Yesterday, AIG reported the biggest loss in America’s corporate history (just a few days after RBS similarly reported the UK’s biggest corporate history- a staggering, but nevertheless still smaller £24.1bn). With a loss of $61bn, the insurance firm again ran to the government to seek for more aid, which they got in the amount of $30bn in exchange of majority ownership in two of their money-makers: American Insurance Association (AIA), its business in Asia and American Life Insurance Corporation (ALICO). Remember that the firm entered this pit after they decided to issue billions of dollars worth of credit default swaps, the instrument which had it share of the spotlight after other firms, notably Lehmann Brothers, fell victim to the failure to manage risks associated with CDS. The trouble of the firm is further compounded by the news that former CEO Hank Greenberg will be filing a lawsuit against the company for allegedly being misled to buy inflated prices of the AIG stock. As the firm’s biggest shareholder, Greenberg’s wealth is without a doubt wiped out by what has happened.
It was a rather exciting day for the markets as the Down Jones plunged under 7,000 to 6,763, its lowest level since around 2nd quarter of 1997. More interestingly, the S&P managed to stay barely above the 700 threshold at 700.82. With futures on the green, there is a possiblity to escape crossing that threshold… at least for a day or two. As of 3am CT, there’s about 120-point move to the north so I am hopeful for a bounce after a long time of bloody trading; S&P has been negative in 9 out of the last 10 sessions.
Other major news revolved around other financial institutions with HSBC performing a $17.7bn issue rights as well as cutting its dividend to increase its capital level. This caused its shares to suffer by as much as a 19% drop in NY. Moving to BofA, CEO Ken Lewis claims the $20bn aid sought for the acquisition of Merrill Lynch was a tactical mistake and it put the bank on the same level as Citi. In the commodities market, while still under 50/barrel, oil saw a 10% drop to a little over 40 a barrel today.
Some random thoughts:
- The market’s been waaay oversold that it would just be quite right (AND REFRESHING) to see a bounce. I need to find out how I can start investing and take advantage of this great opportunity that is the depressed prices.
- As much as I should be appreciating that Obama is keeping his word to bring change, I just don’t think it is viable for him to achieve all the plans he laid out in his State of the Union Address. It’s just way. too. ambitious.