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TheGarcipian (42.84)

What Does AIG Stand For?

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March 25, 2009 – Comments (21) | RELATED TICKERS: AIG

Last week, Rep. Paul Hodes (D-New Hampshire) famously quipped the answer to the question “What does AIG stand for?” as: “Arrogance, Incompetence & Greed”.  That got me thinking about how mad I’ve been about this whole financial sector bailout thing, simmering just under the brim of my thinking cauldron. First, I’m gonna do some complaining. Then, I’ll get to some answers to that question myself.

For me, my complaint is not about the bonuses. Really, folks, AIG’s bonuses amount to about 0.1% of the money we gave them; not a big deal on the money meter, but certainly a big deal in the principle of the matter. I understand that. Rewarding these idiots for taking huge chances without firing these inept business leaders is really at the core of it for me, regardless of whether it’s a contractual obligation or not. I’m one pitchfork-and-torch away from crying “Off with their heads!” Instead, I’ll say, “Put someone else in charge”, even from within their own ranks; at least, the newly appointed will understand there’s some cause-and-effect to their actions because they saw their predecessors gutted & fired. After all, if you don’t want to play by the very rules that you force upon us when we come to you asking for a loan, then fine. Go right yourself by whatever bootstraps you have left, for apparently, you don’t need our money as bad as Congress thinks you do. What’s good for the goose is good for the gander. If you’re going to privatize the profits, don’t come to me asking to socialize the losses.

Furthermore, I don’t see how more liquidity is going to solve our current problems. Pumping billions and billions of dollars into these companies so they can, in turn, hand that money over to European and PacRim investors only depletes the net cash you & I have in our bank & brokerage accounts by devaluing the US dollar. And it still leaves us with the bill! It does absolutely nothing for the main cause of financial gridlock, which is trust (as I wrote about here). I can understand giving money to Ford, GM, or Chrysler for they’ll produce something, eventually. What does AIG and its ilk do for me? Not much, as far as I can tell. I've got all the debt I can handle now, thanks.

You know, nationalizing the banks for a short time may not be such a bad idea. I’m not advocating that at this time, but at least with that process, all the toxic debt is laid wide-open for appropriate eyes in the government and in the failing firm to see. No more hiding of that data. No more BS from the likes of John Thain (Merrill Lynch) or James Cayne (Bear Stearns). After the “good” is separated from the “chaff”, at least everyone left outside will have the trust issue behind them because of the (assumed) impartiality of the federal government. Right now, no one firm wants to “belly up to the bar” and speak freely of their gluttonous behavior over the past decade. That'd be political and commercial suicide.

And there’s (at least) one other problem…

When will people wake up to the real problem? It's not liquidity! It's the massive debt loads that Joe Citizen has taken on. Pumping billions of dollars into the economy via banks and financial houses (which had ballooned to 2.5X their GDP percentages a decade ago) is not going to fix this issue. Generally speaking, we the public are just as stupid as the bankers & finance sector (well, okay, not that stupid). We have gorged ourselves with debt to fulfill our part of this consumer-based economy, taking 2nd and 3rd mortgages simply to drop in on Vegas and see what’s happening or buy that had-to-have bling-bling. Manufacturing has died off in this country, being shipped offshore & replaced by Services which provide lower-paying jobs and no long-term contributions to GDP. That’s part of the heart of the problem. When Consumerism retrenches, Services are the first thing hit. So what if all the banks were to magically relieve themselves of this toxic debt tomorrow? Does anyone really think that's going to solve the real issues, those being trust and too much consumer debt? If you do, you're not thinking straight, IMO. If anyone's opinion differs, here's your chance to educate me.

Certainly, some of the bailout funds may eventually find their way into helping consumers on-the-ropes refinance their 100+% LTV homes (which is a good thing, to keep them in those homes), but that's not going to soak up any more liquidity the government is dumping out there right now; they'll simply be borrowing from Peter to pay Paul (but at better rates). Does anyone really expect anyone but the most stupid or hardest-pressed borrowers in the world to take on more debt at an economic time like the present?! Hardly.

Personally, I think it would be massively better if those funds were pumped into the economy via infrastructure and R&D dollars, as I’d written about earlier here.

Ok, I’m done complaining, well for now anyway. In answer to the question “What does AIG stand for?”, I did find another entry on the Web (but surprisingly, not very many). Someone suggested “And I Get?”, which is pretty funny. But I’ve got a few of my own.

So, without further delay, here’s my Top Twenty List of What AIG Really Stands For:

#20 – Adept In Guile

#19 – Accounting Insolvent Goobers

#18 – Ain’t It Grand?

#17 – Abandoned Ideals Gratuitously

#16 – Alternative Investment Gorging

#15 – Antitrust In Gear

#14 – Association for Ironic Genuineness

#13 – All Is Gold

#12 – Artifices & Inventoried Graft

#11 – Appropriations In Germination

#10 – Anything Ill Gained

#9 – Anti-regulation Invites Greed

#8 – Abrogating Irretrievable Greenbacks

#7 – American Investors Gilded

#6 – Adopt, Ingratiate, Grab

#5 – Abusing Idiots Gleefully

#4 – Artful Investing Gimmicks

#3 – Avarice Intoxicated Goons

#2 – American Illusionists Guild

And my  #1 Choice for What AIG Really Stands For is…

#1 – Any Investment Goes

 

Feel free to add to the list. Hope your day is a good one!

Best Regards,
--Gar

21 Comments – Post Your Own

#1) On March 25, 2009 at 9:22 PM, MauiPeter (< 20) wrote:

I certainly agree with your assessment, Garcipian. Interestingly, Goldman Sachs was one of the major recipients of AIG money, which is not strange since Henry Paulson was CEO of GS prior to his stint as Treasury Secretary. Reported on March 16, 2009, the Top Four "counterparties" that benefited from the bailout include European banks Societe Generale and Deutsche Bank, and Wall Street firms Goldman Sachs and Merrill Lynch.

I also agree with your assessment that the consumer debt load is preventing any kind of real economic recovery. When home values were rising we leveraged ourselves to the hilt with 2nd/3rd mortgages and HELOCs so we could buy BMWs and take Maui vacations, and now with home values falling, wages and salaries flat and unemployment rising, we don't have the ability to pay off our debt.

In fact, I believe it is possible that the link between the NAHB HMI and the S&P500, the link that David Rosenberg discovered existed between 1998 and 2005, may be irrecovably broken. If our homes can no longer serve as ATMs, the housing market is not going to be driving S&P500 earnings in the future. 

Your "pitchfork-and-torch" quip may not be far off the mark. This could turn into a real revolution, and if the Obama administration does not "get it" and move fast, I predict there will be some surprises in the Congressional midterm elections, which by the way are only 20 months away.  MauiPeter

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#2) On March 25, 2009 at 9:35 PM, TheGarcipian (42.84) wrote:

Thanks, MauiPeter. Yes, it's very possible that the long-standing relationship of the HMI to the S&P500 may finally be broken. We'll have to wait and see. P/E ratios are still too high, so stock prices will continue to fall, as we've discussed before.

I did run across this article today,  and what stood out to me (with respect to my blog entry) was this quote from Nick Kapur, Motley Fool Analyst: "...I urge Bernanke and Geithner to spend more time restructuring the incentives and practices of our nation's financial systems rather than increasing the scope of their authority. Address the root causes of this financial calamity. Fix the ratings agencies, create sustainable lending standards, establish real risk management practices on Wall Street, improve transparency across the board -- these are the initiatives worthy of your time. Ditch the power play. Cure us of what ails us most!"

Now, that sounds more like a plan for reinstilling faith & trust in our banking system, rather than simply throwing money at the problem.

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#3) On March 25, 2009 at 9:52 PM, madcowmonkey (< 20) wrote:

But that is A.I.G tax man?

translation: But that is All I Got tax man?!

 

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#4) On March 25, 2009 at 9:59 PM, Tastylunch (29.29) wrote:

Dude Gar that list is just awesome.

I really can't think of many worthy adiditions...

Avarice In General ?

Audacious Imprudent Greed?

Always Irking the Gallant

Artifice Imposture Gambit?

@$$holes Idiots & Goons

All Illegal Gambits

eh none o these have the same punch as yours. :)

 

Deej's post today is proof that if you don't make the guys who take risks suffer the adverse reaction of bad bets than they never learn.

Yeah I agree illiquidity is the symptom not the problem. Until we  we treat the consumer/federal debt problem and procutive/consumptive imbalance (which caused said debts)we are still going to be in the infirmary ad infinitum

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#5) On March 25, 2009 at 10:04 PM, devoish (98.26) wrote:

America's Investment Gone.

 

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#6) On March 25, 2009 at 10:10 PM, TMFLomax (47.99) wrote:

Those are all hilarious, that's a great list. Kind of off topic, but yesterday I remembered once again those old AIG commercials again... the dude thinking about butterflies when his daughter's all freaked out about the financial future and the little kid who "can't sleep." Yeah, no kidding, the little kids were right to be all bent out of shape. Sheesh. That would have been great, "We're with Avarice Intoxicated Goons, honey. So I'm thinking about butterflies."

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#7) On March 25, 2009 at 10:59 PM, nottheSEC (80.28) wrote:

AIG=Absolution isn't granted

http://dealbook.blogs.nytimes.com/2009/03/25/dear-aig-i-quit/?scp=2&sq=aig&st=Search 

JAKEY come on! .How could you write a whiny arse letter to the NY Times complaining a corporation  basically in  government receivership didn't fufill their promises.Basic finance =companies  in trouble lie and If THE GOVERNMENT takes over your company and you make more than 20 bucks an hour find another job especially when one is OFFERED to you. I am taking your lead and applying for a job at Enron.  Also jakey administrative assistants on Water street making a tenth of what you are got more heat till the changed the sign to AIU.

 Sorry just a vent and my opinion. Good subject  

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#8) On March 25, 2009 at 11:07 PM, bothisellhigher (29.02) wrote:

Adolf Is Grinning...Arsenic Is Given...All- In Governor

This is one terrific post Garcipian...should be required reporting on CNBC...instead of the constant coverage of the Asshile in Green-Bernie the Scum.

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#9) On March 26, 2009 at 12:15 AM, binve (< 20) wrote:

How about "Airplane Into Ground", going along the crash and burn metaphor.

Great post Gar!

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#10) On March 26, 2009 at 12:48 AM, camistocks (< 20) wrote:

What about this:

All Is Good 

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#11) On March 26, 2009 at 2:05 AM, grammerkat (< 20) wrote:

Garcipian, the only thing I want to disagree with is the generality of the public being stupid.  I do agree that way too many people have been gorging themselves with the instant gratification of credit, and are now paying the real price, and not in money.  However, maybe there are more people out here than you realize that have not lived that way.  Although forced into retirement early because of health issues, and feeling not nearly prepared enough, I am grateful to have had some common sense and a healthy fear of living it up on credit.  My house payment is manageable,  I have a newer car with no car payments, and no credit card debt.  I started living with the idea about 15 years ago that if I didn't have the money, I didn't need it.  The biggest problem  is the cost of health insurance.  But I still have everything I NEED and more   I keep trying to drive home the lesson to my kids and grandkids that WANT is not the same as NEED!  I, like you, am really worried about what the gov't is doing and the effect it will have on us.  I think there are a lot more like me out there who have been taking care of our own business in a judicious and sensible fashion, but will be dragged along to the poor house (kicking and screaming all the way) by means of this massive bailout and its repercussions.  I've already seen my portfolio value diminished incredibly, and I'm worried about what will happen to the value of what I have left.  Whether we voted for this President or not (not), we have him.  As a gluttonous, consumer nation, we have been headed for trouble for a long time, but I wonder if the Prez may be setting the all time speed record for getting this country into some really deep s**t!

 

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#12) On March 26, 2009 at 2:40 AM, TheGarcipian (42.84) wrote:

Wow, what a response. Those are some great ones: "All In Governor", "Airplane Into Ground", "Absolution Isn't Granted" (love that one!), "America's Investment Gone" (hilarious, devoish), "Audacious Imprudent Greed" -- all excellent. Every bit as good as mine. Thanks for contributing. Don't you feel even microscopically better for doing so?  Heh heh...

I'll get to more serious responses in the next few days (I'm getting ready for more business travel, this time to Indiana). But I wanted to get some more AIG news out there, in case you've not seen it yet -- the viral videos are already up-and-at-em!  Check this out:

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#13) On March 26, 2009 at 10:16 AM, nottheSEC (80.28) wrote:

 grammerkat (< 20) Good post and it bears noting and repeating.It is absolutely prudent to have MINIMAL/NO credit card debt. Life presents issues as health, job loss and family problems which can be handled better without the albatross of credit. Hope this post is finding you well and that something can be done about your health expenses through credit, deduction ,program or anything. Also all how about personal finance teaching in grammar school! That way folks can make informed decisions. All best J

Gar again great post

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#14) On March 26, 2009 at 4:48 PM, TheGarcipian (42.84) wrote:

Alyce (TMFLomax), thanks for slumming with me, perusing the blog, and commenting. I too remember those AIG commercials, and I found the one you're talking about. It's below. And as the little kid says, "Liability is the nightmare!"  That's classic irony. Too bad AIG didn't follow their own advice. (Boy, I should post that clip by itself; the subtext is worth an entire blog!)

 

nottheSEC, I read Jake DeSantis' op-ed piece in the NY Times yesterday. Like you, I don't feel all that bad for him for the very reasons you pointed out. Bonuses are not guaranteed (even if it's written in your contract) because the company could go bankrupt before it pays you that money, which is essentially the case he's in right now. Sorry, Mr. DeSantis, your bosses screwed up big time, and that leaves you screwed. It shouldn't be the American taxpayer that gets screwed because your bosses messed up. So, while I can certainly commiserate with your loss (for I didn't get my year-end bonus either, boo-hoo), I'm looking at the bigger picture and realizing WE ARE ALL HURTING here. Personally, I'd be more devastated (as you noted, Mr. DeSantis) that your boss sold you down the river before Congress and the American public...

grammerkat, duly noted and I highly agree! Sorry to hear about your being forced into early retirement (and especially for health reasons--that is your most valuable asset, your health!). Not all of the public is stupid, certainly. Some of us haven't been to Vegas in a decade of more :-).  I drive a 9-year old car that's paid off. Prior to that, I had a 13-year car that had its problems, but it was serving its purpose dutifully and would have continued doing so until an idiot sped through an intersection and slammed into the side of me, robbing me of that car by having the insurance total it out. For 3 years after that, I drove a tiny deathtrap, my beater Mazda pickup, not because I wanted to but because it didn't make financial sense to take on more debt for a car, even with money being as cheap as it was at the time. I have no credit card debt to speak of. In fact, I even took out a free loan (since they were offering it to me at 0% APR) and have invested that money in a simple CD. When that matures, I'll pay them back their money and keep the interest I made off of it. That's learning to work the system, baby!

My point about our fiscal health can be summarized with the immortal words of Forrest Gump: "Stupid is as stupid does." We need to have better financial education in this country so that people can assess & appreciate their financial situation before doing something "stupid".

And yes, personal finance education should start in grammar school. My dad did it for me by opening a passbook savings account on or around my 6th birthday. We took the entire $10 I got from family & friends (that was a lot of money back then!), opened an account, and I learned about the very basics of finance. Other people can and should do that for their children. The forthcoming hyperinflation storm (due in the next 3-7 years) will have many victims. Do you want your family & friends to be among them? Websites like the Fool help, but without a personal committment to understanding your financial situation and trying to improve it, you're doomed to be one of those victims.

Thanks for the responses, everyone.

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#15) On March 26, 2009 at 5:31 PM, Eudemonic (64.69) wrote:

Atleast Inbedwith Geitner

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#16) On March 26, 2009 at 6:50 PM, ContraryDude (32.26) wrote:

You've done it again, gar!  Greatest blog EVER!  I love the video clip.

Here's my contribution, late as it may be: 

Aging Ideologues Grovel

ideologue.

Main Entry: ideo·logue

Variant(s): also idea·logue \ˈī-dē-ə-ˌlȯg, -ˌläg\ Function: noun Etymology: French idéologue, back-formation from idéologie Date: 1815

1 : an impractical idealist : theorist 2 : an often blindly partisan advocate or adherent of a particular ideology

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#17) On March 26, 2009 at 6:52 PM, TMFLomax (47.99) wrote:

That's right, "liability's the nightmare!" HA! That is so funny in that gallows humor way... good grief.

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#18) On March 26, 2009 at 9:02 PM, Tastylunch (29.29) wrote:

I think devoish wins the internet on this one

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#19) On March 26, 2009 at 9:17 PM, MasterMind1234 (25.63) wrote:

hey you guys will love this one! hahaha

 AIG

America's Insolvency Guru

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#20) On March 27, 2009 at 3:17 PM, Melaschasm (55.51) wrote:

It is laughable for politicians to act like they are upset with how AIG spent the money.  AIG is using the money in the way that it was intended to be used...  It is protecting the politically connected from fiscal loss at the expense of the US taxpayer.  Which is exactly what the politicians knew they were voting for last fall, and again this winter.

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#21) On April 07, 2009 at 9:27 PM, lastupendas (< 20) wrote:

here's an article I think you might be interested:

 Three Reasons the World's Best Investors Are Wrong
 

The market is rallying. The S&P 500 is now up 114 points in the last 17 trading sessions... for a total rise of 16%. Astonishing.

And the price strength of the move has all the marks of a massive new trend.

It's true the market has fallen 50% in the past 18 months and valuations are now in "cheap" territory for the first time in years. It's also true sentiment reached an extreme level of panic in March. The AAII investor sentiment survey, for example, reached all-time bearish levels in the first week of March, just before the rally started. We love to be bullish when the crowd is bearish.

Now even some of the market experts I respect are calling for higher stock prices. "You have to be careful not to miss the opportunity," says Mark Mobius. Mark, one of the most famous money managers in the world, sees value in stocks and says we're at the start of a new bull market.

Recently, another institutional heavyweight, Barton Biggs, told Bloomberg he thinks the S&P 500 Index may rally between 30% and 50%.

Even Whitney Tilson – one of the most bearish fund managers of the last few years – has turned bullish. He's loading his fund with financial stocks like American Express and Wells Fargo.

It's hard not to be on the same side as these guys... But the chart is sending us a different message.

In the early 1980s, Jim Fixx was the world's top running trainer. He literally wrote the book on running... called The Complete Book of Running. It sold over 1 million copies and made him rich and famous. His muscular legs were featured on the cover. The picture of health.

A few years later, Fixx dropped dead of a heart attack. He was 52 years old. Turns out, on the inside, Fixx was not so healthy.

Look at this chart of the S&P 500. The price is rising, and it has the appearance of health... But when we look below the skin, there's no multi-month breakout developing. The volume looks sickly, and the momentum is erratic and jerky.


Let's start with the breakout. This index needs to rise through 950 to make a new 65-day high. I studied the initial rallies that followed the great bear-market bottoms of 1929, 1938, 1974, and 1982. If this market was to maintain its ascent to 950, it'd be the strongest, sharpest rise in the history of the stock market... even sharper than the bear-market rally that started in late 1929 after the initial crash.

I think that's unlikely. If this is a new bull market, it's far more probable we'll see the market form a base over the next few months that sets the stage for a breakout later this year.

The market's volume pattern is sickly... Its recent declines have come on huge trading volume... but its recent rallies have come on low volume. This guy is having a heart attack.

The momentum – as shown by the relative strength index (RSI) – is strong right now, but it looks jerky and sudden. I like to see a trend of higher highs and higher lows driving higher slowly but surely.

In sum, it's just too early to call the beginning of a bull market. We don't have enough evidence to be bullish on stocks in general.



Good trading!

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