So my wife is apparently moonlighting as a securities analyst, and suggested over breakfast that AIG might be a solid company when they get through this. I shrugged and said “Walking dead” and then she gave me this finance lecture. Geez. Does anybody here agree with her? Please tell me something sensible.
i think she is setting you guys up for make-up sex.
Hell no. . . look at the tax payer cash they are burning through. Putting $$$ on AIG would be like playing the roulette wheel! I’m sure you have better ideas.
needhelp Wrote: ------------------------------------------------------- > i think she is setting you guys up for make-up > sex. Once you’re past 45, you just don’t need to do this kind of thing.
Joey - Key word is “if” they get through this… My group talks with Treasurers at fortune 500 tech companies and a survey recently went out about this… Consensus is nobody feels good about doing business with AIG (D&O, liability, disaster etc…) 80% of companies have already taken business elsewhere or moved them higher up in the tower. Doesn’t look good for AIG from our POV
My thoughts too… She may have to buy a couple hundred shares of this for the tuition effect.
AIG has a solid business model. They just made a bad bet and the problems with FAS 157 and the general credit crisis has not made it possible for them to recover in a normal way. However, AIG is dead. Its businesses will survive, but not under the AIG flag. It will be interesting to see which units are purchased by the remaining international insurance companies. I don’t see how they keep much, if anything together seeing that they owe the government $16 billion or so in interest over the next 2 years.
what do you mean good business model… they collect premiums. they invest those premiums trying to out earn the liability that awaits them. their investments worked really really well as stock/bonds rose to all time highs. they increased their investments using more and more leverage. it worked until it didn’t… now they have liabilities but with super depressed assets… if the market rebounds and we do not go into a great depression and default rates stay relatively in line with other recessions, then yes, AIG should be able to shed assets/bonds mature/etc, and some residual value will remain. i don’t think it matters about future business, it’s all about book value… so it really depends on 1) the govt’s pressure to reduce assets at any price & 2) the entire world economy, recover rates, etc… i would not bet with US Govt with my money & #2 is a double down bet that I’m not taking…
Good post ConvertARb. I generally mean that AIG would have been able to remain a unified entity if it was not from the risks it took on in the CDS market. If accounting/valuation standards were more transparent and reflective of reality they would be able to raise the money it needed to offset the CDS losses (or those losses may have been avoided entirely as the market would have had a totally different reaction). They, like a lot of businesses would have suffered from the recession, but they certainly wouldn’t have to be liquidated.
how many times are we going to see this on Wall Street (maybe not for a while). A company has a great business model (LTCM, any financial company today, etc) they decide they will leverage it up slightly… that works really well. Some executives that show concern are ousted due to investors wanting more and expectations are growing… so they get rid of the executive team that intiated the business model in place and left with ‘cavaliers’ only concerned with short term bonuses and risking the house to get there…then this comes to a total shock to all involved when it blows up…
Are the pieces of AIG worth more than its market cap? What will be left when AIG sells off its divisions? Will AIG still be an insurance company?
Joey, You should have said… “Yes, honey, AIG is a good company… FOR ME TO POOP ON!”
i think the govt will suck out any value that’s left in AIG (unlikely that there will be any… government is going to have to jack up the funding on these way beyond anything they’ve said so far)
We’ve moved everything away from AIG and I know most others have done the same. Also, AIG sellings off all its assets bits by bits. It’s not dead but it’s certainly dying.
JoeyDVivre Wrote: ------------------------------------------------------- > needhelp Wrote: > -------------------------------------------------- > ----- > > i think she is setting you guys up for make-up > > sex. > > Once you’re past 45, you just don’t need to do > this kind of thing. No more fights? Or no more sex?
Well according to Jim Cramer (boo-ya!), AIG was on the wrong side of a ton of bad CDS trades. And now they can’t afford to meet those obligations. In steps the gov’t to pay off those trades, but, I wonder if, when push comes to shove, congress won’t just say “$crew it” sorry HFs you’re not getting paid on these trades.
AIG was up 14% today. My wife thinks you’re all a bunch of morons.
If there is a government intervention whereby all previous counterparties to AIG have to become current counterparties of AIG, they’ll be fine. But until we live in such an extreme, control-grubbing society, no hope. You’d be lucky to get your $1 out of it by the time they sell everything. I’m pretty sure the govts idea is to loan to them until the market recovers to the point where competitors will pay a decent price for its assets then get their money back, while collecting 11% coupons while they wait. Sounds like a WB deal to me. He’s probably Paulson’s advisor.
bill ackmann took a position in AIG, hes the 10th biggest shareholder right now i think. when he does somethin i take that very seriously (his move on WB was fantastic, but TGT - retailer real estate thing is getting ridiculous). he essentially said that the book after all the dilution is around $6; and if the government changes the terms then it becomes an option. it only makes sense! why should AIG be treated differently than the banks? most of the cash has been used for collateral calls not actual losses (yet); actual losses have been a fraction of that (as per greenberg).
JoeyDVivre Wrote: ------------------------------------------------------- > AIG was up 14% today. My wife thinks you’re all a > bunch of morons. So up 14% in one day confirms that AIG is going to be a strong company if they get through this? Joey, surely you’ve got better analysis than that? Though maybe the analysis is: don’t argue with your woman.