubscribe future auctions.

2009 Feb 24 12:01 PM

[Michale S]

This is like Comedy Central. How much of this loss went to relieve Goldman's exposure? While Blankfein claimed before Congress he was collateralized, he still had exposure to the credit trades in the event of default. While they were not the only ones, they were definitely the major beneficiary. Goldman wants to repay the TARP, they should repay the exposure on this trade that Paulson negotiated.

2009 Feb 24 01:33 PM

[Roberm73]

doomisnigh.blogspot.co...
If you not read the time story about AIG If the first paragraph to be down right scary.

"Management at AIG has calculated exactly how much money the Treasury and Fed will have access to after all of the TARP, financial stimulus, and mortgage bailout projects have been funded. The insurance company then plans to ask for whatever is left to fund its deficits so that it can stay in business, effectively making the federal government insolvent. "

2009 Feb 24 03:04 PM

[raytayzmd]

...one of the dumbest posts I've seen in a while:

"The black hole known as AIG will be eating up a trillion dollars a quarter a year from..."

...sure, IF if your presumptions are correct...on the other hand, IF they fix everything, then maybe they'll be making trillion dollars a year...or maybe not...why waste people's time with such nonsensical speculation...did like the cartoon, however.

2009 Feb 24 03:12 PM

[If U Say So]

Amazing how a AAA rated insurance company can become roadkill in the blink of an eye. I worked for them till 2007. While I could easily say good riddance, I'm a little afraid of the aftermath of yet another public bailout or even allowing them to go bankrupt. I figure the government will swallow them whole and use it as a bad bank holding tank. By taking them over, they will eliminate their counterpart's risk with their CDS exposure and the government could still hold true to not nationalizing any large banks. Not saying that would be a great plan but it might be more politically prudent.

2009 Feb 24 05:25 PM

[Teutonic Knight]

It is sad to see how just one division within the company could perhaps bring the whole one down. When the public begins to learn more and more about the deeds of AIG over the past 4 to 5 months, its fate is sealed. The insurance business is highly competitive and far from being monopolistic. If there are choices around abound, why bother to risk your trust in a tainted name.

2009 Feb 25 03:16 PM