AIG – How Much More Can $30 Billion Buy?

Posted on 03. Mar, 2009 by Simon Banks in Business, Finance

U.S. to Take Over AIG in $85 Billion Bailout; Central Banks Inject Cash as Credit Dries Up

Emergency Loan Effectively Gives Government Control of Insurer; Historic Move Would Cap 10 Days That Reshaped U.S. Finance

September 16, 2008 — Wall Street Journal: by Matthew Karnitshnig, Deborah Solomon, Liam Pleven and Jon E. Hilsenrath;  U.S. to Take Over AIG in $85 Billion Bailout

The above article was written in September when all of AIG’s troubles came to a pinnacle. The U.S. government seized control of an American business to keep it from failing. Although the move is unconstitutional – it may not have been a bad move if it would have helped. After all, remember when the government stepped in and loaned money to Chrysler on September 7, 1979; and the corporation hired back Lee Iacocca and within a year they were back in the black and paid back their debt?

“U.S. government will effectively get a 79.9% equity stake in the insurer… –WSJ.com”. For $85 billion dollars, the U.S. government controlled 79.9% of AIG. The loan was secured by AIG’s assets and “taxpayers could reap a big profit through the government’s equity stake”.

The article, like many other articles about AIG and the process of what the government was going to get from its infusion of capital, etc… talks in circles – and by the time anyone is finished reading it, is totally confused as to what really happened.

Correct me if I am wrong as I break down the following chronology:

• Sept. 16, 2008: U.S. government takes over 79.9% of AIG with an $85 billion dollar investment.
  This investment is suppose to be secured by AIG’s assets
• Immediately AIG begins selling some of its assets
  Now – my question is: what do we have to secure the loans with?
• Oct. 8th, 2008: Less than thirty days – AIG get an additional $37 billion — U.S. government did not receive additional percentage of the company
• Nov. 9, 2008: Just thirty day later this investment gets $152 billion dollars more and AIG management gets a $500,000 vacation, compliments of the United States Tax Payer. Still no more stake in equity and now there are less assets to attach loan to.
• March 2, 2009: AIG seeking an additional $30 billion – “for addressing AIG’s financial challenges…“

Private sector investors won’t touch this. If banks would have made those kinds of loans they would end up going under for bad credit lending. Oh, I’m sorry – that is what happened to the banks. AIG would have been better off going to the chopping block in the beginning and other companies would have bought them up in pieces.

Why don’t they want to do that? Because they think the U.S. government owes them a living and should pay more for their assets than they are worth.

The same thing is happening with the banks right now and bad stocks. Everyone seems to want to sell to the U.S. Government at a higher price than what they are currently worth. That is bad business. And then these failing companies say: “Well, we just won’t sell”. Great! If you feel you don’t have to sell – in reality, the U.S. Taxpayer does NOT have to buy.

If Warren Buffett bought companies the way the U.S. Government is buying into companies with bailout money – Warren Buffett would be penniless and probably living in the streets. But Warren Buffett knows when to buy and when to not buy – he knows when to sell and get out as well. He also knows that if he owns a controling share in a company and that company is not making money, there are immediate managerial changes. You don’t keep dead weight and you don’t keep “but that is the way we always did it” people.

How many more billions have to be thrown down the drain before someone admits that trying to save AIG was a mistake? Or is it once again the issue of government pride that says: “Well, we have invested this much into it – we might as well keep going – we can’t admit we were wrong”. Besides, that is less than George Bush spent every month on the U.S. war in Iraq. So what is another month of (dead) loans to AIG.

It is time for Americans to lift up their voices and take action. If any private citizen went to the U.S. Government with the types of business plans that AIG, The Big Three, and the failing banks have right now – we would be turned down flat. If you went to a bank for a business loan with as much debt as the banks have while asking for bailout money, you would be laughed out of the bank.

The U.S. Government has currently spent over $9 Trillion dollars in bailout money without much effect. That much additional buying power in the economy without helping it seems ludicrous to say the least. So what really is the problem? If the U.S. government gave each working person in the United States $50,000 – it would have saved the government almost $2 trillion dollars so far. That money wouldn’t have helped save some mortgages? That amount of money wouldn’t have helped save some businesses? That money wouldn’t have increased buying power in the economy and thus saved a lot of production, manufacturing, etc… How many automobiles could have been bought with $50,000?

What is the final solution? That question may still yet be decided. It certainly doesn’t seen to be sinking more money into worthless investments. Perhaps we need to consult with someone like Warren Buffett.

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USS AIG Struck By Iceberg

Posted on 01. Mar, 2009 by Simon Banks in Business, Finance

U.S. NEWS — Headlines: Sept. 16, 2008 the United States largest flagship insurance carrier, the “U.S.S. AIG” was struck by an iceberg in the north Atlantic at 12:14 a.m. Details are still unclear as to the extent of the damage; however, CIDA News is getting reports of a radio S.O.S. transmission that was sent out just after the iceberg was struck.

Radio Transmission Transcript:

Radio Operator: S.O.S. S.O.S. – U.S.S. AIG needs immediate assistance. Have struck iceberg and are going down by the nose. Repeat – we have struck iceberg and are sinking. All ships in the vicinity please respond.

U.S.S. Private Sector — Please repeat – it sounded like you said you need assistance and are going under! (Captain to engine room – slow these engines down – we can’t afford to get on scene first)

U.S.S. Venture Capital — Your signal is unclear – what did you say? Your radio signal is weak. (later reports would show that there was nothing wrong with the radio signal)

Radio Operator — repeat – have struck iceberg and we are sinking. Water has come up over second level airtight compartment and pumps are failing. Any assistance would help…

U.S.S. Private Sector — We are 200 miles out and will get there as soon as possible.

U.S.S. Government — We are en route to your location and will be there momentarily – what do you need?

U.S.S. AIG Radio Operator: Our short term pumps are failing and our assets have been stretched to the limit. If you have $85 Billion on board we believe that we can patch up the breach and get into dry dock for an overhaul.

Our news sources tell us that even though there were other ships in the area only one came to the rescue:

The final decision to help AIG came Tuesday as the federal government concluded it would be “catastrophic” to allow the insurer to fail, according to a person familiar with the matter. Over the weekend, federal officials had tried to get the private sector to pony up some funds. But when that effort failed, Fed Chairman Bernanke, New York Fed President Timothy Geithner and Treasury Secretary Paulson concluded that federal assistance was needed to avert an AIG bankruptcy, which they feared could have disastrous repercussions.

– Wall Street Journal Sept. 16, 2008

Slow to make repairs U.S.S. AIG still sinking

Less than two months after the U.S.S. Government answered several distress signals from insurance giant flagship U.S.S. AIG – AIG still has yet to make drydock and effect repairs from the iceberg damage.

The first on Oct. 8th, 2008 when the U.S.S. Government with the help of the U.S.S. Taxpayer brought additional $37 billion dollars worth of assistance to help the sinking U.S.S. AIG stay afloat long enough to get into shore since it was still too far out for tugs to be called in for assistance. Although 79% of the damage was slowed down – U.S.S. AIG was still taking on water and so, on Nov. 9, 2008 a third distress signal was sent out. Coincidentally, the U.S.S. Government was once again on the scene:

Third Distress Signal Radio Operator: S.O.S. – S.O.S. We are still taking on water. Fourth compartment has been breached. Need immediate assistance or we will flounder. “We cannot continue to hemorrhage cash in the two areas of securities lending and credit default swaps,” Chief Executive Edward Liddy said on a conference call. “We need to stop that, and we need to stop it now. — Reuters.com: AIG gets $150 billion government bailout”

U.S.S. Government — We will assist you with $150 billion dollars worth of life jackets but you must make repairs as soon as possible.

U.S.S. AIG — understood! We will stuff the $150 billion dollars worth of life jackets in the breach as see if we can float to the nearest port.

As the U.S.S. AIG slowly steamed along to make shore – the Captain and chief officers were flown ahead in the ship’s private helicopter to alert the repair dock in the port of  Colorado. The Captain and chief officers were forced to wait for repairs in a run-down hotel with no amenities and food that was barely edible. Our last report – they were still there.

Meanwhile, U.S.S. AIG began listing badly in “The bailout that won’t quit”, and sent out another distress signal.

Radio Operator: …This may be my final message (or not).  May not make port. Need additional $30 billion in funds to get us until next month. Generators are failing. Crew are on deck with their pension funds and retirement accounts secured around their necks just in case. Passengers are being calmed with stringed quartet on the promenade deck and lido deck.

Need more help… “NEW YORK (CNNMoney.com) — Troubled insurer American International Group is looking for more help from the federal government as it struggles to sell off assets and keep its core businesses afloat.”

And then all was silent!

What will happen to the largest insurance flagship that ever sailed he high seas, we do not know. But we must ask one question – when do you let a ship sink and get all the passengers off?

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Windows 7 – Microsoft Announces New Operating System at CES Las Vegas

Posted on 10. Jan, 2009 by Editor in Business, Feature, Hot Topics

Microsoft Announces New Operating System at CES 2009

Microsoft Corp. CEO Steve Ballmer delivered the pre-event keynote address for 2009 International CES, laying out Microsoft’s vision for personal computing, connected entertainment and consumer electronics. He was joined by Entertainment & Devices Division President Robbie Bach. The keynote featured some of the most anticipated Microsoft consumer products and services, including Windows 7, Internet Explorer 8, Windows Live and Xbox LIVE.
– Microsoft at International Consumer Electronics 2009 Virtual Pressroom
– Visit Microsoft.com Press Room

What is going to happen to “PC & Mac”?

The computer world has come a long way since “Windows”, Microsoft’s original GUI (graphical user interface) to MS-DOS back in 1985, thus overtaking Mac OS in sales and market place. By 2004 it was estimated that Microsoft Windows had approximately 90% of the client operating system market.

Windows 98 (codename: Memphis) saw the birth of the early internet years and became the power-driver of Microsoft’s operating systems even though its early release had over 10,000 bugs – people still flocked to buy it. Stabilization came with “Windows 98 – service pack 2″ and driver updates, along with software programs finally caught up with the operating system.

Then came Windows ME – a rushed product to get something out before the new millennium – it could have stayed in the box.

A New millennium – a new operating system – Windows 2000. Or was it really? Not a lot going on there – a few changes, more stable when it came to business apps; however, not the easiest OS to install new drivers or upgrade networks.

Finally, the operating system update that everyone had been waiting for – “Windows XP” (codename: Whistler). With its many known bugs and instability issues, Microsoft released Windows XP into the market place. They needed a new operating system and technology was out pacing previous versions. The initial release was not the greatest debut in the world. There were many bugs – but it looked good, and that seemed to make a difference to the average user. It was pleasing to the eye, easy to navigate and once “service pack 1″ came out and finally “service pack II” adding new devises or updating software seemed effortless. It truly was a good operating system. (Pst… as a matter of fact I still use “Windows XP Pro”).

It seems that Microsoft’s best work skips a generation and “Vista”, (codename: Longhorn) is that generation that could be skipped. The only really good thing that came out of “Vista” is the “Apple”, Mac vs. PC ads – those are funny!

But like Windows ME and Windows 2000, the general consumer and business version of the operating systems that came between Win 98, and Win XP – I believe that Windows 7, may be the next stable, functional and improved Microsoft OS. If that is the case – what will happen to “PC vs. Mac”? Will Apple have to come up with a whole new set of ads? Will PC & Mac have to retire? Will Mac turn into the whining, sniveling, crashing, can’t get an update, losing market share rival that “PC” had been? Will “PC” retire to a Tahitian Island somewhere sipping margaritas in an Internet Café?

Las Vegas – What is Hot at CES?

Posted on 09. Jan, 2009 by Editor in Business, Hot Topics

CES – Consumer Electronics Show – produced by the Consumer Electronics Association, has opened its doors once again for its annual International electronics show in fabulous and famous Las Vegas, Nevada.

CES highlights every year what is new in the field of digital electronics during this coming year. In some cases you get a sneak peak of what is on the technology burner in development; and in others you will get to see the new release of a finished product.

SDXC – eXtended Capacity memory card

One of the hot new little items is the SDXC – eXtended Capacity memory card. Remember back in the day when the first 640Mb hard-drive was produced? At the time, Bill Gates said who would ever need that much space; and yet, look at where we are at today. The new SDXC – eXtended Capacity memory card will now have storage capacity up-to 2 terabytes.

Now who needs all that memory space?

With all the latest explosions in video playback from a cell phone – you now have the space to record your long (long) family vacation. Only don’t try to email a copy through your phone to your friends or relatives. Their technology may not have caught up with your and their ISP’s may think you are starting a Denial of Service Attack because your file is so large.

What else is new?

“The Palm announcement at CES — a new OS and new hardware — was everything people had been hoping for, and more. The OS, Palm webOS, looks solid, and the UI looks fun and easy. The device, the Pre, is pretty slick, with both the pebble-in-the-stream smoothness of the iPhone and a slide-out keyboard. One thing that’s less clear: How will developers get their apps into the hands of users, and how will Palm (and Sprint, the Pre’s launch carrier) ensure reliability of the apps? And can Palm still attract developers?” — Rafe Needleman – CNet News

Steve Ballmer of Microsoft announced the new Microsoft 7 operating system.

Panasonic announced Internet content for its plasma TVs.

The gadgets are too numourous to mention; however, here are a few that were reported by Anupreeta Das on Reuters Blog entitled CES: Gadgets, from the corny to the cute.

Universal remote control: Not a big deal, but Logitech’s newest one is a sleek little gadget, with a 3.5-inch touch screen that fits easily in the palm of your hand. It’s an improvement on their previous universal remote, which had both a touch-based user interface and keys, the exhibitor told us. But it’s not cheap — she said it would retail for $499.95 from end-February onwards.

USB 3.0: The era of USB 3.0 is here, the folks from the USB Implementers Forum announced at CES. Data transfer speeds will get a lot faster once gadget makers begin making devices with the news standards. So, for example, you can download a 27 gigabyte high-definition movie in a little over a minute, or 8 gigabytes of photos from your camera in just 20 seconds. It will still all be compatible with USB 2.0 platforms, of course. Made me wonder for a minute about USB 1.0 compatibility… my work laptop still runs that standard.

Fuji’s green batteries: What’s green about these new AA and AAA batteries from Fuji apart from their color? They’re actually 94 percent recyclable. As the demo guy told us: “You could throw these into your backyard and it would be fine.” The batteries are made through a green manufacturing process and contain no mercury, but that doesn’t make them any pricier than your regular cells. ETA: around Earth Day.

For the rest of this article visit: CES: Gadgets, from the corny to the cute

That is our CES Wrapup for the moment. If you have any comments or news you would like to share with us please let us know. We request that all comments relate only to the article being commented on.

Sweet Crude Oil Prices Drop – Gasoline Remains the Same

Posted on 28. Dec, 2008 by Editor in Business

Gasoline prices remain the same across the nation as the price of crude oil drops to its lowest levels in years.

In 1980, gasoline prices rose over $1.00 per/gallon. At the same time, the price of crude oil reached $35.00 per/barrel – peaking at just over $36.00 per/barrel. By 1981, the average consumer was paying $1.25 per/gallon at the pumps.

What do most people remember about those times? They either followed the price per/gallon at the pumps or they followed the price per/barrel – but rarely, did they follow both to see what was happening in the way of price fixation.

If you were following the price at the pumps (which is what oil companies wanted you to do), you paid higher and higher prices per/gallon. At last the nation reached a “I have had enough attitude” and the prices came down – but only twenty, thirty and in some areas forty cents while the price of crude dropped from $35.69 per/barrel to $14.00 per/barrel – back to the prices when the consumer paid less than $1.00 per/gallon.

At those times, when the price dropped a few paltry cents, consumers felt relieved and almost grateful; however, they did not correlate the drastic drop per/barrel with the almost negligible drop per/gallon.

What did this mean?

It meant greater profits for the oil companies again. While the majority of the population were relieved at the pumps by a few pennies, oil companies were paying less and less for the same gasoline to be made and during those times they recorded some of their greatest profits.

Now, here we are in 2008, after paying the highest prices that we have ever paid for gasoline in our history – $4.00+ per/gallon – the American population is glad to see the average price at the pumps drop to an average of $1.62 according to AAA daily fuel gauge report and a report on CNN.com [Gas prices: Five-year low and falling].

It sounds good doesn’t it? Except when you look at the fact that in 1980 when the price per/barrel was the same as it is now – the average price per/gallon was only $1.25. Then, ten years later – 1995, we once again saw the average price per/gallon at $1.26; however, the cost of crude oil had dropped once again to just over $16.00 per/barrel. People didn’t notice because by then they were comfortable with $1.26 as an average and didn’t think twice about paying it so they could go on with their daily lives.

Inflation – how does that play into the equation?

If you lookup crude oil prices or gasoline prices for any particular year – you will be bombarded with inflationary comparisons of price per/gallon; say in 1970; with today’s (2008) inflated, valueless dollar. See chart below:

It is a very nice graph but highly unrealistic.

The graph does not take into account the fact that before WWII we were on the gold standard and the value of the U.S. Dollar was based on a solid weight that didn’t change. It was not based on fractional values of today’s money system which is what causes over inflation of the value of a product to begin with.

This type of unrealistic bombardment of inflation, cost comparisons only seems to be another form of lulling the American population into thinking that they should be thankful for the price that they are paying instead of crying outrage.

If it were really inflation that drove the price so high; then with the strength of the dollar we should be seeing prices bottom out close to $1.00 per/gallon right now and yet that is not the case.

So what is driving the price per/barrel or the price per/gallon of gasoline?

Greed & Profits!

In the 1980’s, the average American spent what the average American could make – and a little more. Oil companies began squeezing as much out of the cost per/barrel as possible until the price of gas reached a zenith. That zenith was when the people said: “I have had enough”! They had reached their tipping point and oil companies backed off enough to let the people feel some relief but not as much as equaled the drop in barrel price.

In the 2000’s, the average American spent what the average American could make – plus a lot more. During the reign of king George – oil companies squeezed more and more and more, having record profits, until finally the American people said: “I have had enough” and started finding ways to not use so much oil.

What was the difference? The oil companies went too far – and now people are holding on to their economic guns and searching for alternative fuels and fuel sources. Demand decreased because Americans drove 100 billion fewer highway miles this year according to a press release by the Federal Highway Administration on Dec. 12, 2008.

Do not be surprised when the big oil companies still show huge profits. They managed to buy millions of barrels of oil at $33.00 per/barrel and are still selling at $1.62. The numbers don’t add up and the quarterly reports will show the same. Right now, their profit margins should have increased. The cost to produce the fuel hasn’t changed much – the cost per/barrel has decreased dramatically and the cost of selling has increased compared to the percentage to buy. Guarantee – profits will be good and the American people have been smoked-screened once again.

Christmas Shopping – A Sign Of The Times!

Posted on 28. Nov, 2008 by Editor in Business

Christmas Holiday Specials Which May be the Last!

The 2008 holiday Christmas shopping season is in full swing across the nation with sales and specials enticing you to spend your money for that perfect Christmas Gift and that hard to find present for the estranged relative.

But in the midst of the celebrating and the specials, their are some deliberations that must bring a cautioua hand to the table.

The following is a list of stores that have informed the Security Exchange Commission of store closing plans between October 2008 and January 2009. Many of them staying open just long enough to garnish those final sales from holiday shoppers.

Who is going to honor those gift cards from the listing of stores that are closing?

For some holiday shoppers, this may be a good thing. You may be able to find that special gift at greatly reduced pricing. However, a word of caution – if you are looking to purchase one of these business gift cards – you may want to ask yourself one question first: “Who is going to honor those gift cards if those stores are going out of business?” Some of the Companies are only closing select stores, but it doesn’t help if you receive a fabulous $100.00 gift card and the closest store is over one hundred miles away.

How can you find out if a store is closing (even temporarily) in your neighborhood? Well, you can put in the name of the store in your favorite web browser with the following tag – (store name store closings). Like Circuit City – they have a listing of locations that will be closing.

So don’t be afraid to purchase gifts from your favorite stores – just be cautious when it comes to “credit gift cards” – they may not be the best choice this holiday season.

Compiled list of stores closing or partially closing

• Circuit City (most recent)
• Ann Taylor – 117 stores nationwide
• Lane Bryant, Fashion Bug, and Catherine’s to close 150 stores nationwide
• Eddie Bauer – 27 stores (with the option of more) after January
• Cache - all stores
• Talbots - closing down all stores
• J. Jill – closing all stores
• GAP - closing 85 stores
• Footlocker - closing 140 stores possibly more after January
• Wickes Furniture – closing down
• Levitz - closing down remaining stores
• Bombay - closing remaining stores
• Zales - closing down 82 stores and 105 after January
• Whitehall - closing all stores
• Piercing Pagoda – closing all stores
• Disney – closing 98 stores and will close more after January
• Home Depot – closing 15 stores – 1 in NJ (New Brunswick)
• Macys - closing 9 stores after January
• Linens and Things – closing all stores
• Movie Galley – closing all stores
• Pacific Sunware – closing stores
• Pep Boys – closing 33 stores
• Sprint/Nextel – closing 133 stores
• JC Penney - closing a number of stores after January
• Ethan Allen – closing 12 stores
• Wilson Leather – closing all stores
• Sharper Image – closing all stores
• K B Toys – closing 356 stores
• Loews – closing some stores
• Dillard’s – a few stores

Below are some pictures of some of the stores closing or closing some of their outlets.