Jim Rogers: Let AIG Go Bankrupt, Not America
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Originally posted by Shotgun:
So, are we coming to an end of the financial system? A system of "virtual" money as some would put it.
If so, what is gonna replace it?
How else is the powerful going to dominate the others if there is no such thing as money?
I will not say 'end of the financial system' but that the system needs to be overhauled.
I just hope western powers be wise enough to incorperate China, India, Africa and Latin America into the decision making processes. -
Originally posted by xtreyier:
An explanation, but not enough clarity.
100 million shares exists.
Only 10 million shares changed hand, at 10cts per share. The highest price rose to was $1.00.
The owners, eg ABC, of these 10 million shares quickly sold it at $1 per share.
Immediately the new owners, eg DEF, of these 10million shares saw the price drop to 10cts. They lost 90cts to a share IF THEY SELL now.
Q: Where did the 90cts per share went?
Ans: It went to ABC when they BOUGHT from ABC. Money 'dont disappear'. It goes into someone else pocket WHEN a transaction occurs. Is this so hard to understand?
Q2: What about the other 90 million share?
Ans: It was'nt sold. There was NO transaction. It's value is 10cts now. It's in the 'asset value' range now and use for record purpose, such as balance sheets or collateral for loans.
Q3. How can a share that rose to $1 from 10cts drop down back to 10cts?
Ans: TRANSACTIONS. BUY & SELLING of stocks. Heavy buying or selling cause the VALUE to rise or fall. Stocks prices DON'T JUST rise or fall on their own MAGICALLY OR AT THE SNAP OF FINGERS.
I dont mean you. This following passage is for someone else:- There are people who dont study banking. It is not a crime. It is only a crime when those who DO study banking assumed that they know it all and deride others who seek clearer explanations or misunderstand.
Isnt the example quote by you saying that money is via valuation ..... Its not physical money what !! Which is why reports always say its undervalue or overvalue ... But the actual value is the current share price value.Furthermore , what you see trading in the shares are those in free float .
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Originally posted by maxtor:
let me try.
firstly i want to clarify that i am talking about fixed income instruments with coupons, ie treasury notes and bonds. treasury bills have tenures less than 1 year and therefore usually do not pay a coupon. it is this coupon payments that will affect the value of the bond.
a bond is valued by 1) the present value of the future maturity amount + 2) the present value of the coupons.
lets take a 10 year $1000000 bond yielding 5% when interest rates are 5% ( this means the bond is selling at par). this bond pays interest annually.
the present value of the bond when interest rates are 5% is =
5000 (1- (1.05)^ -10) 100000
________________ + ________ (divided by)
.05 (1.05)^10
= 38608.675 ( present value of future coupons) + 61391.325 (present value of maturity amount)
= $100000
Now lets take this same 10 year $100000 bond yielding 5% when interest rates are 1%. this bond also pays interest annually.
the present value of the bond when interest rates are 1% is =
5000 ( 1 - ( 1.01)^-10) 100000
________________ + ______ (divided by)
.01 (1.01)^10
= 47356.523 (present value of future coupons) + 90528.695 (present value of maturity amount)
= $137885.219
So we can see from this simple exercise that when interest rates are lower, bonds that have a higher interest rate than that of the current interest rates would sell at a premium, rather than a discount.
of course there are other issues that come into the pricing, including but not limited to, the duration, convexity, effect of time on a bond's price, as well as market supply and demand. what i am trying to show you is purely the academic way of calculation.
Have to take time to digest this ... But as I said earlier ... I am referring to T Bills ..But its still correct that China will not want their money to appreciate as it lessen their returns when changed back their investments to yuan .
To bonds , even if they are selling at a higher price US based price , their returns will be lower when yuan appreciate.
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Originally posted by xtreyier:
An explanation, but not enough clarity.
100 million shares exists.
Only 10 million shares changed hand, at 10cts per share. The highest price rose to was $1.00.
The owners, eg ABC, of these 10 million shares quickly sold it at $1 per share.
Immediately the new owners, eg DEF, of these 10million shares saw the price drop to 10cts. They lost 90cts to a share IF THEY SELL now.
Q: Where did the 90cts per share went?
Ans: It went to ABC when they BOUGHT from ABC. Money 'dont disappear'. It goes into someone else pocket WHEN a transaction occurs. Is this so hard to understand?
Q2: What about the other 90 million share?
Ans: It was'nt sold. There was NO transaction. It's value is 10cts now. It's in the 'asset value' range now and use for record purpose, such as balance sheets or collateral for loans.
Q3. How can a share that rose to $1 from 10cts drop down back to 10cts?
Ans: TRANSACTIONS. BUY & SELLING of stocks. Heavy buying or selling cause the VALUE to rise or fall. Stocks prices DON'T JUST rise or fall on their own MAGICALLY OR AT THE SNAP OF FINGERS.
I dont mean you. This following passage is for someone else:- There are people who dont study banking. It is not a crime. It is only a crime when those who DO study banking assumed that they know it all and deride others who seek clearer explanations or misunderstand.
I dont mean you. This following passage is for someone else:- There are people who dont study banking. It is not a crime. It is only a crime when those who DO study banking assumed that they know it all and deride others who seek clearer explanations or misunderstand.
The fact that we are all here means we are all sharing view and opinion, isn't it? If we are deriding you of clearer explanation or understand, would we doing so much explanation?
The point about you is that you come here, post views that are based on your own personal experience.
When we point out your mistake, you either argue for the sake of arguing or post further personal views that are not based on logic or fact. -
Originally posted by 4sg:
The fact that we are all here means we are all sharing view and opinion, isn't it? If we are deriding you of clearer explanation or understand, would we doing so much explanation?
The point about you is that you come here, post views that are based on your own personal experience.
When we point out your mistake, you either argue for the sake of arguing or post further personal views that are not based on logic or fact.
???Do you even know what you are saying?
But no worries. I am not forcing anyone to listen to me. Go ahead with your gooblespeak, and may it be of help to real people suffering in the real world. It's only your opinion of me, and 'illogical' to you or not base on 'fact' to you and thickheaded others like you. You think i bother? I am sure there are more intelligent people and less egoistical than you here who knows better.
Cheers and have fun with your...... virtual factions. Do let me know whom you buy your house from. It seems your seller accepts 'virtual' money. I wonder if i can convince the kopi-tiam to accept 'virtual' money for my cup of steaming kopi-o too!
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Originally posted by Ice Dive:
Isnt the example quote by you saying that money is via valuation ..... Its not physical money what !! Which is why reports always say its undervalue or overvalue ... But the actual value is the current share price value.Furthermore , what you see trading in the shares are those in free float .
value = what you think an item is worth in monetary terms = free market.
Is Citibank shares worth more than $1.50?
if you THINK yes = you buy.
If you think NO = you no buy.
Is my kopi-o worth 90cts?
If i think yes = i buy.
If i think no = I no buy or look for cheaper one.
The common theme here is - Buy. When you BUY, you are paying PHYSICAL money=current value.
When you NO BUY = only a value, can be undervalue, overvalue
PS: dont take me seriously please. I am only a nobody and probably helped no one. Here is drifting off topic. I am only against supporting AIG. It would be suicide for taxpayers.
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Originally posted by xtreyier:
value = what you think an item is worth in monetary terms = free market.
Is Citibank shares worth more than $1.50?
if you THINK yes = you buy.
If you think NO = you no buy.
Is my kopi-o worth 90cts?
If i think yes = i buy.
If i think no = I no buy or look for cheaper one.
The common theme here is - Buy. When you BUY, you are paying PHYSICAL money=current value.
When you NO BUY = only a value, can be undervalue, overvalue
PS: dont take me seriously please. I am only a nobody and probably helped no one. Here is drifting off topic. I am only against supporting AIG. It would be suicide for taxpayers.
Eh ... you do not play stocks right ...
Then you should not be worried about money written off at all .. It will come back in the future .. The fact that trillions are washed away is because we are talking about current valuation as compared to the pass valuation + other things
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Originally posted by xtreyier:
SIGH....................Question 1:
When one pledges the shares as collateral for loan, eg $1.7million, and the share drops to $0 per share, WHO HAS THE $1.7MILLION ?
Ans: Hirer has it.
Question 2:
When shares are pledges as COLLATERAL, and hirer defaults, WHO OWNS the COLLATERAL and is responsible for it?
Ans: The sucker - BANK.
Question 3:
Did money 'disappeared'?
Ans: It sure disappeared! From the bank, but only to the defaulting hirer.
Question 4:
Why does the central bank needs to pump 'liquidity' into the bank for the 'presumed loss'?
Ans: Because the sucker bank had not SOLD the worthless share, it still has a 'book value' of $1.7M to it. And at the end of the day, when the accounts must be balance as per 'mark to market' value, it shows $1.7M 'loss', so Central. Bank injects $$ to make up for the short fall.
The bank shouid sell the damn share and accept the loss, which they don't, and thus bankers go on their knees and beg for bailout funds, hoping the stock market will shot up again. Who pays for the bailout funds? Dumb taxpayers, caused banks dont wanna accept their losses and stop funding stockmarket operations(casino)
Told yer stock market is a casino dump, and dumber folks still accepts stock market 'value' in this current day and age. They better raise capital thru other means. Go for long term true investments and live on dividends by all means. But if you are the kind that watches the stock movement day by day, hell, you are a gambler.
Spare the goobletalk and cut straight to the clarified point please. The only 'virtual' money there is are hell notes and linden notes from 2nd life.com ( but even that has a value - make an internet transfer of $1000 real money to buy eg a virtual property there, and when you go to the bank in the real world to draw money, your bank account is lighter by $1000 'rea;' money - the money went into the pockets of 2nd life site owners and did not 'disappear')
You are even more stupid then I thought.
If the shares are worth $5 million, they can be used as collateral, not necessarily they are used as collateral, with $5 million in consideration.
If the shares are worth $1 million, they can be used as collateral, not necessarily they are used as collateral, with $1 million in consideration. $4 million has disappeared from the system.
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Originally posted by AndrewPKYap:
You are even more stupid then I thought.
If the shares are worth $5 million, they can be used as collateral, not necessarily they are used as collateral, with $5 million in consideration.
If the shares are worth $1 million, they can be used as collateral, not necessarily they are used as collateral, with $1 million in consideration. $4 million has disappeared from the system.
Wah ..... no need so fierce .... majiam your anti PAP propaganda .... You work in constructions ah ... screaming at people ... haha
The money can be put to better use than to bail out AIG . Imagine govt invest in a 100 M project .
100 M to main con
Main con sub 80 M to company A
Company A sub 50 M to company B
Company B sub 10 M to company C
Company C buy 5 M dollar stuffs .
Question , what is the amount of money created from this initial 100 M investment ?
Then again .. I may have some insurance by AIG .. So cannot let it fall ...
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US, Europe Banks Get Cash From AIG Rescue: Report
At least two dozen American and European banks benefited from the bailout of American International Group, with approximately $50 billion paid out to them since the Federal Reserve first gave aid to the insurance giant, the Wall Street Journal reported Saturday.
Goldman Sachs [GS 75.65
-6.07 (-7.43%) 
]
and Deutsche Bank received about $6 billion between September and December last year, the paper said, quoting a confidential document and people familiar with the matter.Other banks that received large payouts from AIG late last year include Merill Lynch, which was bought by Bank of America [BAC 3.14
-0.03 (-0.95%) ]
, and France's Societe Generale, according to the report.Morgan Stanley [MS 17.18
-0.80 (-4.45%) ]
, Royal Bank of Scotland, HSBC, Calyon, Barclays, Rabobank, Danske Bank, Santander, Wachovia and Bank of America are also among the counterparties who benefited from the AIG bailout, the paper said.AIG, whose $61.66 billion fourth-quarter loss was the largest ever for a US company, received $30 billion more in government funds last Monday.
The insurer's financial health hasn't improved despite getting as much as $150 billion from the government last year.
Lawmakers have pressed the insurer to disclose its counterparties and have slammed the secrecy of banking bailouts.
Fed Vice Chairman Donald Kohn said revealing names risked jeopardizing AIG's continuing business but said the counterparties numbered in the "millions" and were spread all over the globe, including pension funds and US households, according to a Reuters report.
Congressmen criticized the generosity of the bailout for counterparties, and one lawmaker said AIG had to be bailed out because otherwise it was "going to bring down Europe."
The names of the counterparties who benefited from the AIG rescue have still not been officially disclosed.
The taxpayer-funded rescue of AIG helped prevent its counterparties from sustaining immediate losses on mortgage-backed securities and other assets they had insured through the company.
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one of the reason why AIG was bailout.
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The crux of this whole issue is self-interest against collective interest, isn't it? Is looking after the interest of AIG policy holders (or policy holders of its subsidiaries) really sufficient reason to continuously bail them out?
Look at it another way and ignore what Jim Rogers has said for a moment. This started out as a financial crisis (with Bear Stearns) that spiralled out of control whose contagion effect is now witnessed in other key industries (think AIG for insurers and the big 3 automakers in the auto industry) with no imminent signs of abating.
Fact of the matter is, the present policies pursued are quite simply unsustainable. For all the regrets the Treasury might have had in allowing Lehman Brothers to fail, propping up every other company out there running into financial trouble isn't exactly an optimal solution, is it?
After all, where is the buck going to stop if this trend carries on?
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Originally posted by walesa:
The crux of this whole issue is self-interest against collective interest, isn't it? Is looking after the interest of AIG policy holders (or policy holders of its subsidiaries) really sufficient reason to continuously bail them out?
Look at it another way and ignore what Jim Rogers has said for a moment. This started out as a financial crisis (with Bear Stearns) that spiralled out of control whose contagion effect is now witnessed in other key industries (think AIG for insurers and the big 3 automakers in the auto industry) with no imminent signs of abating.
Fact of the matter is, the present policies pursued are quite simply unsustainable. For all the regrets the Treasury might have had in allowing Lehman Brothers to fail, propping up every other company out there running into financial trouble isn't exactly an optimal solution, is it?
After all, where is the buck going to stop if this trend carries on?
Last week, the Business Times ran an article justifying the fight to keep AIG private by stating the interests of the numerous insurance policy holders and the combined amount of money in these funds. Can't remember the exact number but I think the amount nears something like US$9.6 trillion dollars.
I am wondering however, would these interests be compromised even if AIG was nationalised? Is this really the issue at hand? Or is it the credit default swaps market the government is trying to prop up while trying their best to keep low?
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Originally posted by maxtor:
Last week, the Business Times ran an article justifying the fight to keep AIG private by stating the interests of the numerous insurance policy holders and the combined amount of money in these funds. Can't remember the exact number but I think the amount nears something like US$9.6 trillion dollars.
I am wondering however, would these interests be compromised even if AIG was nationalised? Is this really the issue at hand? Or is it the credit default swaps market the government is trying to prop up while trying their best to keep low?
Nationalizing banks or insurers is, for me, just a catch phrase which is nothing more than a bailout. After all, did Gordon Brown not say the UK government's stake in RBS was just a temporary measure - which is widely regarded as nationalization in the UK - with the ultimate aim of restoring ownership in private hands when the recession is over?
Fact of the matter is, the argument can take both ways. If you let AIG fail, the short-term ramifications on financial markets and the insurance conglomerates will be disastrous, not to mention the inevitable calamity awaiting millions worldwide with direct exposure to such firms. The knock-on here will have major macro- and microeconomic impact that could potentially hurt the US and global economies even further.
However, if that's good enough reason to bail out such firms, where will this end? Will there come a day when the US government will need to bail out McDonald's and Coca-Cola with taxpayers' money too?
I certainly don't think the US government is trying to prop up the credits market - ask anyone in the industry and they'd tell you it's not likely things will go back to what it once were even when a recovery eventually comes along.
CDS, just like any other financial instruments, are reflective of market sentiments and the large spreads you have witnessed lately is indicative of the turbulent times you live in - no government in the world (just as how Central Banks worldwide have not been able to do much to restore liquidity to their financial systems) would be foolish enough to think they could actually do much to prop up the markets by targetting CDS alone.
Personally, having traded credit products in the past, I'm glad I'm no longer in this business now given the environment we are in...
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Rogers Says Farmers Will Drive Lamborghinis, Not Brokers
http://www.bloomberg.com/news/av/
He is so trying to push up commodity prices....
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Originally posted by maxtor:
Last week, the Business Times ran an article justifying the fight to keep AIG private by stating the interests of the numerous insurance policy holders and the combined amount of money in these funds. Can't remember the exact number but I think the amount nears something like US$9.6 trillion dollars.
I am wondering however, would these interests be compromised even if AIG was nationalised? Is this really the issue at hand? Or is it the credit default swaps market the government is trying to prop up while trying their best to keep low?
I think the issue would be that if AIG was nationalised tax payers' money would have to be used to pay those 9.6 trillion dollars. A lot of those policy holders aren't even American.So potentially if AIG is nationalised, Americans tax money would also have to pay for the insurance for these foreign policy holders as well.
I'm thinking that's the scenario they want to avoid.
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Unless of course they print US$ to pay the 9.6 trillion dollars... sure American tax payers pay but so does the rest of the world, considering how big the external debt is.