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A.i.g. Rises, And Many Ask Why

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http://www.nytimes.com/2009/08/28/business...mp;ref=business

It may have been written off as a hopeless case less than a year ago, but the stock of the American International Group shot up to $50 on Thursday, capping a fourfold gain in the last two months.

For all the optimism taking hold in the markets these days, it is hard to find a tangible explanation.

“Who would want to buy a stock that’s still 80 percent owned by the government?†wondered William T. Fitzpatrick, an equity analyst at Optique Capital. Shares ended the day at $47.84, a gain of 27 percent from the previous close of $37.69.

Yes, the company has named a new chief executive, who comes from a solid background at MetLife, and yes, he has said that A.I.G. will pay back the government for its bailout sooner rather than later. The giant insurer has been moving to change the names of key business units and working to disentangle its bewildering structure. It even reported a profit in its latest quarter.

But none of that really explains the recent gains. Speculation swirls daily that some deal may be in the works, that short sellers are being squeezed out of their positions, or that the company’s former chief executive, Maurice R. Greenberg, may be poised to make a comeback in the role of consultant. The new chief executive, Robert Benmosche, has been fueling some of the interest, as he talks about seeking advice from Mr. Greenberg and slowing the breakup of A.I.G. so it is not a fire sale.

Mr. Fitzpatrick said he thought the likelier explanation for the increased share price was that speculators looking to profit from a distressed stock had pounced on A.I.G.

“The risk appetite has returned to the marketplace,†he said. “People don’t want to get 5 percent back. They want to get the money back that they lost over the last year.†They look at a cratered stock like A.I.G. and think, “This is the place to do it,†he said.

Taxpayers may take some comfort from the rise in A.I.G.’s stock, which means better returns on their involuntary investment. Even though the government owns most of A.I.G., however, the soaring value of its shares does not come close to matching the vast amount of credit it extended through the Federal Reserve and the Treasury. Roughly $180 billion was marshaled to keep A.I.G. afloat last fall and winter. The entire market value of A.I.G.’s stock is just $6.4 billion, even at the current price.

Also, the stock is concentrated in a few hands, meaning that a small number of investors can cause a big move in the stock price. The number of shares was reduced by a 20-for-1 reverse split in June. The government has the biggest stake in A.I.G., and the biggest common shareholder is Mr. Greenberg and a group of entities he controls.

Mr. Benmosche’s total pay, about $10 million a year with bonus, includes a substantial portion in A.I.G. stock, which has gained 53 percent since his selection. His contract granted him $4 million in restricted shares, which cannot be sold for five years, as of Aug. 10.

Even though A.I.G. is back in the black, there are still signs of trouble under the surface. Its insurance companies hold big blocks of complex asset-backed securities, and the company’s departing chief executive, Edward M. Liddy, said that an accounting break helped produce its recent modest profit.

Mr. Liddy has also warned investors to “expect continued volatility†in the coming months, saying that even good news could be bad for the bottom line: if A.I.G. succeeded in repaying its debt to the Federal Reserve soon, he said, the accounting treatment could produce a $5 billion pretax hit to earnings.

Nor is it clear that A.I.G. will succeed in raising enough money to pay back the Fed. MetLife has been looking carefully at A.I.G.’s big international life insurance business for several months, but has not yet made an acceptable offer. Hopes that Mr. Benmosche would be able to jawbone his old company into raising its price were dampened earlier this month, when A.I.G. said in a regulatory filing that it had taken steps “to ensure that Mr. Benmosche is not inappropriately involved in any transaction between A.I.G. and MetLife.â€

Would it be quite easy to manipulate the share price up in AIG with such a huge concentration of shares held by one entity which won't sell them?

The share price with AIG seems to be mirroring what Porche did but on a smaller scale?

Because the stock is controlled by so few people would it be an easy target for a quick short term profit?

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http://www.nytimes.com/2009/08/28/business...mp;ref=business

Would it be quite easy to manipulate the share price up in AIG with such a huge concentration of shares held by one entity which won't sell them?

The share price with AIG seems to be mirroring what Porche did but on a smaller scale?

Because the stock is controlled by so few people would it be an easy target for a quick short term profit?

No. And the stock isn't controlled by so few people. In the same way that it went down very quickly, it can come back up again very quickly.

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No. And the stock isn't controlled by so few people. In the same way that it went down very quickly, it can come back up again very quickly.

The amount of shares issued is massive because the US govt bought shed loads of AIG it owns 79.7%. The US govt has stated that it will not sell immediately so the %tage of shares availble to trade is 20%.

So I do not know where you get yout statement that the stock is not controlled by two few people. 80% is controlled by one man Obamaessiah.

It does not take a lot of money to move AIG shares because the free float is so low.

Edited by ralphmalph

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The amount of shares issued is massive because the US govt bought shed loads of AIG it owns 79.7%. The US govt has stated that it will not sell immediately so the %tage of shares availble to trade is 20%.

So I do not know where you get yout statement that the stock is not controlled by two few people. 80% is controlled by one man Obamaessiah.

It does not take a lot of money to move AIG shares because the free float is so low.

so that implies that selling the government holding to recoup the 400% gains is going to wipe it all out again?

sounds like having a huge holding is not as good as advertised.

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so that implies that selling the government holding to recoup the 400% gains is going to wipe it all out again?

sounds like having a huge holding is not as good as advertised.

Yes but it all count towards a paper profit, which is all good. It's what mark to market was designed for.

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The amount of shares issued is massive because the US govt bought shed loads of AIG it owns 79.7%. The US govt has stated that it will not sell immediately so the %tage of shares availble to trade is 20%.

So I do not know where you get yout statement that the stock is not controlled by two few people. 80% is controlled by one man Obamaessiah.

It does not take a lot of money to move AIG shares because the free float is so low.

What absolute ********. Are you saying 20% of 'massive' is not still 'massive'. Unless the government or anyone else goes out and buys more of the 20% remaining then the price isn't going to shift. Similarly, if everyone were to sell their holding of the 20% remainder then the price owuld fall.

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What absolute ********. Are you saying 20% of 'massive' is not still 'massive'. Unless the government or anyone else goes out and buys more of the 20% remaining then the price isn't going to shift. Similarly, if everyone were to sell their holding of the 20% remainder then the price owuld fall.

AIG market cap. is 6 billion and at 47 bucks per share that means about 127 million shares in circulation. The govt owns 80% so the 20% that is available to trade is 25.4 million shares (The US govt shares are not avialable to trade buy and hold investor).

So the average number of AIG shares traded over a three month period is 23.4 million per day or 92% of the free float have been traded every day for the last three months.

Yesterday 150million shares were traded in AIG 7.5 times the free float.

The OP made the point that because so much stock was held by one owner the stock was easily to manipulate. You disagreed that one owner owned so much stock - WRONG and the figures above prove that the stock is being manipulated by traders (the ops other point) because so much of the free float (multiples of it) is beeing traded every single day. Hardly a buy and hold strategy.

20% of 100% is not massive it is one fifth. 20% of a 6 billion market cap is 1.2billion. This is a tiny amount of the money traded every single day on the US markets.

Also the OP said this is like when Porsche controlled so much stock in VW the amount of shares that was available to trade was so low that the price shot up when the shorters tried to cover by buying a very limited amount of stock and again he is correct.

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AIG market cap. is 6 billion and at 47 bucks per share that means about 127 million shares in circulation. The govt owns 80% so the 20% that is available to trade is 25.4 million shares (The US govt shares are not avialable to trade buy and hold investor).

So the average number of AIG shares traded over a three month period is 23.4 million per day or 92% of the free float have been traded every day for the last three months.

Yesterday 150million shares were traded in AIG 7.5 times the free float.

The OP made the point that because so much stock was held by one owner the stock was easily to manipulate. You disagreed that one owner owned so much stock - WRONG and the figures above prove that the stock is being manipulated by traders (the ops other point) because so much of the free float (multiples of it) is beeing traded every single day. Hardly a buy and hold strategy.

20% of 100% is not massive it is one fifth. 20% of a 6 billion market cap is 1.2billion. This is a tiny amount of the money traded every single day on the US markets.

Also the OP said this is like when Porsche controlled so much stock in VW the amount of shares that was available to trade was so low that the price shot up when the shorters tried to cover by buying a very limited amount of stock and again he is correct.

is AIG in the DOW?

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No it is not. The yanks are very good at taking the crap out of the dow and putting growing companies in. This is why it is such a bad indicator the S&P is a much better index.

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No it is not. The yanks are very good at taking the crap out of the dow and putting growing companies in. This is why it is such a bad indicator the S&P is a much better index.

good, a blue chip gaining 400% would skew the figures even more than they are.

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So why was AIG removed from the DOW then.

Because it was doing so well?

You make it sound as if they just took it out because they wanted to keep the Dow high. The Dow 30 is the index of the top 30 companies by market capitalisation in the US at the pre-defined date, so if its value took it outside of the top 30 then it comes out by default. There is no manipulation or bending or rules to be seen. You can't have an index of the top 30 that contains the top 29 plus number 78 can you?

The FTSE 100 is exactly the same (except it rarely only has 100 companies in it). If a company such as NORK goes tits up and loses its market capitalisation then it is removed and replaced. Thats the way the index works. You are trying to make an issue out of a non-issue.

And there are more than 127m AIG shares available for tading.

And you need to do some research on what happened with Porsche and VW.

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You make it sound as if they just took it out because they wanted to keep the Dow high. The Dow 30 is the index of the top 30 companies by market capitalisation in the US at the pre-defined date, so if its value took it outside of the top 30 then it comes out by default. There is no manipulation or bending or rules to be seen. You can't have an index of the top 30 that contains the top 29 plus number 78 can you?

The FTSE 100 is exactly the same (except it rarely only has 100 companies in it). If a company such as NORK goes tits up and loses its market capitalisation then it is removed and replaced. Thats the way the index works. You are trying to make an issue out of a non-issue.

And there are more than 127m AIG shares available for tading.

And you need to do some research on what happened with Porsche and VW.

The Dow Jones Index is not an index of the top 30 largest companies in America by market cap at all.

Having read that first sentance I have not bothered to read the rest of your post.

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The Dow Jones Index is not an index of the top 30 largest companies in America by market cap at all.

Having read that first sentance I have not bothered to read the rest of your post.

And no doubt the FTSE 100 isn't the top 100 companies in the UK by market cap (except there aren't 100)?

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The Dow Jones Index is not an index of the top 30 largest companies in America by market cap at all.

Having read that first sentance I have not bothered to read the rest of your post.

They just took out CitiGroup and GM too. Was that to stop the Index from falling as well?

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They just took out CitiGroup and GM too. Was that to stop the Index from falling as well?

Google is the 13th largest company in America by market cap is it in the DJIA?

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Google is the 13th largest company in America by market cap is it in the DJIA?

No, you are correct in that it is not the top 30 by market capitalisation and you have my apologies for that. It is a different set or rules for to the FTSE.

However, the point is, the index is caluclated under pre-defined rules and they don't just take companies out because they fall in value. e.g. by default, and company applying for bankruptcy protection is removed.

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No, you are correct in that it is not the top 30 by market capitalisation and you have my apologies for that. It is a different set or rules for to the FTSE.

However, the point is, the index is caluclated under pre-defined rules and they don't just take companies out because they fall in value. e.g. by default, and company applying for bankruptcy protection is removed.

Apology accepted.

The index is calculated by a known formula I agree. There is no set of rules for inculsion or removal from the index it is done on the sole decision of Dow Jones the company and they do not publish the rules apart from bankruptcy being one, unlike a market cap index like the S&P 500.

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They just took out CitiGroup and GM too. Was that to stop the Index from falling as well?

course, they weed out the bad and add the high flyers...thats why the index is a nonsense.... then add in the "adjustements for weighting and stock size and whatever else they need" and you have a fixed index.

CPI it is not.

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