BoA buy Merrill, Lehman Bankrupt, and AIG needs 40 billion by Monday morning...

NEW -> Contingent Buyer Assistance Program
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Human sacrifice, dogs and cats living together... mass hysteria!
 
[quote author="theBigD" date=1221479689]<a href="http://www.nytimes.com/2008/09/15/business/15lehman.html?hp">This is crazy. What's next?</a></blockquote>


This is nothing crazy... just a reality check.
 
[quote author="redline" date=1221509343][quote author="theBigD" date=1221479689]<a href="http://www.nytimes.com/2008/09/15/business/15lehman.html?hp">This is crazy. What's next?</a></blockquote>


This is nothing crazy... just a reality check.</blockquote>


Wrong, what was crazy was the prices of these properties profiled in IHB in the first place.
 
Question? Is AIG and insurance firm, or investment house? Why are they failing? Did they hold billions in bad real estate? I'm confused...
 
[quote author="GeorgeO" date=1221527994]Question? Is AIG and insurance firm, or investment house? Why are they failing? Did they hold billions in bad real estate? I'm confused...</blockquote>


They're an insurance firm...and they insured all types of wonderful mortgages :)



Just thank the housing bubble for all that is happening now.
 
[quote author="GeorgeO" date=1221527994]Question? Is AIG and insurance firm, or investment house? Why are they failing? Did they hold billions in bad real estate? I'm confused...</blockquote>


AIG is getting whacked because they sold guarantees on mortage-related securities (CDO's) by using credit swaps. When things got dicey and prices started falling, banks collapsing and the biggest of them all...the infamous "credit crunch" has sent the value of these CDO's south forcing AIG to take big losses.



They were able to raise capital in recent times to take these hits. I think I read they are asking for a 40B loan from the FED which can help them ride this through. If they are able to ride it through....the 5.50 share prices is looking a bit attractive for the long term. I'm keeping my eyes open, and cash ready.
 
blackvault,



My coworker jumped the gun on the AIG buy and ate it today. :(



I'm wondering when BAC will become a buy .. they're down w/the Merrill merger and could come out looking strong in the long term. Haven't researched yet, just thinking out loud.
 
[quote author="IrvineRenter" date=1221480475]

Human sacrifice, dogs and cats living together... mass hysteria!</blockquote>


Great, all we need then are proton packs for Bernake, Paulson, Obama & McCain then and the day will be saved!
 
[quote author="ogredave" date=1221530849]blackvault,



My coworker jumped the gun on the AIG buy and ate it today. :(



I'm wondering when BAC will become a buy .. they're down w/the Merrill merger and could come out looking strong in the long term. Haven't researched yet, just thinking out loud.</blockquote>


Yeah. I wouldn't jump on AIG until they can get capital. I'm doing research right now to see exactly how much exposure they have. I'm seeing around 38B so far. So if they can get this 40B they should have enough to sustain the turbulance (unless they are cooking the books and not being truthfull about what their exposure is). However, even if you do buy your money will be dead money for a long time as the financial market won't rebound anytime soon.



Point is...if they can survive then you can only assume that they will resume business and the share price will EVENTUALLY (who knows when) rebound. If they don't(raise capital) then your money is shot and that is the exposure I'm not willing to take on myself until I know for sure.



As far as BAC...I bought in today. Not fully just 33% in so far and doing it in 3 stages. I've done my anaylysis/research on them and wanted to buy them at 30-33 for a couple of weeks but never pulled the trigger...but the news about Merill just confirmed that they are comfortable in their own shoes to do something like buy Merill. Because honestly...why would you buy Merill for 60B if you are worried about raising capital to fund your losses (caugh...WaMu, Bear, Lehman, AIG...etc...)



As a result their shares slipped mainly because shares always drop when a company buys another company and second buying Merill does add some risk. But I like risk, calculated risk that is, and I like this move personally on BAC part because it adds a big list of clients to their portfolio and BAC is all about expanding their client base. So when their shares dropped to 27 bucks, its a steal IMO. But it can go down further...that is why I only buy 33% at a time. If it goes up...so be it...if it goes down...I'll buy more to cut my cost basis.
 
[quote author="blackvault" date=1221529279][quote author="GeorgeO" date=1221527994]Question? Is AIG and insurance firm, or investment house? Why are they failing? Did they hold billions in bad real estate? I'm confused...</blockquote>


AIG is getting whacked because they sold guarantees on mortage-related securities (CDO's) by using credit swaps. When things got dicey and prices started falling, banks collapsing and the biggest of them all...the infamous "credit crunch" has sent the value of these CDO's south forcing AIG to take big losses.



They were able to raise capital in recent times to take these hits. I think I read they are asking for a 40B loan from the FED which can help them ride this through. If they are able to ride it through....the 5.50 share prices is looking a bit attractive for the long term. I'm keeping my eyes open, and cash ready.</blockquote>


AIG is an insurance company on financial crack.
 
[quote author="blackvault" date=1221535656]

Yeah. I wouldn't jump on AIG until they can get capital. I'm doing research right now to see exactly how much exposure they have. I'm seeing around 38B so far. So if they can get this 40B they should have enough to sustain the turbulance (unless they are cooking the books and not being truthfull about what their exposure is). However, even if you do buy your money will be dead money for a long time as the financial market won't rebound anytime soon.



Point is...if they can survive then you can only assume that they will resume business and the share price will EVENTUALLY (who knows when) rebound. If they don't(raise capital) then your money is shot and that is the exposure I'm not willing to take on myself until I know for sure.



As far as BAC...I bought in today. Not fully just 33% in so far and doing it in 3 stages. I've done my anaylysis/research on them and wanted to buy them at 30-33 for a couple of weeks but never pulled the trigger...but the news about Merill just confirmed that they are comfortable in their own shoes to do something like buy Merill. Because honestly...why would you buy Merill for 60B if you are worried about raising capital to fund your losses (caugh...WaMu, Bear, Lehman, AIG...etc...)



As a result their shares slipped mainly because shares always drop when a company buys another company and second buying Merill does add some risk. But I like risk, calculated risk that is, and I like this move personally on BAC part because it adds a big list of clients to their portfolio and BAC is all about expanding their client base. So when their shares dropped to 27 bucks, its a steal IMO. But it can go down further...that is why I only buy 33% at a time. If it goes up...so be it...if it goes down...I'll buy more to cut my cost basis.</blockquote>


I don't think I have the $ to gamble or the stones to buy AIG.



As for BAC, your reasoning is similar to mine, except that you've actually done your homework already. I still have to look into it. I'm actually hoping to goes down to ~$22-24. I'm expecting overstated #'s to drag it down farther, but it's all speculation on my end right now.



<a href="http://finance.yahoo.com/tech-ticker/article/58320/Roubini:-BofAs-Lewis-Totally-Overpaid-in-Reckless-Deal-for-Merrill">Roubini's take</a>
 
Yeah...its very speculative and that is why i'm buying in stages. But like I said BAC is all about having every client under the sun, thus the reason they bought Countrywide. You wonder why buy such a "toxic" company, but the amount of client base you instantly inherit that can take millions of dollars in marketing + years of time is pretty amazing. I'm betting on the fact that they know what they are doing and that they analyzed the risk of buying Countrywide and Merrill.



LOL...but then again didn't Lehman, Bear, AIG, Wamu and company know what they were doing too?



Time will tell.
 
[quote author="morekaos" date=1221545136]Well well well, the board seems to have attracted a new set of traders. Welcome to the party</blockquote>


Just for the record, if you are not trading a mechanical system with a proven statistical edge, you are just speculating, and <a href="http://www.irvinehousingblog.com/blog/comments/speculation-or-investment/">speculation is a loser's game</a>.
 
[quote author="IrvineRenter" date=1221547119][quote author="morekaos" date=1221545136]Well well well, the board seems to have attracted a new set of traders. Welcome to the party</blockquote>


Just for the record, if you are not trading a mechanical system with a proven statistical edge, you are just speculating, and <a href="http://www.irvinehousingblog.com/blog/comments/speculation-or-investment/">speculation is a loser's game</a>.</blockquote>


Speculation/mechanical system or what I like to call a sound strategy go hand in hand. If you don't want to somewhat speculate...then how can you invest in wallstreet? You always speculate when making a purchase...



Fixed income funds and CD's are your option if you dont want to speculate.



Its good to speculate....just have a strategy when you do so. Mine is simple. If I want to place 100 dollars in an investment (example), I will stage my entry point into 3 segments. 30 first entry, and 3 dollars goes towar put contracts. If it falls a reasonable amount, sell the put, invest another 30 bucks and place another 3 for another put...etc. If it goes up, screw the staging and ride the profits. This way not only are you cost averaging your are making profits on the put contracts...
 
[quote author="blackvault" date=1221565762][quote author="IrvineRenter" date=1221547119][quote author="morekaos" date=1221545136]Well well well, the board seems to have attracted a new set of traders. Welcome to the party</blockquote>


Just for the record, if you are not trading a mechanical system with a proven statistical edge, you are just speculating, and <a href="http://www.irvinehousingblog.com/blog/comments/speculation-or-investment/">speculation is a loser's game</a>.</blockquote>


Speculation/mechanical system or what I like to call a sound strategy go hand in hand. If you don't want to somewhat speculate...then how can you invest in wallstreet? You always speculate when making a purchase...



Fixed income funds and CD's are your option if you dont want to speculate.



Its good to speculate....just have a strategy when you do so. Mine is simple. If I want to place 100 dollars in an investment (example), I will stage my entry point into 3 segments. 30 first entry, and 3 dollars goes towar put contracts. If it falls a reasonable amount, sell the put, invest another 30 bucks and place another 3 for another put...etc. If it goes up, screw the staging and ride the profits. This way not only are you cost averaging your are making profits on the put contracts...</blockquote>


I speculate all the time, but I run an automated trading strategy through Tradestation. I have learned, painfully, that discretionary trading in the long term leads to steady losses.



It is a bit like card counting at blackjack. If you have a rigid system, and you count cards properly on single-deck blackjack, you can get a few percentage points in your favor. If you play enough hands of blackjack, you will make money. If you don't have a rigid system with a proven statistical edge, you are just throwing money on the table and hoping you get lucky. The house has a statistical edge in that scenario. Given enough hands of blackjack, the house will make money.



I will admit, I still screw around with daytrading, but I take small positions, and most often, I make a few dollars. However, I run my system on the bulk of my account.
 
Great article on AIG in BusinessWeek...



<blockquote>How AIG got into this terrible spot draws, in some ways, on the lessons of classic risk mismanagement?what Schiff calls "Insurance 101." The job of an underwriter is to spread risk around. If you write earthquake insurance, you don't write it only in California as that could leave your entire business exposed to one terrible turn of events. AIG appeared to ignore that practice when making just such a dangerous bet on subprime mortages. At least until 2005, various divisions of the company were writing subprime mortgages, selling mortgage insurance for borrowers, writing derivatives on collateralized debt obligations (CDOs) with subprime exposure, and investing premium dollars in mortgage-backed securities as well. </blockquote>


<a href="http://www.businessweek.com/print/bwdaily/dnflash/content/sep2008/db20080915_552271.htm">LINK</a>
 
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