American International Group Inc
$0.13 (0.21%) Today
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The same. Bear Stearns was prevented from suing the people who sold it fraudulent bonds too. Ultimately the FED and US Treasury stepped in and said "these guys are the losers, they're going to take all the losses even if they should be able to limit their losses because of the fraud we're not going to let them.". And you can argue that he should have seen that possibility and not gone so far in in his investments. But tbh it's not an unreasonable play. By the pre-bailout rule set he had a dynamite position. AIG and Bear Stearn's would have recouped billions via the courts and likely have also recovered in their stock price and getting in low was a smart move. But Bear Stearn's was cellar boxed into bankruptcy and AIG's bailout terms meant it couldn't recover from the fraud. It would be like if MOASS starts and then the FED steps in and says, "Ya you own this company; but we're going to force Gamestop to sell 100 Billion shares to short sellers for $0.001/share so they can close their position." We wouldn't have made a bad investment. You'd have made the right investment and got screwed over by the Money'ed class.
It would have been "right" if AIG had been able to recover the policy payouts from the lawsuit. People forget that AIG had an airtight case and the assets to pay all the money they were ordered too. But the bailout money came with a condition that they don't sue. If they had taken the ratings agencies and investment bankers to court instead they could have came out in a great position and the people who caused the 2008 crisis would have gone out of business instead of enriched.
I mean he was right to do so. AIG and others had solid cases against the Goldman Sachs and other brokers who committed fraud to sell junk bonds. They should have been able to recoup their losses over time with lawsuits, but the bailouts said no lawsuits.
Global insurance conglomerate American International Group Inc. AIG 0.80% posted strong gains in first-quarter profit, benefiting from reduced catastrophe losses, growth in new business and premium-rate increases. remember these guys
They all thought they were hedged through AIG they had the insurance policy’s to cover however AID hag given out insurance policies 1000x of what they could cover. So when the hedges couldn’t pay they couldn’t pay. Bill Hwang just did this with swaps got over leverage through multiple firms (yet I fail to see where he did anything illegal) and the debt was called. He was arrested with a slew of charges. How many people from AIG or from housing collapse went to jail? How many will this time?
Everyones already mentioned the time scale but let's also not forget how fast the government moved this time to bail out the system. We won't ever see another Lehman or AIG weekend as long as we have a federal reserve. If it's let the markets implode or let inflation run at 10% buy calls on wheelbarrows because they'll just keep printing before letting markets break again.
Long story short I was getting AIG premium stock at a 40% discount so I piled in on the advice of all the boomers around me that I was working with…… Within 1 year the 09 financial collapse happened and it lost 99.98% of its value in 1 day and did a reverse 1/20 split…. NEVER EVER be invested fully in anything. EVER.
boy this is a nuclear chain reaction. AKA 2008 crash with swaps because insurers like AIG had collateral beyond their tits for swaps. One default ignites a chain reaction that collapses everything else. Impossible to stop unless you start QE which is what the fed did in mid 2009. So if TSLA goes down his collateral vanishes and he has to up it up for his Twatter stock and add more equity /sell more TSLA stock which further depresses prices. Would be ironical if the stock market / S&P exploded due to this deal.
As far as I can tell, none of that has anything to do with the $1 billion in Reedy Creek bond debt; it’s not debt *from* Florida, it’s bonds that are owed *by Reedy Creek*. If Reedy Creek ceases to exist, that revenue stream ceases to exist, while the debt does not (and the local governments absorbing the land get to foot the bill). Here’s a source I found, which specifically notes that this isn’t a simple ordeal, and that in some cases debt like this could even come due immediately: > The billion dollars in bonds that Reedy Creek holds will mature as late as 2036. About 20% are revenue bonds, which will be backed by payments for services like utilities. The remaining 80% are general obligation bonds, backed by faith and credit in the district, which is on the verge of dissolution. > > “Those are issued to creditors on the promise that the district will continue to exist and will be able to pay those obligations, of course, state law says that those bonds will be assumed by the counties but just because state law says that you really must dig in to see what is in those agreements,” said Joe Bishop-Henchman, vice president of policy at the National Taxpayers Union. “You don’t really know what’s in the fine print of all of these agreements.” > > In 2008 when the government bailed out AIG and assumed control, its bonds had to be paid immediately. The bonds that were taken out by Reedy Creek could be the same, and if so, that payment would fall on the county. Via: https://www.wftv.com/news/local/orange-county/disneys-debt-is-about-be-central-florida-taxpayers-problem/SIDQMVZ55ZED3HH2ATXQYNVIPQ/
A lot of people are giving these theoretical answers who probably didnt own stocks. It was depressing. Every morning I would have a queezy feeling with my heart pumping and butterflies in my stomach hearing that market would be down big and I would be losing thousands. I couldnt look away because of my personality and because I was working for a mutual fund shop at the time. Of course I was also worried about my job where I was eventually laid off. Everyone likes to talk percent, but I remember on those days I felt the impact was the dollars in the red. Some days it would go up big, only to be down 2x the next day. The huge gyrations and failures of huge companies like Lehman, Fannie Mae and AIG really challenged what you thought you knew about investing.
I think what most allude to is the creative accounting part and not about accuracy. Even if the numbers are technically correct, it may just be due to adjustment to hide something. Look at subprime (AIG and Lehman) as they repackage bad debts to hide. Also, Enro SPE fiasco where they purposely use various accounting tricks that’s now illegal.
There's only 6 covering anaylsts for Aterian... they're on the Aterian investors website... names and phone numbers... I'm going to do little DD of what I've been watching 👀 reading collecting since AIG 6th last year when I entered my Position... thanks I want to see all sides... 👍 Me I don't have an exit strategy because NO ONE knows when the SHORTs will decided to cover... but, they make WAY more money running it up to $25-$50 before reshorting it down and WAY more money on Calls on the WAY UP... I expect them to eclipse $12 easily because $12-$6 isn't really a BIG money maker for them... we'll see 👀 though as we know the SPIKE will come.when they do decide to run it...
Large financial institutions generally have businesses which are diversified. A bank, brokerage, investment advisor, mortgage lending, investment banking all generate revenue and have risk profiles which are very different. And in the US - the capital reserve requirements are much higher than in the past. That said - I understand your sentiment. I think that there is an argument where concentration risk at some large FIs may pose a problem. Some of these large financial institutions could have exposure in such a way that causes the failure of one line of business to impact the entire FI. And it's been suggested in the past that some of these "too large to fail" financial institutions should be broken up because if they fail - it could cause a ripple effect. Alan Greenspan, former Federal Reserve chair was a proponent of breaking up such FIs. If you look back at 2008, I think that there are interesting learnings from the Washington Mutual and Lehman failures. And large FIs like Wachovia and Countrywide that were on the brink of collapse had to be rescued/acquired by other FIs. And if you looked at what happened with Wachovia as an example, their collapse really didn't have much to do with their legacy AG Edwards or Evergreen investment management business units. And firms like AIG were able to just barely save themselves with lots of government help. Financial risk isn't my area of expertise, but I think (at least I hope) that regulators and financial risk management at FIs have learned a lot from 2008 and some of the additional safeguards can reduce the likelihood of large systematic failures. But these kinds of risks are always a moving target.
well its not as if they need the money. i mean their entire foreign debt exposure is 40 bil gov debt and 100 bil corporate debt. if US doesnt want them to allow to pay for that debt, then i guess US and West gets another LTCM style disaster of their own making, with bond markets blowing up. in 1998, RU had no money, now they have all the money and they are aside Estonia and formerly Libya, only country that can pay off its entire debt in cash. its just they are not allowed. so for RU nothing changes, its Western bond markets that will come to turmoil. now the important question, how much will the next AIG bailout cost, since these suckers probably insured times over these Ruskie gov and corporate bonds that GS and JPM were fighting over so much just recently and now since western corps stopped exporting to RU, Russia has little reason to change ruble into USD and devaluate ruble, so ruble is rising, as there is little demand for USD in RU. I had a friend note, that somehow Ukraine Hrivna is worth twice as much as Rubel, while its pretty obvious to everyone, which country has more resources and economic capacity
>I know they never stopped selling CDOs after 08/09. Like the film ending scene of 'the Big Short' pointed out they are now making 'boutique synthetic CDOs' and call them 'bespoke tranche opportunity' and there's a lot of activity in product CDOs are not the same as synthetic CDOs. They are literally the opposite. CDOs are comprised of mortgages (MBS) while synthetic CDOs are made of swaps/ CDS. When CDOs go down, synthetic CDOs go up. Also the problem in 2008 was not CDOs. It was the swaps and unregulated swaps at that. Burry and other's bought swaps (insurance) for commodities (MBS) that they didn't own because they knew that housing was unstable and MBS (CDOs) would crash. If one car crashes, the insurance will pay it out. If every car in a city crashes the insurer is fucked and this is what happened to underwriter of synthetic CDOs most notably AIG (https://www.reuters.com/article/us-how-aig-fell-apart-idUSMAR85972720080918)
You're correct but this will require them to create so many more synthetics to justify the increase in the long position. I think the number will be 3x what was done all last year. Creating a synthetic usually requires the addition of another long position or cash, typically in the form of swap (see AIG per 2008). Now, I think we've focused on the real crux of the bet, will the rest of the market bear the influx of shares?
>2008 They don't have magic crystal balls. You cannot take the ex post result and claim it should have been known ex ante. That requires reality breaking God powers. >No, you didn't. Yes I did. You had the initial acute crunch in MMFs and the repo market. That lead to a sort of bank run until it eventually affected areas the Fed could intervene on. You also had a few bad actors like Bear and AIG that I mentioned. >But they're not. They're all part of Goldman Sachs. Sometimes the left hand does know what the right hand is doing. If they do then they get fined. It's illegal. It also doesn't sound like what OPs article is discussing.
>Risk categorizing doesn't mean a magic crystal ball. So, you believe everything was fine, and that were no evident problems leading up to 2008? Proper risk assessment involves nothing if not categorizing catastrophic risk. They obviously missed this, from the looks of it, they missed the ***possibility*** of it occurring. This is mis-categorization. >That sounds like the trouble AIG ran into. Fed had to intervene there, Brother, Fed intervened everywhere. Fed strong-armed Merrill into being bought out by BofA, because had the Fed not done so, Lehman's Friday collapse would have been followed by Merrill Monday. >No, random analysts don't get to rate bonds or structured products. Ok, when you say "rate", I'm guessing you mean the rating of a product given by a rating agency. Now, I'm not using that term. Goldman likely has an internal analysis division that gives actionable information as to whether or not it or its clients should buy or sell a security. This is not a "rating agency rating". This is their internal analysis which they regularly share with their clients. During the prelude to the financial crisis, my understanding is that they were caught selling to their clients things they were themselves trying to dump, and they did this via deceit.
>Yes, this is inherent in mis-categorizing risk. How? Risk categorizing doesn't mean a magic crystal ball. >My understanding is that there were derivatives written on top of these derivatives, credit default swaps, which triggered at only slight movements in the underlying security, which then triggered a cascading clusterfuck of bad that required the massive intervention the Fed undertook. Again, this is all in line with risk mis-categorization. That sounds like the trouble AIG ran into. Fed had to intervene there, but that was an after effect of the crisis already underway. >Pretty certain that is one of many responsibilities tasked to any analysis department. No, random analysts don't get to rate bonds or structured products.
> mortgage originators weren't doing their due diligence, and money market funds weren't aware of that. But neither activity is something investment houses were big into. Not directly, but certainly indirectly when they made the derivative instruments based upon this faulty product, i.e. MBSs, which they miscategorized the risk involved because "housing prices never fall!". The explanation from the wiki goes far to explain why that risk was miscategorized. >There were a couple notable bad actors (Bear and AIG come to mind) but the big issue was ***MBS becoming untrustworthy*** and that market collapsing. The bolded is key. My understanding is that ALL of Wall Street was in on this big, and that Goldman came out ahead because of unscrupulous practices like that article I cited, i.e. selling their customers bags of dogshit, dogshit they knowingly created and knew was toxic. Anyway, like you said, this is probably all academic lol. >It's generally fine to sell a shitty financial product and I'm not seeing what this has to do with analyst desk and client services My understanding was that they knowingly mis-categorized the risk of those instruments. When the analyst desk gives its blessing to a shitty product, that allows the sales people to unload that product upon an unsuspecting customer base. >The structured product would be getting a rating from a 3rd party. Correct me if I'm wrong, last time I checked Goldman has its own analysis department. Insofar as the rating agencies are concerned...if I were to guess, they probably trusted the analysis from the big conglomerates. Perhaps something like "well that firm is A rated so they must be selling A rated products!" That sounds like the inbreeding that got exposed in 2008. If the rating agencies are anything like the SEC, likely they have very little influence and power and are more of a rubber stamping organization. The firms with the dollars and the clients control everything. /end conspiracy rant
>To me, this is an extremely compelling argument. What occurred in 2008 was that the risk assessment was off. Sort of.. mortgage originators weren't doing their due diligence, and money market funds weren't aware of that. But neither activity is something investment houses were big into. There were a couple notable bad actors (Bear and AIG come to mind) but the big issue was MBS becoming untrustworthy and that market collapsing. >What the OP is describing sounds a lot like what Goldman Sachs was accused of doing pre-2008, i.e. dumping shitty product they created onto their customers, stemming from an unholy marriage between their analysis dept and their client services. It's generally fine to sell a shitty financial product and I'm not seeing what this has to do with analyst desk and client services. The structured product would be getting a rating from a 3rd party.
I worked for a larger insurer in the 2000s -- not AIG, but another with huge CDS investment exposure. I vividly remember our Chief Investments Officer saying during a 2006 quarterly earnings call, "Our investment portfolio revenue is so strong, our core business revenue is almost irrelevant." Totally knew we were fucked right then, just didn't know when. Guys like Roubini were getting some play on Yahoo! Finance, but it definitely was presented as the contrarian opinion. Even right before the bottom fell out, there were wild swings for multiple consecutive days when things should have been limit down or limit up from (what I assume at that time were institutional) investors "BTFD", not believing the crash was real. I remember sitting in a doctor's office with CNBC on in the waiting area and realizing for the first time that the talking heads were suddenly legitimately scared, hahaha.
Worked for that company before. They are an insurance company - pretty large and they primarily associated with AIG and co. I worked in the insurance brokering side for a bit as an intern. They also own some other subsets such as Oliver Wyman the consulting firm (which I was trying to get into).
These assets are completely inapposite to each other and the collateral problems that would arise are similarly completely different. Your response does not cover this point - I'm not sure you understand that citing AIG in 2008 makes no fucking sense in the context of GME.
OP doesn't understand what happened in 2008 . Here are the glaring points 0) "*I'm rewording a previous post and adding another fund onto it... Going to try and make it easier to understand*." 1) "*AIG suffered roughly $21B in losses from this same business practice in 2008. They would borrow securities from a broker dealer (Citadel & others) and lend them to hedge funds, who would short sell the stock. AIG's counter-parties (the brokers) were bailed out $43.7B."* AIG was the Insurance Group and companies like Lehman and Bear Sterns that were making completely idiotic bets undersigning NINJA loans were the ones that HAD to go down as they were small fish as compared to JPM and G.Sachs. Just like Archegos fiasco where these latter two ***JUST SO HAPPENED*** to get out in the nick of time leaving all other banks and lenders holding bags of debt. GS was also involved in 1MDB (Malaysian development Fund). What happened? The Malaysians got PHUKED HARD as GS simply gave a portion of the fund back to them. HOW PHUKED UP IS THAT?!?!?! Same thing happened with GS **shafting Greece hard** when it got informed by the Greek .gov about its debt situation. Greece has NEVER recovered from that.. and you think that cupcakes such as yourself will make bank with GME? You'll be the ones taxed , made to bail in and out the banks all the while getting marginalized like Steve Cohen. (You know , the guy that's heading Hedge Fund Point72 ??)
You are correct in that AIG messed up their securities lending process by making poor investments. My point of the reference to AIG was to draw a similar comparison (the process of securities lending) that would show the types of losses that could occur from this practice if a lender overplays their hand... When I repost this elsewhere I will change the wording to make that more clear. Also, here's a quote from a mutualfunds.com article regarding the collateral: *When a fund lends the stocks, these assets are not actually part of the fund, the put-up collateral is. Typically, U.S. Treasuries or cash is used. **However, in recent years everything from mortgage backed securities and derivatives to letters of credit and other exotic I.O.U.’s have become commonplace.** These sorts of instruments fluctuate in price and must be marked-to-market daily. That can actually affect the net asset value of the mutual fund if they swing rapidly. An additional risk is if the mutual fund invests that money in something less than desirable to juice returns. Secondly, if the collateral drops in value by too much, the investor borrowing the shares may be forced to add additional collateral or cover the short early. If they can’t, the mutual fund and its investors are on the hook for the damage.*
From the AIG article you linked I want to point out that the $20 Bn loss that AIG suffered was not due to counterparty risk and a lender of securities. It was that they took all the cash collateral they received and plowed it into... You guessed it, high-yield subprime mortgage bonds. "Companies that lend securities usually take that cash collateral and invest it in something short term and relatively safe. But AIG invested heavily in high-yield—and high-risk—assets. This included assets backed by subprime residential mortgage loans." "The borrowers of a security can typically terminate the transaction at any time by returning the security to the lender and getting their collateral back. But since AIG had invested primarily in longer-term assets with liquidity that could vary substantially in the short term, returning cash collateral on short notice was not so easy." So the issue wants that they lent shares. The issue is they took all the cash collateral they received from the share loans and put it in the exact asset class that collapsed in underlying value in 2008. I also want to point out that the worst case of MOASS happening and the borrowers not being able to locate shares and going bust still means the lending fund just keeps the cash collateral. It would in the absolutely worst case mean they miss the upside but wouldn't lead to liquidity/solvency issues like AIG had
LOL. Just a curious ape who wondered how it all fell apart. I started researching afterward but long before the Burry movie, etc. I think the first time I really “got it” was an early Planet Money podcast where they described how the guy who came up with the idea got industry awards… for what eventually blew up the entire world economy. (I often wonder if you would keep that award and display it in your home office. Haha. “I ruined millions of people’s lives…” There’s also a fun interview with Buffett where they supposedly kept trying to call him, seeing if Berkshire could buy them or buy them out. Warren has the old paper where he printed their 10K and scribbled notes on it and said nah, even Berkshire can’t buy that… They were calling anybody with enough capital to cover them. When Berkshire can’t even bail you out, you know it’s bad. Ah here it is. Whether it’s Warren pimping himself or all real, I dunno… but interesting… https://youtu.be/1QeUcfqkUzc “Fear is extraordinarily contagious…” I’m not a fan of AIG or Wells Fargo after all that. Wells got saved and went on to rip even more customers off, their culture was so bad… Friends today wonder why I mumble under my breath when someone says they bank at Wells… or why I grumble lightly when some volunteer orgs I would for use them. Yuck…
Prior to 2008 AIG was writing an absolute metric asston of uncovered puts on the housing market (they weren't technically put contracts, they were credit default swaps, which are sorta like puts for bonds so I'm going to call them that). This was degen behavior the likes of which WSB has never seen. Bill Hwang looks like a boomer passive investor compared to AIG. Lots of banks and investors were using these puts as hedges or to limit their downside risk on other puts that they wrote. The housing market tanked and the AIG couldn't meet the obligations on this mountain of naked contracts. They got the most epic margin calls to ever be called. Because they couldn't pay, people who held those puts were actually unknowingly unhedged/uncovered and couldn't meet the margin calls that they themselves were now getting. The federal government bailout of AIG was $182 billion. The bailout happened because a massive portion of the global financial system was dependent or connected to AIG's degeneracy. There were other banks and investors involved in this or similar idiocy. Lehman was levered 24:1 in bullish housing positions, and was systemically critical. But many - like pension funds - didn't know that the bonds they were writing puts for were WAY more risky than the ratings agencies said. AIG knew better and didn't care.
Most of the debt is bs the US owes to itself, and what remains is either owed to the US or a fraction (like 10%ish) is foreign. The bigger issue is like in 2008. The govt had years of prior knowledge about what was going on in the housing market. They sat on their hands and gladly got fed by the rich to keep their mouths shut. It took the obvious sign the economy was in free fall (AIG going under) that got the gov't panic moving, which ofc meant it was too late and they had to play kick the can until today. Once again they'll sit on their hands and stuff their faces until shit's about to explode. Except, unlike 2008 the gov't is far less financially stable. When the DoD admits it can't launch another gulf war invasion, you know we're in hot shit.
They say that now. It's the 11th hour. They didn't say shit in 2008 until AIG actually shit the bed. Then suddenly there was action. I don't believe a word of what the fed says they'll do until the drop actually hits, then when they act I'll believe them.
Very true. The bubble was obvious in 2005 to most everyone, too. I know people talk as if it was a surprise. I was surprised by the extent of it. I didn’t know one little division of AIG in London had bet the whole company on their deals, or Bear Stearns, Lehman etc. but the housing bubble was obvious. Excess always does it.
I remembered unemployment was around 8%, everyone at work was panicking, backstabbing each other to avoid being layoff, some lost their home, others in foreclosure. Everyone 401k is down 50%, Lehman just went bankrupted, Government had to bailout Ford and other car manufacturers….I told my dad to throw some money at Citi at $4 since AIG is done for and competition got way less, the big guys will be left standing to reap the returns. This China fear is something I can say I’m familiar with but it’s something you have to go through to actually understand how market panic works. BABA can go to $50 and I wouldn’t flinch.
Relationship and trust? Buffett was the only person with any cash during the Great Recession. Goldman had to give him an insane deal or they would have gone bankrupt like Lehman or AIG. They desperately called Buffett too and he said no.
>You'll make it all back eventually and companies that can't adjust, they were diomed anyhow. This is what angers me about the 2008 crash. Between Lehman and AIG and the rest of the major investment houses, the gov was forced to prop them up or they would have taken down the global economy. The most beautiful moment from that time was when Bear Sterns was given a pittance of a bailout and left to burn. Too bad the rest of the companies couldn't have been tossed on the bonfire.
No one in their right mind would sell insurance in the MCU, unless it came with guaranteed backstopping by the government Every other week there’d be another AIG scenario The other option is that insurance so damn expensive meaning all but the richest of the rich are effectively priced out of the market, as an entirety. The margin requirements for commodities would be so astronomical, the VIX would look like y=x^2 as with less and less market participants means less liquidity and a more volatile orderbook, causing huge swings repeatedly in both directions
We passed Sarbanes Oxley in 2003/2004 (ish) that put public company officers and directors purposely on the hook for the veracity of their financial statements. Plus there were a bunch of accounting rule changes so there aren’t as many accounting scandals “in the wild” today (plus with the rise of private capital it’s easier to do those things in the private market and not have to be troubled with things like SarbOx) That didn’t stop the S&P taking a 46% peak to trough draw down from 2007-2008. Also the cause of the GFC was less so a stock market bubble, but the floor coming out of the financial system. In the years leading up to the GFC there was a bubble in homes for sure (though we’ve since surpassed those home price levels). This was driven by the fact banks were securitizing the mortgages they were writing, then selling them to institutions (for the more senior/ higher rates tranches) and each other for the lower quality/ higher yield tranches (because why keep your cash in overnight reserves at no interest when you can put it into higher yielding securities and then pledge to them as collateral on the repo market to get your cash back) So you had this situation where all banks had money in each other (directly via pledging the mortgage securities as collateral or indirectly my investing in each other’s CDOs). Not only that they were each leveraged to the hilt (I think lehmans and bear Stearns were both around 35x assets to equity) So in essence you had (illustratively) Morgan Stanley who had money in Goldman, who had money in Lehmans, who had money in Bear Stearns. Then AIG went and sold “insurance” to all of them in case their counterparts defaulted. Well you can see what happens to the daisy chain when home prices dropped and suddenly hoomerz couldn’t make their mortgage payments. Two of Bear Stearns mortgage funds blew up, which eventually caused all of Bear Stearns to blow up. All of a sudden the money Lehman thought it had in Bear Stearns goes poof, so it blows up, which means the money Goldman had in Lehman went poof… all the while AIG is now on the hook to make these guys whole, but wait they never underwrote this scenario where they all fail so there is no money to cover the losses. That is the essence of “too big to fail” and systemic risk that caused central banks to step in and break the daisy chain (including forcing some shotgun marriages). Just as with the dot com bubble, our leaders decided to plug this hole by passing Dodd Frank (which banned banks from using customer deposits for proprietary trading and added in a bunch of consumer protection to reduce predatory loan activity). We also implemented Basel III regulation basically tried to contain too big to fail banks by putting in more strict leverage limits, which as I understand it get more strict as their shareholder equity increases, which discourages banks from ever becoming “too big to fail” again. So the same reason the 2008 bubble burst for different reasons than the 2000 dot com bubble, the next bubble will burst for a different reason because we spent the past 15 years plugging the holes that caused the last one.
Footnotes \*All Liquidity Facilities includes: Term Auction credit; primary credit; secondary credit; seasonal credit; Primary Dealer Credit Facility; Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility; Term Asset-Backed Securities Loan Facility; Commercial Paper Funding Facility; Money Market Mutual Fund Liquidity Facility; and central bank liquidity swaps. \*\*Support to Specific Institutions includes: Maiden Lane LLC; Maiden Lane II LLC; Maiden Lane III LLC; and support to AIG. \*\*\*Support to AIG includes: credit extended to American International Group, and preferred interests in AIA Aurora LLC and ALICO Holdings LLC.
September 2008 The month started with chilling news. On Monday, September 15, 2008, Lehman Brothers declared bankruptcy. The Dow dropped more than 200 points.2 On Tuesday, September 16, 2008, the Fed announced it was bailing out insurance giant American International Group Inc. It made an $85 billion loan in return for 79.9% equity, effectively taking ownership. AIG had run out of cash. It was scrambling to pay off credit default swaps it had issued against now-failing mortgage-backed securities (MBS).13 In the days following Lehman's collapse, money market funds lost $196 billion.14 That's where most businesses park their overnight cash. Companies had panicked, switching to even safer Treasury notes. They did this because Libor rates were high. Banks had driven up rates because they were afraid to lend to each other. On September 17, 2008, the Dow fell 449.36 points.2 On Thursday, September 18, 2008, markets rebounded by more than 400 points.2 Investors learned about a new bank bailout package. On Friday, September 19, 2008, the Dow ended the week at 11,388.44.2 It was only slightly below its Monday open of 11,416.37.15 The Fed established the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility.16 It lent money to banks to buy commercial paper from money market funds. The Fed's announcement confirmed that credit markets were partially frozen and in panic mode. On Saturday, September 20, 2008, Secretary Henry Paulson and Federal Reserve Chair Ben Bernanke sent the bank bailout bill to Congress. The Dow bounced around 11,000 until September 29, 2008, when the Senate voted against the bailout bill.17 The Dow lost 777.68 points during intraday trading.18 Global markets also panicked: Brazil's Ibovespa stock exchange was halted after dropping 10%19 The London FTSE dropped 5.3%20 Gold nearly reached $900 an ounce21 Oil dropped to $95 a barrel22
If you want to consider Elliott Wave analysis, the guy I first started reading is Avi Gilburt on Seeking Alpha. He has a huge and very informative output there, plus a private service you can test for free (more than once, using different email addresses). My total portfolio isn't sufficient (low 6 figures) to justify subscribing to his services, and as I rarely invest in individual stocks his output on SA is good enough. Also I think individual stocks are too vulnerable to manipulation, to just trade them based on sentiment. The S&P OTOH is such a big market that it's very difficult to move artificially. I don't use SA a lot - there are only 4 writers I look out for, the others being John Kingham (UK market), Lyn Alden Schwartzer (global macro), and Roger Nusbaum (a personal friend online, although I've never met him in real life). The other EW analysts I watch are on the channels TradingLounge, StockCharts, and Green Star Trading on YouTube (again, all free to view occasionally but also have paid services). I also found it hard to get into EW, but reading or viewing those analysts is proving much more helpful than watching the likes of Bloomberg or CNBC. As I said, I've been reading Avi's output for nearly 3 years and in the last year decided to look at other EW analysts as they really do seem to be onto something. I don't trade a lot, but last year I sold a chunk August 27th and bought back late September and early October. The catalyst for that was a YT video showing a steep decline in margin debt, on top of the EW analysts being fairly sure a dip and buying opportunity were likely. That's the only short-term trade I've made, the others have only been buying (mostly US indices). In a longer term timeframe, there is some agreement in the EW community to a top of around 5500 to 6000, followed by a long to very long secular bear market with cyclical bulls and bears before an absolute low (possibly as low as in the 2000s) is established. I'm fairly sure I'll be gradually getting out of the market once/if we get up to 5500. I've not even begun to look at equal weighting and rebalancing. I have a very small sum in a bond fund, tried buying commodities in 2007 - they were synthetic ETFs which went to zero until AIG was bailed out - and sold for a tiny profit which was really not worth the stress of holding them, and nothing in precious metals or electronic money/coins (using the proper name causes the automod to delete my post). Electronic money/coins, to me, is an awful asset but you can ride its swings and make some decent money if your morals allow. Precious metals aren't of any interest because of their lack of any yield, but that could change in the future. If I did invest in either electronic money/coins or metals it would be in ETFs, because the storage of both is too risky and expensive.
I am a risk manager. I used to be in Property n Casualty within Underwriting. I'll try to be quick with an explanation that reads... cat bonds triggering wont tank the economy... maybe some scandal may happen but it certainly won't be a MBS/Lehman/AIG thing like one would expect. ..It will not tank anyone economy. Cat bonds are sold to IB or govt, institutional investors, PE,etc. The risk is underwritten (albeit low risk a cat will trigger...whatever the bond is representing ie a high loss amount because...pandemic, war, company going bankrupt, huge lawsuit(s), etc) and the payout is determined before party enters into contract. Yes if its triggered they pay up and don't get the "premium" not really a prem but lets just say that. But these funds are held in trust, escrow,etc... And most of these are covered by re-insurance. Yes insurance for insurance. That is there whales like Lyods of London, Munich Re, Swiss Re, etc that are buying these portfolios to ensure it is solvent and backing it up. Albeit yes it will hurt their books that they have to pay up. They'll jack up those premiums for those new cat bonds issued, and eventually you can argue (although not proven) that with time, premiums of non correlated risks will also go up... ie your home mortgage, your med prems, etc etc. but its very slow and small. TLDR: Medical carriers (ie the IBC or Aetnas of the world) wont go out of business or have lower Price to earnings ratios, etc. B/c they are protected. The insurance regulations makes them have reinsurance, reserves, cat bonds, etc etc. So yea they will be fine...but yes shit will go up in prems eventually...some areas faster and higher than others...
None of these add up - singly or in combination - to the discovery in 2008 that RMBS pieces with subprime mortgages were used to create CDOs which were then rated AAA, despite being made up wholly of RMBS BBB and A pieces, which meant that a 10% loss in the RMBS would wipe out the CDO. That was a major screw up in what was considered mainstream finance. The RMBS / CDO mismatch single-handedly took down AIG, which had written insurance on the CDOs. To their credit, there were folks - like Greg Lippman’s team at DB - who spotted it and would freely tell anyone who would listen. I agree it’s “end of cycle” times. But end of cycle could mean 2001 - crazy speculative assets get their comeuppance, and the value investors say: See! Told you so! In the short run, the market is a voting machine, but in the long run it’s a weighing machine! (Warren Buffett). Maybe Bitcoin is having another 80-90% drop, because that’s what it does every few years. How is that going to infect the entire investment world, in a way comparable to subprime, which was potentially in most RMBS and every CDO, and no one could know, because of their complexity and lack of transparency?
Actually it's about a billion times more nuanced than that, but ok. ABS issuers were financing their warehouse lines with short term commercial paper. The housing market started to go down, prices falling due to oversupply of houses. So commercial paper issuers started pulling back from financing those warehouse lines. Because the loans were going negative equity to the borrower. Warehouse lines are pools of loans that are being added to, financed by short term borrowing, until they can be delivered into a trust, via true sale, paying back those short term loans in full. So then Lehman, FASB 115 mark to market accounting rules, the fact that AIG was an insurance company regulated at the state level (insurance companies have little to no federal oversight) writing insurance on complex products issued by banks and sell side wall street which is more heavily regulated at the federal level. So regulatory mismatch, bad accounting rules, and a lot of other stuff. Reference pools (known as CDO-squared) which referenced a pool of subprime loans for investors that wanted exposure to the risk of those loans but couldn't actually buy the ABS because of limited supply of those loans. And much much more, but ok sure.
It is in vogue to yell "criminal this" and "manipulation that," and while that can be the case at times, maintaining orderly markets do require extraordinary steps to be taken time to time. This is why we bailed out the airlines and car companies over the years, AIG was not allowed to fail, why we had the post-COVID relief in the order of trillions, and why basic stuff like halts exist in the market. In this case, the DTCC would have forced the hands of brokers had they not managed their margin provisions, leading to further destabilization of the market. At some point, the public good just gets in the way of sticking it to the hedgies.
in 2008 hedge funds had a combined CDS position on Lehman Brothers bonds almost twice as big as Lehman's market cap lol. The investment banks that were underwriting these CDS were the same ones who came under pressure during the crisis and couldn't pay of course, but luckily these CDSs were insured by AIG, except they also went under before it got bailed out by GOV. So the CDSs ended up getting paid by the govt lol. I suppose that if they were was such a market failure that MMs couldn't pay puts, someone else would end up holding that bag, maybe an insurer, and ultimately the govt would just step in if it got so bad the insurer itself was fucked.
The obvious reason is because people spend first and think about their future later but later never happens. I'm sure we all know people that are "present oriented". But for the people who were working towards their future, I think its because they suffer life tragedies such as divorce, death in the family, medical illnesses, and changes in the labor markets that diminishes the value of their labor and are unable to adapt to market trends. No joke, a former mentor of mine who is roughly 45 years older told me she had to take a little over a million dollars out of her 401(k) before she turned 59 and was hit by the 10% early withdrawal because she had to endure: (1) two life saving medical procedures which the insurance would not cover entirely. (2) her 15 yo son caused a minor accident while under the influence while driving a car registered under her name. Insurance didn't cover so she had to pay out-of-pocket for property damages, medical bills, legal fees, and etc. (3) Divorce. She was the bread winner in the family and she had to pay her and her husband's legal fees, arbitration fees, court fees, and other expenses associated with. They ended up selling the home and split the proceeds but the capital gains tax from the home sale mostly came from her end. (4) Labor Market Changes: The insurance coverage and defense legal practice took a hard hit after 2008 because insurance companies like AIG (we all know what happened to them lol) did a complete makeover on all their operations and cleaned house. That specific practice became less profitable so she had to transition to other legal practices which meant she had to learn and adjust her workflow to other practices resulting in a pay-cut for someone her skill/experience. She's a partner at a large law firm and a skilled attorney. At the end of the day, she's doing much better than the average American. Thankfully she made plenty of wise financial choices and can retire comfortably whenever she wants but won't be traveling as often as she hoped. When she told me this story, she said the three biggest things I should take away from it is: (1) marry with a pre-nup. Not to screw over your spouse but a pre-nup will set the terms of a divorce and splitting assets which means more money to you and your ex-spouse instead of going to your lawyer. (2) Buy a reliable Toyota worth no more than 15% of your take-home pay and put all your money saved into a roth 401 (3) Don't use cigarettes/alcohol/drugs because health is the best form of wealth.
Actually BlackJack (Card Counting) is a very good analogy. Also there’s the ability to hit ‘Blackjack’ overnight with an over 100% payout if a stock gaps up. Regarding tickers, I research all kinds of things - mainly whatever is going on around me, I’m naturally curious. Obviously it starts with what I know or what I use. I was in the Auto industry for 17 years, so hence AutoNation, Carvana, Carmax, Toyota, Rivian, Tesla. I know the business and how it works and the future and customers so it made sense to start there. Also the stuff around me, BTI makes my Vape and they’re by far the best device and value easily accessible, so I looked into them. LOVE made the couch we want so I looked into them. Worked for TM so that’s a no brainer. APHA I found at $2-3 from a YouTuber who did actual DD on them. Carnival at $8 from the same YouTuber, balance sheet DD showed they wouldn’t go bankrupt at the start of covid but they traded like they were going bankrupt. I just really like learning and researching companies to be honest, I feel that helps a lot. Like I’ve researched dozens of company’s for days and never traded them. Also I USUALLY, not even sometime, but usually, watch a stock trade everyday for months before I trade it, that helps a lot not just with knowing the stock but also understanding how irrational people and thus the market are. It’s like a Hunter in a tree stand watching a prey and never taking a shot, I enjoy just watching the action even without the money. Then once I find a company I do the usual, I look at charts, I look at the balance sheet, I look at valuations, I look at rsi and trends. Then I look at sentiment, yahoo message boards , seeking alpha, here, just to gauge what people are saying and if I agree or if they’re way off. For some reason I really value Yahoo, I don’t participate but I feel like there’s a certain value to seeing what regular people are saying about a stock when it’s anonymous. Even the crazy ones drop a DD gem here and there, they’re like private investigators. Then if I feel like I’m onto something (good or bad) - I listen to the last few conference calls and read the 10k / Q’s. One thing I’ll point out is to me it’s very important to go both ways, puts and calls so I’m never scared of the market and so half of my research isn’t a waste. If I start to feel like somethings a shit company, shit stock, overvalued, I get even more excited because now I have a protection company/play If I feel like the markets gonna tank - perfect example is Carvana and rivian today. There was no ‘play’ company wise on either — but they’re both overpriced garbage with no viable near term upside — thus they’re most likely to be affected by a sell off — so no company specific catalyst yesterday or today but I knew the market was trash and just begging to go lower, so I bought weekly puts on both at close, and they both rolled over with the market. I’ll do this for trades or hedges to guard my calls on the good companies. Oh and I never go over 40% long calls total — I have to offset with puts on the trash if I want more calls, that way if we get nuked or We find out Bill Wuang was just the bear sterns and there’s still a leman brother and AIG out there and they’re all using the same brokerages, or if we find out Tesla stock and commenters has been a Chinese/russian troll botfarm to prop our market and they dump shares and or evidence of fraud/fud whatever… just if any bad shit happenes then not only am I protected, but the outs would print harddddd… and I’d be excited looking for opportunities while everyone’s panicking and trying to withdrawal their 401k at completely the wrong time. So yea, it’s important to be comfortable going short and long. And I’ve never understood buying shares. When the hell do you sell? What do you do if it goes up 20% right when you buy it? What do you do if it goes down 10%. What do you do if it just doesn’t do shit? What if you like 20 companies? Which do you buy? What if you find another one but don’t have open cash? Which do you sell? That shit is brain damage to me, I don’t get it. Swing trading options makes all of those decisions for me. Get in and get out, on to the next one. If I stock goes down on a call, I lose, it’s over, onto the next play. If a stock goes up I sell at 100%, it’s over, onto the next play. Just like you said with AMC — that WOULD BE ME. I’d have no idea what to do, it’s wayyy wayyy to easy to not make a decision and do nothing. I’d own shit way to long and miss out on other stuff. And I don’t think I’d be pushed to research as much. Also, people don’t value time. They don’t value their time. They don’t even know how to value it. With options, theta does that for you. A high theta premium has saved me from getting into into countless bad trades I was either way to early in or just wrong about. Sorry for the Novel, hope that helps brother!
Pretty sure their insurance would cover it. I mean SIPC covers you but they have something that covers them, and that insurance is ultimately covered by the taxpayer... I may be wrong, but AIG got a bailout so they could cover claims by the BIG banks on their bad bets, right? This is all backstopped. I mean it's all bullshit, but it's all backstopped by even more complex and convoluted bullshit, right? Some one set me straight here.
BABA belongs to the government now. Expecting it to act like one that doesn't is a mistake. Munger is bottom-fishing but doesn't realize the fish are just painted there. Buffett has a rote strategy for creating a portfolio that attracts other people to buy shares in it. It almost imploded with AIG.
Well if I came off like a 18 year old who bet my student loan on it or a cuck that took out a 2nd mortgage you'll be disappointed. Had way OTM puts. Loss like $500 plus maybe another hundy on AIG puts. If it gets you off though, I just stay losing on options. Basically like heroin. Chasing the dragon. 100 here 100 there. 😉
It was way bigger than that! There were swaps on top of swaps. Morgan Stanley, Deutsche Bank, and Credit Suisse were holding heavy bags of these swaps, when the music stopped.The banking sector had a heavy exposure to AIG's insolvency, which created the setting for a cascading global financial crisis, spearheaded by under-collateralization and overstated creditworthiness.
It seems that your comment contains 1 or more links that are hard to tap for mobile users. I will extend those so they're easier for our sausage fingers to click! [Here is link number 1 - Previous text "AIG"](https://www.reuters.com/article/us-how-aig-fell-apart-idUSMAR85972720080918) ---- ^Please ^PM ^[\/u\/eganwall](http://reddit.com/user/eganwall) ^with ^issues ^or ^feedback! ^| ^[Code](https://github.com/eganwall/FatFingerHelperBot) ^| ^[Delete](https://reddit.com/message/compose/?to=FatFingerHelperBot&subject=delete&message=delete%20hqs8u25)
The main CDS insurer was [AIG](https://www.reuters.com/article/us-how-aig-fell-apart-idUSMAR85972720080918), which went bankrupt overnight until the FED bailed them out - I remember this as my synthetic exchange-traded funds backed by AIG went to zero overnight, and stayed that way until AIG was bailed. It was a huge company and it going to 0 was serious, but wasn't a large influence on the crisis.
Aside from the fact that it is possible for blue-chips to fail, you have to also account for the fact that by holding a losing position indefinitely, you are forfeiting other opportunities. There is opportunity lost when you simply hold a stock for extended periods. There are numerous examples of strong blue-chip and value companies which as technology and economic conditions change, if those companies do not adapt or if they were already over-valued - a recovery in the stock price can take years, decades, or never. Besides GE, look at AT&T, Cisco, US Steel, Kodak, Sears, Intel, IBM, Navistar, F.W. Woolworth, Union Carbide, AIG, Citigroup, Bank of America, etc. These are just the ones of the top of my head.
Enron, then Tyco, then worldcom, then the GFC and AIG, then Valeant, Wirecard and Luckin Coffee, and currently PTON, BYND, DKNG, AMC and about 80 more. Chanos has done a lot more since Enron. I think he’s a bit more than a has been despite what people who’ve been investing since January think.
The government saved the companies, but took ownership of them. Governments profited massively from the GM, Ford and AIG bailouts from instance. In the latter's case, they took about 95% ownership of the company post-bailout. Current shareholders were diluted into oblivion and didn't receive anything. In GM's case, the company was made bankrupt and governments (US and other countries) owned almost all of the new company (which was a new company entirely from a legal perspective). They gradually sold their ownership stakes for massive profit. All those bailouts did was to save existing jobs and make sure the economy didn't go through a 1929-style default. It's one of the stories that got the most unfair media treatment ever, and still does to this day because a ton of people like you believe these companies just got money to be saved.