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AIG
Old 09-16-2008, 09:07 AM   #1
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AIG

Two questions.
1. If AIG goes bankrupt how will it affect my home and auto insurance?
2. I own unsecured bonds of International Lease Finance Corp which is wholly owned by AIG. Am I screwed?
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Old 09-16-2008, 10:04 AM   #2
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My mom has one of those stock market indexed annuities with them and I hope it is ok. It has a guaranteed minimum interest rate and will begin paying in a few more years, after a 10 year period.
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Old 09-16-2008, 10:38 AM   #3
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Policyholders will very likely be protected, since any BK filing would be by the holding company while the insurance companies would stay out of BK and keep doing business. If you want a precedent, go look at what happened with Conseco policyholders. The holdco went bust but the insurance companies (which were much weaker than AIG;s insurers appear to be) keptright on chugging.

ILFC is a big question mark. I think it is a very likely sale candidate if AIG gets the time to sell stuff in an orderly fashion. Its an attractive business with lots of hard asset value underlying the bonds. The question is what protections there are for ILFC bondholders vs. AIG's troubles and whether ILFC would get dragged into BK if the AIG holdco files.
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Old 09-16-2008, 02:08 PM   #4
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ILFC is a big question mark. I think it is a very likely sale candidate if AIG gets the time to sell stuff in an orderly fashion. Its an attractive business with lots of hard asset value underlying the bonds. The question is what protections there are for ILFC bondholders vs. AIG's troubles and whether ILFC would get dragged into BK if the AIG holdco files.
Berkshire Hathaway has been rumored to be sniffing around this one... but after all the Gen Re & AIG prosecutions, AIG would be dragged through a knothole on the price. After walking away three or four times, Buffett would eventually negotiate a price about two bucks over a bankruptcy liquidation.

Wow, look at that-- Berkshire Hathaway's stock price was up during Monday's meltdown and it's up another 3.5% this (Tuesday) morning!
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Old 09-16-2008, 02:12 PM   #5
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Wow, look at that-- Berkshire Hathaway's stock price was up during Monday's meltdown and it's up another 3.5% this (Tuesday) morning!


Yeah! I gleefully noticed that and wonder why.
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Old 09-16-2008, 05:24 PM   #6
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That's what I love about BRKB... it usually goes up when the rest of the market is in trouble, as investors "flee to quality".
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Old 09-16-2008, 06:37 PM   #7
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Just announced,

85 billion for 85 % of AIG from the fed.
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Old 09-16-2008, 06:38 PM   #8
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from the fed.
I guess that duct cleaning business really took off for him then.
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Old 09-16-2008, 07:21 PM   #9
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I guess that duct cleaning business really took off for him then.
I was thinking the Fed had found a strong stash of weed like thefed used to grow.
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Old 09-16-2008, 07:25 PM   #10
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That's what I love about BRKB... it usually goes up when the rest of the market is in trouble, as investors "flee to quality".
Berkshire is the only single-company stock that I would consider treating as an asset class for asset allocation purposes. It has a long-term trend of rising in value, it is itself a very diversified operation AND it feels like it has a low -- if not negative -- correlation with the broad market.

The market meltdown of 1973-74, for example, may have been the best thing that ever happened to Berkshire, as it was able to use its "Fort Knox of capital" to buy quality companies at insane discounts. And in the 2000-2002 bear market, Berkshire stock was sharply higher. I don't think investors who hitch their wagons to Warren Buffett in bear markets have forgotten that.
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Old 09-16-2008, 07:26 PM   #11
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Congratulations everyone! We now share a controlling interest (and then some) in AIG, without any control whatsover...
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Old 09-16-2008, 07:29 PM   #12
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Berkshire is the only single-company stock that I would consider treating as an asset class for asset allocation purposes. It has a long-term trend of rising in value, it is itself a very diversified operation AND it feels like it has a low -- if not negative -- correlation with the broad market.
Wait until Warren kicks the bucket suddenly. You'll get to see all sorts of single-company stock behavior. Doesnt matter that they have a succession plan set up...
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Old 09-16-2008, 07:36 PM   #13
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Wait until Warren kicks the bucket suddenly. You'll get to see all sorts of single-company stock behavior. Doesnt matter that they have a succession plan set up...
Oh, I know it. And the funny thing is that in terms of *operations* of its subsidiaries, Buffett does *nothing*. None of its companies will be negatively impacted by Buffett's departure, since he has a rather unique management philosophy of only buying businesses with top-notch management and leaving them alone. (Okay, for Gen Re that didn't work so well, but usually...) That would be in stark contrast to (say) Apple, where much of the value and execution of the business operations is dependent on the ideas of its CEO.

To me, that means that if BRK sold off so viciously that the value of only the current operating companies and stock holdings were more than the share price, it would be an incredible buying opportunity. I think it would produce one of the larger market inefficiencies we've seen in quite some time -- fitting, it would seem, as Buffett himself has become a legend largely on the basis of doing just that.
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Old 09-16-2008, 07:44 PM   #14
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Yeah, it might be a good buying opportunity...might also be a situation where the folks who own the stock for emotional reasons part company with it, and the institutional holders start asking why they'd own it vs owning 'best of breed' in each of its holdings industries.

You might be looking at a couple of years before the price started picking back up.

Dont get me wrong...love the guy, love the company, and I've owned A and B shares before. But I got a wee bit nervous about a guy who likes to eat cheeseburgers and candy on a regular basis thats getting along in years being the reason why a lot of people own and hold the stock.
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Old 09-16-2008, 08:00 PM   #15
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I am definitely in the wrong business. In engineering, if you screw up your company goes bankrupt. In finance, if you screw up your company gets bailed out by the American taxpayer.

I'm no longer an employee, so I can no longer spend as I did during the old days. My new low income status is a threat to the American financial system. So where's my taxpayer bailout? Surely the economic masturbation payment I received earlier this year doesn't represent the extent to which current and future taxpayers are willing to sacrifice in order to make my life more comfortable :confused: :confused: C'mon, folks, belly up to the bar and pay for my drinks! The round's on you...
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Old 09-16-2008, 08:05 PM   #16
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I am definitely in the wrong business. In engineering, if you screw up your company goes bankrupt. In finance, if you screw up your company gets bailed out by the American taxpayer.
As the saying goes: Privatize the gains, socialize the losses. I wish I could do that with my 401K!

On one hand, some in Washington are bashing Big Oil for being too successful and profitable even as on the other hand they reward bad management with bailouts. Nice consistent message to send there.

This is a problem with allowing companies to become "too big to fail." I consider myself a good capitalist who believes in free market economics, but when any one company becomes so big that they threaten to cause major economic damage to the entire nation (if not the world) if they go under, one has to wonder whether that's an advisable situation to allow.
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Old 09-16-2008, 08:15 PM   #17
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Had I only known we could get payments for masturbation...well...I guess I could have retired a lot earlier than I did. I might have barely made it out of high school...
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Hank Greenberg-With Friends Like This, Who Needs Enemies?
Old 09-17-2008, 01:10 AM   #18
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Hank Greenberg-With Friends Like This, Who Needs Enemies?

Did anyone see the open letter he sent to Robert Willumstad, CEO at AIG?

Basically he said that You are a disaster, you and the board have ruined this company.

Just saw Hank G. on Charlie Rose. What an impressive guy! Usually youk see morons on TV. Greenberg is so not a moron.


Ha
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Old 09-17-2008, 03:13 AM   #19
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Can anyone answer where the authority comes from for these bailouts?

Didn't it require an act of Congress to give loan guarantees to Chrysler?? and that was a lot less money..($1.5 billion in 1979 dollars = mebbe $5.5 billion today). Carter was attacked for it IIRC.

Who's running the joint here?
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Old 09-17-2008, 03:14 AM   #20
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A friend asked if he would be allowed to write off the losses in his 401k. I broke the news gently telling him that he was the working class.

Oh and AIG. I have some AIG VALIC 403(b) from years ago - not much but I still have a fondness for it. They say that the insurance and retirement components of AIG are firewalled and might change owner but won't be financially hit. I would find it reassuring if I could muster the ability to believe anything "they" say.
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