VivaVegas

AIG Exec Departures: What a Surprise!

Unfortunately the whole AIG bonus debacle has cast doubt on the reliability and predictability of the United States. The fevered way Congress tried to wrestle away bonuses agreed upon a year ago and then confirmed just a few months ago shows that the US government cannot be trusted. Congress has shown its willingness to trample contract rights if it is politically expedient. However, in the rest of the civilized World a contract is a contract whether it proves to be advantageous or not. If I were a fund manager or the head of a multinational corporation I would rather do business with the communist Chinese than with the United States. At least the Chinese understand the importance of living up to their bargains.

U.S. Market: So Much Stupidity in Such Little Time

The reality is that nearly everyone in America made money from easy credit, Republican and Democrat alike. Car dealers/manufacturers sold record numbers of cars, retail was hot, the service sector was booming, never mind real estate, construction, etc. One way or another most of America benefitted from this whether in the form of bonuses, higher salaries or even jobs people would never have had but for the easy credit and the spending spree that went along with it. Lets admit it, we all (i.e. we the people) had a very good time. Unfortunately, many of us failed to hold on to the gains and now its come time to pay the piper. For those that did save their money instead of spending it, a $6,000 per head tax burden shouldn't really be that big of a deal since you do get to keep the rest. I'm one of the people who saved their money and quite frankly I'm OK with the $6,000 if that means keeping this country from going into a depression.

Why Friday Came Early

Many of the posts here prove that Plato was right when he railed against Democracy. People will cut off their nose to spite their face. Our represenatives in Congress should do what they feel is right and not what is politically expedient or what the voters want. Rule of the mob is a dangerous thing.

AIG: Closing My Long Position

User 269778

It's hard to say who will ultimately be proven right or wrong. That's what makes investing in equities so exciting. If you're right you can make a fortune. If you're wrong you can lose a fortune. At least in investing you make a more or less educated guess. Gambling on the other hand is just a matter of probabilities and is always a lose lose proposition. In any case, whether gambling or investing, don't play around with what you can't afford to lose. It's that can't lose mentality that caused all of these problems in the first place. As a final note, if everyone thinks we have problems, try Somalia, Liberia or hundreds of other such places. Those people have real problems.

Too Big to Fail, or Too Metastatized?

Great analysis and right on the money. Why was Lehman allowed to fail?because it was an investment bank by rich people for rich people. Some guy who's net worth suddenly went from $30 million to $15 million is not going to end up on NBC, CBS, CNN or FOX. Some guy who's house was destroyed by hurricane Ike and who now has no insurance because AIG went under will.

AIG: Closing My Long Position

Yes, but a limited type of equity. It does not give the Fed a right to 80% of the net assets. It only gives the Fed the right to 80% of dividends (if any), the repayment of the $85 billion and the interest rate. Only when the preferred shares are converted to common does the Fed get 80% of the net assets. However, conversion requires the vote of the common shareholders. The conversion provision is most likely there in case there is a catastrophic failure down the road. I would also suspect there's a limit on it (i.e. cannot be exercised until the 2 year time period is over or there is some catastrophic turn of events).

AIG: Closing My Long Position

Take a look at this. It explains everything in great detail.

www.marketwatch.com/ne...

AIG: Closing My Long Position

Saul, we'll have agree to disagree. I would point out however that AIG never held 80% of its common stock as treasury stock. If you look at its June 30 '08 SEC filings, at best it was 55%. Consequently, AIG could not deliver 80% common stock ownership to the Fed in any event. As for there being no analysts that value AIG at $12.00 that's not entirely true. Thomson puts AIG's value between $14.00 and $18. However, even if no analysts value AIG stock at $12, waiting for anaysts' consensus that a stock is desireable guarantees that you'll miss the boat entirely. Be greedy when others are fearful and fearful when others are greedy.

AIG: Closing My Long Position

Saul you should read and inquire more carefully and not rely on other people who do not know the difference between preferred shares and common shares and have not looked at what is actually happening in any great detail. Preferred shares are a limited equity interest. They can be limited in any number of ways including that they essentially function like bonds (i.e. they are paid out first based upon some set percentage rate of return). That is exactly what's going on with the Fed and AIG. Because the Fed wanted the ability to vote and control the board they could not simply buy AIG bonds (debt interest that doesn't vote) but had to take some sort of an equity interest (i.e. limited preferred shares with a set rate of return). My analysis is correct.

AIG: Closing My Long Position

The columnists facts are wrong. The Fed is getting preferred shares vith an 80% voting right. The return on the preferred shares is to match the 11.5% interest on portions of the $85 billion credit line that are actually drawn (8.5% on portions not drawn). Consequently, there's no 80% dilution of the common shareholders but only their voting rights. At worst the Fed money reduces the net value of AIG by 11.5% per year. At $29.00 per share current book value that's a reduction to $25.00 over 2 years. Even if the book value is 50% wrong its still a $12.00 stock.