This is quite funny that traders and investors actually prices the risk of the U.S. Treasury defaulting on thier obligations higher than Campbell Soup doing the same. With the amount of bonds being issued and the rising interest rates from the “Bong Vigilantes”, I have to agree that canned soup is safer at this point.
I heard a hearing with Ben Bernanke in front of Congress this weekend and he was asked if foreign investors could not buy all the Treasuries we are going to issue this year, would he monetize that debt via open market purchases. He said he would not, I am not sure how he is going to “not” do that unless we are going to raise taxes through the roof and seriously cut government spending. I don’t see either happening soon so I would think the easy way out for the politically minded folks, is to just print the money and devalue the dollar.
No, we’re not talking about stocking a bunker for survival. This is talk about safe investments.
U.S. Treasuries, traditionally considered the safest of all investments because the debt is backed by full faith and credit of the U.S. government, is losing favor among derivatives traders to Campbell Soup Co, Microsoft Corp and Intel Corp as concerns over the government’s massive deficits and costly bailouts mount.
Wow, that just about sums it up. $61.7 billion loss in a single quarter. That is some major derivative exposure and losses. I can’t believe we are actually throwing money at this black-hole of liabilities. There will be outrage if we actually bailout all these unregulated insurance contracts out. It really makes me question why I am sending 1/3rd of my pay to our representatives that in turn have decided to reward greedy corrupt people, if save this flawed system, that is one thing. But, I want to see the board, executives, shareholders and bondholders get wiped out so I know they are not profiting from this mess and we are setting a precedent that will make the next lot think twice about running these types of practices. Here was the most scary statement of the whole article, “Although he avoided offering a forecast on the first quarter, Mr. Liddy said A.I.G.’s outlook was “very much going to be influenced by what happens to the condition of the economy and the financial marketplace around the globe.”” Well if I read this right, you have insurance that is tied to the markets going up when it looks like we are about to have Great Depression 2.0. When do this intervention stop and we let the markets sort this out?
The loss of $22.95 a share compared with a fourth-quarter loss in the period a year ago of $5.3 billion or $2.08 a share. For the year, A.I.G. lost $99.3 billion or $37.84 a share, compared with a profit of $6.2 billion or $2.39 a share for 2007.
Warren can defend these all he wants but he was also the one who coined them as “Weapons of Financial Mass Destruction”. I am surprised that he has so much exposure ($67 billion) to these products. I hope he has been doing the right thing and keep reserves for these insurance contracts like a normal regulated insurance product would normally be.
I really don’t have much issue with the concept of a financial product like this, but be unregulated and a industry that did not have the foresight to self-implement some sort of reserve requirement is no good and as a important lesson, we should not bailout any of these companies that are taking losses like these, the fees were easy in the boom years so companies got greedy, now its time to instill fear back to these markets to keep the balance between fear and greed.
Saying “derivatives are dangerous,” Warren Buffett defended his use of them after they played the main role in driving Berkshire Hathaway Inc annual profit to a six-year low.
Buffett devoted one-fifth of his 21-page annual letter to Berkshire shareholders to explaining how he uses derivatives to make long-term bets on stock markets, corporate credit and other factors.
Ouch for the economy, this is a massive loss to post. It will be very important to watch how the markets react on this news. This could generate more continued selling pressure as this shakes investors nerves. I have noticed that everyone uses bad assets or debts when referring to losses. I believe that some of these are residential and commercial mortgages but I think the real cause are these credit-default swaps that have gone bad.
It is insane to bailout any company on these mis-placed bets. Its corporate welfare to say the least. I don’t want a single cent of our taxpayer dollars to go to this type of transaction. No one is telling us the truth because if they did, it would send people into the streets. When will this lapse in leadership be solved?
Royal Bank of Scotland unveiled the biggest loss in British corporate history, overshadowing a second banking sector bailout and sending its shares reeling to their lowest in over a quarter of a century.
RBS said Monday it was on course to report a 2008 loss of up to 28 billion pounds ($41 billion) and that further hits from bad debts were inevitable, bruising the European banking sector, which fell 8 percent to a 13-year low.
Here we go, we are now actually using real money to retire insurance contracts. Isn’t that great that we are going into debt to either by pieces of paper at face value or we are paying off insurance contracts that have already gone bust. How free market is that? There is so much profanity that I want use when I think about the evil that is being perpetrated on the American public.
This is basically robbery without the gun. What happens when an Insurance company issues too many contracts and a bunch come due???? They go bust and for good reason. In my opinion AIG should have been left to fail like anyone else who did not carry proper loss reserves. This gives future banks and insurance companies the lesson that is you make mistakes that puts your company at risk then you will pay the prices that everyone else pays, go out of business. If you want this too stop before we have so much debt that we default on our dollar then you need to educate people and start calling your representatives non-stop until you start hearing them change the tune of 100% bailout. Here is what one person said that had the guts to say it:
“‘Who are we bailing out here?’ is a broader question,” said Bill Bergman, an analyst at Morningstar Inc. in Chicago. “We’re using public resources to provide benefits to these counterparties that they wouldn’t have had in a free-market solution.”
American International Group Inc. retired another $16 billion in credit-default swaps, the contracts that almost caused the company’s collapse, after buying the underlying securities with help from the Federal Reserve.