Stock Market Tanking on News of AIG Bailout.

[Driven1]

I don't always trust Wikipedia, but here is the best I could do for now:

http://en.wikipedia.org/wiki/BRIC

good enough for me.  looks like i was wrong.

[chipwich]

i love financial stocks right now.  well, for where they'll be in 5 years (not for where they may or may not be 6 months from now). 

My point is that we don't know how many of these institutions will actually be around 5 years from now, let alone 6 months from now. We are in a structural economic decline.  It is not just a tech bubble or a housing bubble.  It is a perfect storm of problems that these banks face.  That is why they need so much money now.  

For instance, AIG is basically in slow bankruptcy.  The government lent them $85 billion to buy time for them to sell off their assets away.  Will AIG actually survive?  It's a big maybe.  I would rather look at companies like Travelers and Chubb Insurance.  They will be the beneficiaries of buying off AIG's profitable insurance assets at a great price.

[Driven1]

wrong...Gov't authorized AIG to take UP TO $85 billion.  they only took a $25 billion loan and do not think they will need more.  who knows if they will, but the point is that the gov't has NOT given them $85 bill at this point.  yes, AIG will survive.  they are in the "too big to fail" category now (obviously).  just like GM who got a $25 b loan today (you know it is a crazy market when a govt bail out of $25billion barely makes the news).

[Lunican]

Nothing is too big to fail.

[Driven1]

Nothing is too big to fail.

actually, you are right, but may not know why.  God controls all and if He wants something to fail, even the greatest man-made kingdom can go down.

[Driven1]

Nothing is too big to fail.

http://www.google.com/search?hl=en&q=too+big+to+fail&aq=f&oq=

[chipwich]

wrong...Gov't authorized AIG to take UP TO $85 billion.  they only took a $25 billion loan and do not think they will need more.  who knows if they will, but the point is that the gov't has NOT given them $85 bill at this point.  yes, AIG will survive.  they are in the "too big to fail" category now (obviously).  just like GM who got a $25 b loan today (you know it is a crazy market when a govt bail out of $25billion barely makes the news).

AIG was too big too suddenly collapse, not fail.  Any company can fail.  Remember Woolworth's?

AIG's collapse would have led to the failure of numerous N. American and European banks and institutions.  They are too intertwined within the system to fail.  AIG however has guaranteed about $500 billion in credit default swaps.  Can anyone say OPPS!  Yah, $500 billion in mostly bulls*%t loans.

Now, they have a high interest loan (I think 11%) from the government to cover them as they raise money to repay some of their immediate obligations.  They are in the process of selling off about 15 major assets in order to not have to use more government loans (as they would dilute the shareholders stake).

So AIG could turn out to be the just like the success story that Chrysler became back with their gov't loan in 1979.  AIG may in fact succeed in liquidating down to only their most profitable insurance businesses.  They just have to try and cover some of their enormous debt obligations while operating under a high interest loan in the meantime.


Oh and GM, they have no more credit lines left and are on tier last $3.5 billion of cash (which could last them maybe 3 months, so they really need that $25 billion government loan in order to cease from being.  You may think they too are too big to fail.  They are just too big to collapse.  For the time being, I doubt the government will let them fall.  Too many jobs and industries depend on them.  Sooner or later though bad companies do fail.

[Driven1]

Bill Ackman (google him to see what he is famous for) has just taken his first position in 5 years in the financials.  Trust me, he is an unlikely investor in the financials.  Becoming now the 12th largest stakeholder in AIG.  He also bought WB around $1/share I believe.

btw, i tend to believe we will see a giant bailout of GM from portions of the $700b bailout - in addition to the $25b. 

[chipwich]

No doubt Ackman is a very wise investor, but so is Kirk Kerkorian.

I am sure he regretted his decision to buy into GM (which he later sold 95% of his holdings) and his bid for Chrysler.

Smart people can do stupid things sometimes.  I am not the most savvy investor out there and I am sure Ackman can school just about anyone in the subject of all things AIG.  In the end though, I can't help but see a failing company.  Even if AIG survives, they can only strive to be a shadow of their former company.  I don't see the value there.

Then again, I don't manage a multibillion dollar hedge fund, so what do I know?