Tuesday, December 29, 2009

AIG undervalued??? I'm not so sure....

According to financial data shown on Yahoo Finance, AIG's book value per share is actually higher than it's currently trading at...

Book Value Per Share (mrq): 37.637001
Current Share price: 31.870000 7:59pm ET 12/29

of course, I don't buy those numbers and I don't think AIG is really worth what it's trading for, even at $31.87 a share. Important note on Book Value Per Share: it includes the acquired cost of the assets of a company e.g.- the now significantly devalued assets at their prior purchase price...

For more info & statistics go to http://finance.yahoo.com/q/ks?s=AIG or see the attached image

Tuesday, September 29, 2009

FDIC May Propose Banks Prepay Fees


Thursday, September 24, 2009

Why Pundits & Jim Cramer Should Can It

.... coming soon

[Jim Cramer & AIG]

Wednesday, September 23, 2009

The FOOLs are in RUINS

Ah, well, perhaps not yet, but the frequent nay-saying of Motley Fool and the cries that there is little profit to be made with seemingly "risky" investments in companies like AIG, C, BAC, WFC, JPM, and _ is ridiculous.

Now I understand where the FOOLS are coming from on this. They see these companies that all required bailouts as being loose cannons with the potential to backfire and completely destroy a non-vigilant investor of his well-earned money.

Where they miss the opportunity is in the fact that all the companies I just mentioned were all rescued by the Federal government with a virtually blank check to ensure the well-being of these seemingly too-big-to-fail companies.

Despite what I saw as an obvious opportunity to make money, I have yet to understand why it is that they haven't admitted that they're wrong and redressed the issue to encourage people to make a few more profitable investment decisions.

Ah, wait! I completely understand now why it is they don't want to do this... because it's far TOO risky. And while they did miss the initial boat, it is a bit late to start recommending these companies at their present values.

Maybe the FOOLS at Motley should take a page from Jim Crammer and admit it when they're wrong, have missed the boat and made genuine FOOLS of themselves.

Sure, Motley may have played it same, but the fact that they sacrificed what I believe will prove to be one of the greatest money-making opportunities of this past century truly makes me question what they really know about finance and government intervention in private v publicly traded companies.

Maybe, instead of going with the masses who thought the sky was falling, they should have realized that, while there was a lot of potential for increased government stakes in these companies, the government had absolutely no intension of taking these companies completely off the market.

I think it was terribly obvious that the US & the Obama Administration have no interest in nationalizing AIG, C, BAC, GM or any of the other companies they took stakes in. Instead, they want to build market confidence in the stock market and protect the rest of the financial institution from going into an even deeper recession.

And for God's sake, Ben Bernakie even went on 60 Minutes and told us he wanted to shore up investor's confidence and..........

Case and point.
"It depends a lot on the financial system," he replied. "The lesson of history is that you do not get a sustained economic recovery as long as the financial system is in crisis. We've seen some progress in the financial markets, absolutely. But until we get that stabilized and working normally, we're not gonna see recovery. But we do have a plan. We're working on it. And I do think that we will get it stabilized, and we'll see the recession coming to an end probably this year. We'll see recovery beginning next year. And it will pick up steam over time."

"No," Bernanke replied. "I think the key issue is the banking system and the financial system."

and I think this line alone made it even more obvious that the FOOLS were wrong:
"There were many people who said, 'Let 'em fail.' You know, 'It's not a problem. The markets will take care of it.' And I think I knew better than that. And Lehman proved that you cannot let a large internationally active firm fail in the middle of a financial crisis. Now was it a mistake? It wasn't a mistake for the following reason: we didn't have the option, we didn't have the tools. All the Federal Reserve can do is make loans against collateral," Bernanke replied.


Tuesday, September 22, 2009

The Reverse Bailout

While on the surface it seemed as perhaps the most ridiculous thing I've ever heard, it may actually be a good idea. After bailing out the banking industry, the US Federal Deposit Insurance Corporation is now seeking loans from the same banks it lent money to to cover the recent gap in federal funding.

Now I understand the political implications of the FDIC asking the Treasury for more money to help the FDIC refund people's deposits. I'm aware that their would be populist backlash and outcries for continued intervention in the banking industry.

At the same time, however, by seeking banking loans the FDIC helps prop up healthy banks and avoids having to drastically increase FDIC fees to banks which could have the 'domino effect' of forcing still more banks into receivership. Thus very feature may actually save the American taxpayers in the long-run and may help keep interest rates lower than they otherwise would be, however, the action will certainly RAISE interest rates as the Federal government seeks to reabsorb some of the money it printed out earlier this year.

To those ends, this is actually even better news than the media is portraying it to be. By seeking these banking loans, the FDIC would actually be helping to decrease the rate of inflation by decreasing the amount of available capital out there.

Sure, that may make it more difficult for some businesses to get low interest loans and that may cause them to have to close up shop, but at this rate, I'm really sick of all the bullshit. Corporate America isn't preparing NOW for any future shortfalls, then by all means they deserve to fail.

Even I'm getting sick of handouts, and that's after I supported the initial bailout, which I continue to standby. I do, however, still have a few reservations about that bailout, and it mostly centers on the issue of bonuses.

Sure, I agree that people should only get bonuses based on their individual performance, but unfortunately, I'd have to agree that these bankers, etc DESERVE their bonuses. It is not their fault that the US government didn't choose to limit compensation or bonuses as a condition of their rescue. On top of that, most of these institutions that are offering bonuses are offering those bonuses to individuals who made profits for the company. The people that created this mess, however, have all been fired at this point.

Regardless, the real issue at hand now is the "REVERSE BAILOUT." As I mentioned, this reverse bailout will do more good than harm. While the healthy banks will make a profit at the taxpayers cost, it's no different than any other time the Federal government seeks out loans from the private sector.


Wednesday, September 9, 2009

The New New Deal

Previously the federal government developed and executed the "cash for Clunkers Program" which has been seen by some as a success and by others as a failure for it's lack of long-term impact and short-term nature.

Now, the federal government is pushing through new programs aimed at stimulating the economy in other related fields... this time, the appliance, battery and weather-proofing industry.

Unfortunately, where the previous program was large, broad, well-funded and consistent, the newest program to take to the streets of American communities and shopping centers is none of those.

Within the upcoming months, the Federal government will begin funding state-rebates for energy efficient appliances that will be granted to states on a basis of population. Under this plan, each state will be granted the equivalent of $1 per person with the minimum state/territorial award being $100,000, for a grand total of $300 million in federal funding.

As a result, the state-by-state awarding system will varying greatly throughout the nation making it increasingly difficult for companies to market their products and the rebate system which will greatly limit the success of the new program.

On top of that, there is the added issue that more people will be able to afford and purchase these products in comparison to those who bought new cars after trading in their old ones meaning that there is a significantly greater chance that the funds will run out long before the program is set to end.

Regardless, there are still other plans awaiting implementation: the weatherization of low-income housing and the subsidizing of fuel cell battery technology in the US.

What I don't understand is why we are spending this money to provide short-term stimulus when we should be funding long-term investment geared at solving the root cause of the current economic crisis: providing extremely low-interest loans for people with good credit scores to purchase foreclosed properties which in the long run would help stabilize housing valuations.

A low-interest loan for investors and similar programs to the "Cash for Clunkers Program" will stimulate demand and encourage spending rather than leading to the usual occurrence with rebates: increased savings.

Unfortunately, politicians are usually motivated by short-term gains at the cost of future economic stability.

For more information, check out the following FORBES article:

Saturday, August 15, 2009

Documenting the Economic Crisis

American Casino [documentary]
Release Date: September 2nd

American Casino movie trailer from Leslie and Andrew Cockburn on Vimeo.

"Capitalism: A Love Story"
Documentary- Michael Moore
Release Date: October