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Wednesday, March 04, 2009

Quick and dirty analysis - AIG

Last week I did a "Quick and dirty analysis" of the Dow. Readers seemed to enjoy it, so this week I thought I would take a look at AIG.

I am still trying to wrap my head around a 4th Quarter Loss of $62 BILLION (which - as you can guess - is the single largest quarterly loss in history). And of course the only logical thing to do is for the Treasury Department to give them another $30 BILLION on top of the $150 BILLION it has already "lent" AIG.

I think people are becoming desensitized at the magnitude of these numbers:

> $62 BILLION quarterly (QUARTERLY) loss
> $180 BILLION "lent" to AIG by the Treasury Department


And look how fast AIG's collapse occurred:

1.) Less than 18 months ago, AIG traded above $70/share.
2.) A year ago, AIG traded above $50/share.
3.) Six months ago, AIG traded above $20/share.

Yesterday's closing price was $0.43 (43 cents).

Again, amazing.



Michael said...

You are right about being desensitized. Those numbers don't even mean anything to the average person.

Anonymous said...

AIG is disgusting. The public is either desensitized or they don't want to look at how poorly tax dollars have been spent. I understand the $180 billion was necessary, but it still sucks to see taxpayer money go into the financial blackhole that is AIG.

You should check out this speech by Fed Reserve Governor Kevin Warsh. He highlights an overarching theme of complacency from excessive liquidity in the financial system that left financial institutions vulnerable to the liquidity shock in August 2007. What I think he's trying to say, though, is that the government made mistakes in the past. Congress deregulated banks, while simultaneously hesitant about regulating new financial products. Meanwhile, the Fed Reserve made a mistake letting liquidity levels get too high. In a sense, the government is reaping what they have sewn

JF David said...

The Fed let the biggest banks to get even bigger in the last couple of months.

Now BAC C WFC are now to big to fail. US goverment is likely to pay hundreds of billion more to save them when they will have more losses.

Bill said...

It makes me sick to my stomach cause you know a bunch of people are just getting richer off our tax dollars.

Complacent Panda said...

So is that a buy or a sell?


QQQBall said...

i always relate it to things. say i guy appraises houses at $300 each, has 50% combined tax rate and has 30% overhead. that means he has do say $85B in gross revs, which equates to 283,333,333 houses. if the guy appraised 1/day, everyday (365 days a year) it would take over 776,000 years...thats alot of manpower getting handed out. of course, $180B is 6x worse; over 4.65MM days of work!