Jim Rogers: Let AIG Go Bankrupt, Not America
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American International Group should be allowed to go bankrupt because keeping it and other sick financials alive on government support risks ruining the US economy, legendary investor Jim Rogers told CNBC Tuesday.
AIG [AIG 0.42 --- UNCH (0)
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, whose $61.66 billion fourth-quarter loss was the largest ever for a US company, received $30 billion more in government funds Monday. The insurer's financial health hasn't improved despite getting as much as $150 billion from the government last year."Suppose AIG goes bankrupt, it is better that AIG goes bankrupt and we have a horrible two or three years than that the whole US goes bankrupt," Rogers said. "AIG has trillions of dollars of obligations, let them fail, let the courts sort it out and start over. Otherwise we'll never start over."
On Monday, CEO Edward Liddy told CNBC that the insurer is far more stable and secure than it was last fall but acknowledged that it was "difficult to say" if AIG will need even more money from the government in the future.
Bailing out the banks is going to increase the debt spiral and finally cause the destruction of the world's biggest economy, Rogers said.
"I think it's astonishing, they're ruining the US economy, they're ruining the US government, they're ruining the US central bank and they're ruining the US dollar," he said.
"You are watching something in front of our eyes, very historically, which is basically the destruction of New York as a financial center and the destruction of America as the world's most powerful country."
Japan's economic "lost decade" was caused by trying to bail out the banks, and the West risks running out of money if it doesn't let the bad banks fail now, Rogers warned.
Systemic risk is going to be the same in 10 months, 5 years of 10 years if the fundamental problem is not solved, he added.
"The idea that you have too much debt, too much borrowing and too much consumption and you're going to solve that problem with more debt, more consumption and more borrowing? These people are nuts."
Wall Street and the City of London are going to be "disastrous" for years, like in the 1950s and 1960s, and in 30 years, finance will "dry up and wither away" as we are entering a "long period of hard times," he said.
"Power is shifting now from the money shifters, the guys who trade paper and money, to people who produce real goods. What you should do is become a farmer, or start a farming network," Rogers said.
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well said.
time to be learning agriculture.
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where you get this piece of news....from cnbc?
i like to go to the site myself.... -
yeah CNBC. it has a video interview with Jim rogers.
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The whole idea of an industry that only manages money and producing nothing could command salaries dozens of times higher is a contradiction anyhow.
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jim rogers a singaporean....not feature in channelnewsasia but cnbc....
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talking about big blue chips,
it suddenly realise to the shock of my life
that citi is now 1.20. it used to be about 50 bucks around the same time in 2007.
time to invest more in this blue chip?
I mean how much lower can it go?
if i assume its wise to buy it for the LONG TERM, then, should buy even more now.
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Originally posted by likedatosocan:
talking about big blue chips,
it suddenly realise to the shock of my life
that citi is now 1.20. it used to be about 50 bucks around the same time in 2007.
time to invest more in this blue chip?
I mean how much lower can it go?
if i assume its wise to buy it for the LONG TERM, then, should buy even more now.
it it really goes bust, you get 0 in value...that how stock works...
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Originally posted by likedatosocan:
talking about big blue chips,
it suddenly realise to the shock of my life
that citi is now 1.20. it used to be about 50 bucks around the same time in 2007.
time to invest more in this blue chip?
I mean how much lower can it go?
if i assume its wise to buy it for the LONG TERM, then, should buy even more now.
why not, no risk, no gain, GIC already pumped money in, trust them, afterall they got lots of top analysis peoples around. Better put all your money in and hope for the best, if it goes back to $50 next years, just imagine, you can shake legs for next 2 generations if you put 1 million in now. -
Originally posted by angel7030:
why not, no risk, no gain, GIC already pumped money in, trust them, afterall they got lots of top analysis peoples around. Better put all your money in and hope for the best, if it goes back to $50 next years, just imagine, you can shake legs for next 2 generations if you put 1 million in now.next years can mean many many next years hor.....
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Doesn't matter. After all, the same people are running the show.
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Govt moves to aid AIG yet again; when will it end?
By JEANNINE AVERSA and IEVA M. AUGSTUMS, AP Business Writers Jeannine Aversa And Ieva M. Augstums, Ap Business Writers Mon Mar 2, 6:39 pm ET
http://news.yahoo.com/s/ap/20090302/ap_on_bi_ge/aig_rescue/print
WASHINGTON – A new definition of desperate times: Even as the government threw a stunning new $30 billion lifeline to American International Group on Monday, the beleaguered insurance giant confirmed it had lost more than twice that much, $62 billion, in a single three-month period.
And many more billions of federal dollars are almost sure to be shoveled into the company for a simple reason: Officials fear its collapse would cripple financial markets in the U.S. and around the world.
The source of trouble for AIG, which has 74 million customers worldwide and operations in more than 130 countries, is its business insuring mortgage-backed securities and other debt against default. That business imploded once the credit crisis struck with force.
The government has now made four separate efforts to save the company, totaling more than $170 billion.
AIG is so big and sprawling, so intertwined with institutions around the globe, that its downfall could set off a vicious chain reaction. Upheaval on such a global scale would plunge the U.S. economy deeper into recession, drive up unemployment and stifle hopes for an economic rebound any time soon.
The company provides life, property and other insurance offerings, with 30 million policyholders in the United States alone. It also provides asset-management services and airplane leases.
Its International Lease Finance Corp., which leases jets to airlines, has been up for sale and was thought to be one of the insurer's jewels. But falling travel demand has forced airlines to shrink fleets.
AIG's businesses also are linked to mutual funds, annuities and other retirement products held by many Americans.
"Given the systemic risk AIG continues to pose and the fragility of markets today, the potential cost to the economy and the taxpayer of government inaction would be extremely high," the Treasury Department and the Federal Reserve said in a joint statement Monday.
Turning AIG into a smaller, more viable company, "will take time and possibly further government support," the Treasury and the Fed acknowledged.
Indeed, many analysts say the United States will eventually be forced to funnel billions more into the company, which the government seized control of last year. And they say AIG has become a seemingly bottomless money pit that poses a cautionary tale about the effectiveness of U.S. bailouts.
Mark Williams, professor of finance and economics at Boston University and a former Federal Reserve bank examiner, said he thinks at least $200 billion more will have to be extended to AIG.
"AIG is holding the U.S. government hostage at gunpoint," Williams said. "The government can't cut its losses because it is too far into AIG. It has no choice but to keep on pumping money into the company."
Said Terry Connelly, dean of Golden Gate University's Ageno School of Business in San Francisco: "If AIG fails, the taxpayer wearing his or her other hats — the worker, the student loan payer, the car buyer, the homeowner — will suffer even more."
"What's going on now is the government is shifting from a tough-love lender to a little more friendly equity investor," Connelly said.
At the White House, press secretary Robert Gibbs said, "We're focused on taking the steps necessary to restructure AIG so that it, in the long run, no longer poses the type of systemic threat that it poses right now."
Under the new deal, the government revamped its rescue package, saying it will give AIG an additional $30 billion money on an "as needed" basis. AIG's bailout now totals around $173 billion.
The American public already is angry about using taxpayer money to bankroll a string of big financial company bailouts — including Citigroup, Bank of America and mortgage giants Fannie Mae and Freddie Mac.
Lawmakers also have expressed skepticism over the rescue strategies of the new Obama administration.
"There are still too many unanswered questions about how AIG spent" some of the rescue money the government has already put up, said Rep. Elijah Cummings, D-Md., a member of the House Committee on Oversight and Government Reform.
Doubting investors have cut the company's share price to 45 cents.
Among its biggest problems: It can't find buyers for pieces of its company — such as Asia-based American International Assurance Co. and American Life Insurance Co., which operates in 50 countries — that it hoped to sell to repay the government. As of Feb. 13, AIG had sold interests in nine businesses.
The additional $30 billion credit line AIG received Monday will come from the government's $700 billion financial bailout pot.
In an interview on NBC's "Today" show, AIG Chairman and Chief Executive Edward Liddy said: "The new $30 billion is a standby line. It's not necessarily something that we think we'll have to draw on right away."
But Liddy, who joined AIG after its initial bailout and is being paid an annual salary of $1, backed off earlier statements about paying back taxpayers in full within two years.
The government announcement came as AIG, once the world's largest insurer, reported it lost $61.7 billion in the fourth quarter of last year, the biggest quarterly loss in U.S. corporate history.
The revamped package also reduces interest payments AIG has to pay on government loans. The Treasury will exchange its existing $40 billion in AIG stock for preferred shares with revised terms that more closely resemble common equity.
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AIG looks like a sick man who refuses to get well.....
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den many ppl will be hong gan liao.
bt u can save one, u canot save all.
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Because its just too freaking big? Maybe its time to sell off the different arms of AIG
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If u read in other post, AIG is trying to do that. They try to sell their asia-pacific ones for US 20 to 30 bil.
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At the rate the US is printing money, I think the greenback is gonna become worthless soon. It doesn't matter if they print 30billion more to give to AIG, its gonna kill the value of USD anyway. Might as well don't bother with the printing process, just give a piece of paper that says $30 Billion, signed OBAMA, and stamp "FED" on it. Save the trees man.
I wonder how long more will China put up with this and stop buying US Debts.
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USA should pary their debts instead of saving AIG..
freaking hopeless
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A ailing person should take drastic measures. The govt need to do something totally unseen and exceptional in order to give AIG a kiss of life ..........
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Originally posted by likedatosocan:
talking about big blue chips,
it suddenly realise to the shock of my life
that citi is now 1.20. it used to be about 50 bucks around the same time in 2007.
time to invest more in this blue chip?
I mean how much lower can it go?
if i assume its wise to buy it for the LONG TERM, then, should buy even more now.
hahaha... buy citi at $1.20 now and if it does not go down further and the US stock market doubles... Citi also doubles to $2.40
Please!!!! you can do so much better.
Don't trade stocks with propaganda information...
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Originally posted by AndrewPKYap:
hahaha... buy citi at $1.20 now and if it does not go down further and the US stock market doubles... Citi also doubles to $2.40
Please!!!! you can do so much better.
Don't trade stocks with propaganda information...
Yes ... Learn from Mr Andrew ... Buy already then go on a relentless propaganda streak .. tell everyone citi is going to skyrocket ...
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Originally posted by Shotgun:
At the rate the US is printing money, I think the greenback is gonna become worthless soon. It doesn't matter if they print 30billion more to give to AIG, its gonna kill the value of USD anyway. Might as well don't bother with the printing process, just give a piece of paper that says $30 Billion, signed OBAMA, and stamp "FED" on it. Save the trees man.
I wonder how long more will China put up with this and stop buying US Debts.
China stops buying US treasuries?... it is not something that China can afford to do.... nobody (at least nobody worth mentioning) accepts Chinese Yuan in international trade. They need US dollars to trade.
If US dollars fall too far, then it would become cheaper to produce in the US then in China. Already, the US economy is getting cheaper by the day because of deflation there.
So basically check mate.
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Originally posted by AndrewPKYap:
China stops buying US treasuries?... it is not something that China can afford to do.... nobody (at least nobody worth mentioning) accepts Chinese Yuan in international trade. They need US dollars to trade.
If US dollars fall too far, then it would become cheaper to produce in the US then in China. Already, the US economy is getting cheaper by the day because of deflation there.
So basically check mate.
Sir ....... For your information , both China and Jap bought a lot of the US T-bills ... (when I say a lot ... its in billions )
This is one of the reasons why china will want to keep their currency low ......
If the T Bills matures or even sold before maturity, even when they are initially bought at a discount, it will be translated to losses when china currency inflates ....... Pure maths and calculation.
*Selling T bills before maturity means giving a lower discount .
* ( Even though I am half sick now , I think my logic should be correct. But do correct me if I am wrong .) I did a study on T bills long ago and cannot rem totally.
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Originally posted by Ice Dive:
Sir ....... For your information , both China and Jap bought a lot of the US T-bills ... (when I say a lot ... its in billions )
This is one of the reasons why china will want to keep their currency low ......
If the T Bills matures or even sold before maturity, even when they are initially bought at a discount, it will be translated to losses when china currency inflates ....... Pure maths and calculation.
*Selling T bills before maturity means giving a lower discount .
* ( Even though I am half sick now , I think my logic should be correct. But do correct me if I am wrong .) I did a study on T bills long ago and cannot rem totally.
T Bills or T Bonds?
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Imagine if AIG collapsed.
1How many hundreds of million of people with policies would be directly affected by having their policies terminated and money absolutely gone?
2.How many insurance agents and staff would become jobless?
Perhaps Jim Rogers was correct? Is it worth saving AIG, compared to the billion other companies and people who could make better use of bail out funds?
AIG's funds are actually depositors money from which it is used to play the stock markets and derivaties in order to pay off the high interests and returns for policies bought.
The stock market is close to dead. AIG's invested policy holder's fund may now be close to nothing. Which was why it need taxpayers' bailout fund, to pay off policies holders whose insurance policy had matured.
Think of the hundreds of millions who bought policies. Would the bailout funds be enough to pay off even the annual obligations of matured policies?
At least banks don't have maturity dates on deposits, and even if they do, are generally smaller in interest returns than AIG or insurance companies.
Saving banks is ok. There are hardly bank runs. But AIG is not a bank. It is worse. It has to automatically pay out on its maturity of policies or accidents. Can US taxpayer continue on paying indefinately? Or tell AIG customers sorry, the way they had told Lehman Brothers' customers sorry?
I'm with Jim Rogers on this.
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Originally posted by Shotgun:
T Bills or T Bonds?
I am refering to coupons ... so its T Bills ..In in the nutshell, my point is that its not in china favour for yuan to appreciate against USD but not for the reason Mr Andrew said as that is a unlikely possibility.
(* Got to rest *)