The AIG Yardsale Might be Good for Uncle Sam

Hmm it seems that Uncle Sam may be a pretty prudent investor judging by some of the stuff AIG has to sell. The government loaned AIG $85 billion over two years at 11.5% interest which they get to borrow for 3.4% in exchange for the right to buy 79.9 percent of the company.

One unit that analysts said will likely be sold is the International Lease Finance Corp., which leases out more than 900 aircraft with asset values topping $44 billion at the end of the second quarter. This division has been a moneymaker for AIG, tallying $873 million in operating income in 2007 and $555 million in the first half of this year, according to securities filings.

Another possibility for sale is AIG's foreign life insurance business, with profits of $1.5 billion in the first half of this year on top of earnings of $6.19 billion in 2007. Gary Ransom, an analyst with Fox-Pitt Kelton, pegged the value of that business at as much as $50 billion.

I would love to be able to borrow money at 3.4% and then lend it out at 11.5% to a company that would be able to get up to $94 billion from selling just 2 profitable units. Crazy Hank Paulson says "Everything at AIG Must Go-go-go!"

Morgan and Wachovia May Merge

It seems that Morgan Stanley is looking for a money center bank to bolster their position according to this article.

According to the Times, Morgan Stanley Chief Executive John Mack received a phone call from Wachovia (NYSE:WB) expressing interest in the bank.

The talks are preliminary, the newspaper says, and no deal may emerge. Morgan Stanley is considering other options, as well, the newspapers report, and other banks have expressed interest in the company.

Wachovia currently has a market cap of $19.48 billion. Morgan has $77 billion in cash according to their balance sheet. So they could conceivably do an all cash deal for Wachovia and still have some capital to fall back on in case they need it. Supposedly Wachovia is almost done cleaning out their balance sheet if you believe their CEO Robert Steel. It also seems that Wachovia came to Morgan and not the other way around so there probably won't have to be a proxy fight or other such nonsense.

I can see the two companies joining up because it bolsters both of their positions. Morgan will get market confidence back up and a depositor base to fall back on if they need it and Wachovia doesn't have to sell themselves at a fire sale price if there is a run on them. This article also shows what could come out of both of them joining forces.

A deal would marry a company with a dominant investment bank and trading business with Wachovia, the No. 4 U.S. commercial bank with branches spanning 21 states. It would also create the largest retail brokerage force in the country with more than 20,000 advisers.

Hillary Fundraiser In McCain Camp

It looks like the leftist wing of the Democratic Party is starting to tick off the centrists.

"I believe that Barack Obama, with MoveOn.org and Nancy Pelosi and Howard Dean, has taken the Democratic Party — and they will continue to — too far to the left," Lynn Forester de Rothschild said. "I'm not comfortable there."

I have to agree with Lynn Forester de Rothschild that the Far Left of the Democratic Party is what turns me off the most about them. They seem to look down on the majority of Americans that they want to "help." They are also very defeatist when it comes to dealing with the world. Instead of pushing for American leadership they are welcome to cede it to the Chinese. If you think Guantanamo is bad the Chinese still have a Gulag-like system in place. I'm pretty sure no one is praying to Mecca or able to read the Koran in a Chinese Laogai.

Also the Chinese have cracked down on political dissent in Tibet and are about the only country that support the repressive regimes in the Sudan and Myanmar. The Chinese have come a long way but sometimes people forget that they are still a Communist system where a Chinese version of MoveOn.org or Code Pink would not be tolerated and their leaders would be jailed and reeducated in a minute.

I would love a return of the Dems to a JFK stance. He advocated a strong US hand in the world. He wanted intervention in other countries when it was in the US interest to do so. He also knew who the enemy was at the time (Communism) and was strong enough to confront it. He also basically believed in the the American people and did not have contempt toward them.

AIG Bailed out for $85 Billion

It looks like the deal is $85 billion in exchange for an 80% stake in the company.

Sources said the loan, which will allow AIG to avoid bankruptcy, will be secured and include incentives for quick asset-sales by AIG.

The deal severely dilutes existing shares of the company.

Management at the firm will be fired as part of the deal.

If it is anything like the Fannie/Freddie Bailout then the equity will probably be wiped out by the deal. I was seriously considering buying some AIG Puts on Friday but I didn't pull the trigger. Too bad because it would have been some quick profit. In any case the stock market will live another day. I think we can call this the bottom since there are only 2 Investment Banks left (both are actually still in the black) and the biggest US Insurer is now on government life support.

Wall Street Journal Agrees That the Economy is Still Fairly Strong

Even though there is a financial crisis it doesn't mean that the economy itself is still on fairly strong footing according the the WSJ.

So far, however, this is a financial crisis, as opposed to a broader economic crisis. Giant insurer AIG has gotten into trouble because of its (highly leveraged) investments in complex derivatives and mortgage-backed securities. The latest economic data still show the broad U.S. economy expanding, and these are data from earlier this year when oil, gas and other commodity prices were soaring. Now commodity prices are plunging, which should provide the economy a powerful boost.

I also like his picks for stocks to watch coming out of this crisis. I mean some really good firms are at sale prices. I like his pick of Bank of America as well since they are a pretty strong force now that they have Merrill Lynch for Investment Banking and Countrywide for mortgage initiations.

As for me, I continue to eye some of the financial stocks. Bank of America, which I own, is well-capitalized and is doing exactly what I would do if I were the CEO, which is to aggressively capitalize on its strength. If there's a fire sale, I want to be the buyer. Yet BofA was roundly punished for snatching Merrill Lynch, dropping 21% on Monday. That strikes me as an overreaction. (The stock rose 11% to $29.55 Tuesday.)

For investors interested in some rock-solid financial companies, see my column in the October issue of SmartMoney magazine, which highlights Northern Trust, SVB Financial, Bank of New York Mellon and UMB Financial.

Biden Says Obama Tax Cut Plan Allows One to Buy a Toaster

So I guess Change You Need is actual pocket change.

Sen. Joe Biden (D-Del.) said on NBC’s “Today” show: “Our tax plan would take that tax cut of another $130 billion that John [McCain] wants to give to people making over $250,000 next year, not let it go forward and give it to the middle class — the very people who desperately need it to stay in their homes, to buy food, to take care of the gas, to fill up their tank, to be able to go out and buy a toaster, to employ people.”

If Obama is boss I hope his tax cut will net me $34.26 so I can purchase this toaster. Whenever I eat a bagel I can marvel that Obama loves the middle class so much that he would actually willingly give $34.26 of their own money back. I mean Obama understands that the middle class clings to their toast and needs these $34.26 handouts from Mama Washington to keep them in bread. Obama's new campaign slogan: "A Toaster in Every House."

AIG Might Get Bailed Out Senate Banking Committee Chairman Dodd Is Still A Doof

It seems like the government may float AIG a loan going forward.

The Federal Reserve is considering extending a ``loan package'' to American International Group Inc., the insurer facing a cash shortage, according to a person familiar with the negotiations.

The stance by federal regulators is a reversal from a position they held as late as last night, and people with knowledge of the talks are ``cautiously optimistic,'' said the person, who declined to be identified because negotiations are confidential.

Of course it made Sen. Dodd has demand a bunch of crap from people that are trying to keep the stock market from tanking and throwing AIGs 116,000 employees out of work.

"I'm willing to listen. I'm skeptical ... I want to have them come to me as they're thinking about it, not announce it and expect us to necessarily go along with it."

"I would say to them now, don't announce that without talking with us up here and telling us why that is necessary," he said, referring to U.S. lawmakers.

You know what Senator? Why don't you or one of your staff go to AIG headquarters and find out why this loan is necessary. I'm sure you can get the CEO of AIG on the phone and ask him why his firm needs $70 billion in loans or his company will fail. In fact why the hell aren't you an integral part of this process working shoulder to shoulder with Paulson and New York FED Chairman Timothy Geithner?

Maybe someone will tell Dodd that if AIG goes bankrupt then they might break open the $62 trillion (yeah trillion with a T) market in Credit default swaps that just about every financial firm in the world owns and would then have trouble marking to market. I'm sure Dodd can Google what a CDS is if he isn't already aware of how crucial they are to the banking system. And people wonder why Democrats aren't trusted when it comes to the economy.

"Yes We Can" Meets "Yes Washington Can"

This is a great article from Alex Castellanos a Romney advisor. He tells how Obama turned from JFK style populism that lifted up the voter to the same old Liberal BS of big government taxing the crap out of you just so some corrupt bureaucrat can squander your money.

Barack Obama may believe "change doesn't come from the top down, it comes from the bottom up," but the leadership of his party doesn't. The national Democratic establishment, from the Daily Kos and MoveOn.org to Pelosi and Reid in Congress, still believe in top-down big-government from Washington, especially if they get to run the factory. Politically, they are industrial-age dinosaurs.

They believe the era of big government is back, not over. They would keep money and power in their hands, not devolve it to the average American. That was not something the Denver Democrats were eager to confess.

That is how McCain is currently running as a change agent and trying to distance himself from Bush. We had big government and wasteful spending as well as corrupt bureaucrats under Bush and McCain will clean it up. Under Obama we will have big government and wasteful spending but this time not on the War on Terror (which is actually keeping us safe) but on the Socialized Health Care (which will guarantee another terrorist attack in Obamas first term.)

The Media Won it for McCain

I think this little blurb from the same Peggy Noonan that secretly slimed Palin is exactly why Obama will lose this election if he doesn't do something in a hurry. The media scorched the earth against Palin and she survived and thrived. Now any attack from the media against Palin will backfire and put even more independents in the GOP corner. If Obama loses these paragraphs are prophetic.

Then Mrs. Palin, and the catastrophe of the Democratic and media response to her. Books will be written about this, but because it's so recent, and so known, we're almost not absorbing how huge it was, and is. Here was the central liberal mistake: They used the atom bomb just a few days in. They used it so brutally, and yet so ineptly, in a way so oblivious to the true contours of the field, that the radiation blew back over their own lines. They used it without preliminary diplomatic talks, multilateral meetings or Security Council debate. They just went boom. And it boomeranged.

The atom bomb was personal and sexual perfidy, backwoods knuckle-draggin' ma and pa saying, Tell the neighbors the baby's ours. Then the ritual abuse of the 17-year-old girl. Then the rest of it—bad mother, religious weirdo. (On this latter it must be noted that Mrs. Palin never told a church that the Iraq war was God's will; she asked them to pray that it was God's will. It wasn't the sound of Republican hubris, it was the sound of Christian humility: We can't know the mind of God, we can only pray we are in accord with it.)

All of this was unacceptable to normal Americans. They experienced it as the town gossip spreading rumor and slander before the new neighbor even got to put down her bags. It offended the American sense of fairness. And—it still lives!—gallantry.

Most crucially, the snobbery of it, the meanness of it, reminded the entire country, for the first time in a decade, what it is they don't like about the left. Really, America had forgotten. Mr. Obama's friends reminded them. Unforgettably.

With Lehman Dead So Goes a Democrat Moneybag

It seems that Lehman was a big contributor to the Democratic party and Hillary and Obama's campaign. It is just hilarious that Obama is now blaming the whole Lehman mess on Bush. I'm pretty sure it was Bush that advised them to buy all of that mortgage debt and exotic CDOs that all went belly up.

In the current Congress, 271 lawmakers have collected nearly $3 million since 1989, with 72 percent going to Democrats. Democratic presidential candidates and senators Hillary Clinton and Barack Obama top the list of all-time recipients for the company, collecting $410,000 and $395,600 respectively.

McCain Says "fundamentals of our economy are strong" and I agree

It seems that McCain is still saying this in his stump speeches:

Delighting Democrats: "The fundamentals of our economy are strong," McCain reiterates at a Florida rally this morning, before noting that "these are very, very difficult times."

Dems love this stuff because economic doom-and-gloom is all they can run on now that Iraq is out of the picture. But I think you have to say that the fundamentals of the US economy are strong. The US economy is much more complicated and robust then just Lehman and AIG.

I mean the tech, energy, and the pharmaceutical/biotech industries in the US are still growing fairly well and we even had a GDP growth rate of 3.3 for the 2nd quarter mostly due to exports. Even the dollar is strengthening due to the European economy slowing. With oil prices and thus gas prices dropping to a 7 month low we may even see the consumer pick up slightly in the coming quarters.

Most companies have raised prices to cope with the commodity inflation and they will probably keep them at the same level so they might see profits pick up. Also notice that most of the corporate bankruptcies seem to be concentrated in the financial and construction fields. If the economy was fundamentally weak then you would figure they would be in all sorts of different industries and not concentrated like that.

It is true that the financial industry is currently in turmoil but I think they will emerge from the crisis in very strong positions. There will be far less competition in investment banking and thus fees could go up for future mergers, private placements, and such. These things will start to come back online next year and need to be handled by someone. There are only a few companies left that can do it and they will reap the lions share of fees.

Also large pools of capital will congregate in the remaining firms who have track records of making good money or keeping risks down like Goldman and JP Morgan. There will be no more 30x leverage to make record profits but steady profits will still be in the cards since competition has been reduced.

Even the non-government mortgage market will be dominated by a few firms that kept clear of the sub-prime crap like Wells Fargo and Bank of America. People will start buying homes again and the housing market should be on the mend by the first half of 2009. There will only be a few companies left that can give you a mortgage and all of them will have managed their risk correctly to have survived the crisis. In other words the strong, the careful and the smart will be the only ones left standing.

I think the only blow to this will be increased regulation from an overaggressive Obama administration. If he stays true to his Carter economy roots and raises taxes while things are just starting to come back around in 2009 then all bets are off. You will then be able to say "because of Obama's tax hikes our economy has been made weak." High taxes sink all ships.

Wachovia Almost Out of the Woods

At least according to the CEO Robert Steel:

Wachovia Corp (WB.N: Quote, Profile, Research, Stock Buzz), which has been battered by mortgage losses, is "almost done" paring $20 billion of loans and securities from its balance sheet, a process it had hoped to complete by year end, Chief Executive Robert Steel said.

I guess they won't be needing any capital infusions after all and Steel seems to be there to spruce things up. Of course if the housing market gets any worse going into 2009 then all bets are off. There has been some takeover talk also that was contingient on getting rid of that $20 billion in bad loans.

The clean-up would have to come before any buyer would step forward, but there are any number of potential acquirers that would be attracted to Wachovia's presence in the Southeast and California. Among the likely suspects are JPMorgan Chase and Wells Fargo.

Goldman itself has been rumored as a potential acquirer. It advised Wachovia on its loan portfolio and helped it raise the capital in April. But Wachovia's chairman, Lanty Smith, tried to douse the speculation Thursday, calling it "silly."

Rock Band 2 Shipped Yesterday (9/14)

I think I might have to buy this one judging by this setlist. These are the songs that I am especially interested in:

1. AC/DC "Let There Be Rock" 1970s
7. Bad Company "Shooting Star" 1970's
13. Bob Dylan "Tangled Up in Blue" 1970's
20. Duran Duran "Hungry Like the Wolf" 1980's
28. Jimmy Eat World "The Middle" 2000's
32. Kansas "Carry On Wayward Son" 1970's
35. Linkin Park "One Step Closer" 2000's
42. Modest Mouse "Float On" 2000's
45. Norman Greenbaum "Spirit in the Sky" 1960's
52. Red Hot Chili Peppers "Give it Away" 1990's
62. Steve Miller Band "Rock'n Me" 1970's
63. Survivor "Eye of the Tiger" 1980's
69 Go-Go's "We Got the Beat" 1980's
71. The Guess Who "American Woman" 1970's
73. The Offspring "Come Out & Play (Keep ‘em Separated)" 1990's
75. The Who "Pinball Wizard" 1960's

Greenspan Pops Off About McCain Tax Cuts

I think Greenspan should keep his trap shut after nearly ruining the current economy with his cheap credit when he was FED chairman. Now he is injecting himself into this campaign where two Presidential candidates are essentially trying to clean up the credit mess that he caused.
At least the McCain camp is saying they won't be borrowing money to pay for these tax cuts.

"John McCain opposed President Bush's tax cuts in 2003, because they didn't include the necessary spending controls. Sen. McCain's proposed job-growing tax cuts are modest in comparison to his plans to slow the exploding growth of federal expenditures — meaning that contrary to Chairman Greenspan's assertions, this relief isn't proposed on borrowed money," said McCain spokesman Tucker Bounds.

Obama Mocks McCain over Emails: Finds out that Vietcong Beatings Makes it Tough to Type

The Obama campaign steps on yet another landmine while mocking McCain over not being able to send emails.

[Obama spokesman Dan] Pfeiffer said. "It's extraordinary that someone who wants to be our president and our commander in chief doesn't know how to send an e-mail."

Yet if they read a little bit about the person they are so quick to mock they would find out this fact:

The outrage comes from inside: McCain's severe war injuries prevent him from combing his hair, typing on a keyboard, or tying his shoes.

I'm sure McCain knows how to send an email but it's sometimes tough to type one out when you have been tortured by the Vietcong for 6 years. Of course Dan Pfeiffer only had to look that stuff up before he shot off his big mouth but I guess the Internet connections at Obama HQ aren't working so well.

McCain and Obama Divided Right Down Color and Age Lines

At least according to this AP poll.

McCain leads Obama by 55 percent to 37 percent among whites. That includes comfortable leads of 24 points with suburban whites and 26 points with whites who haven't finished college, and has similar advantages with white men and whites who are married.

He also leads by 23 points among rural voters and by 13 points with voters age 65 and over.

Obama leads 61 percent to 35 percent among voters under age 30. He has about a 5-to-1 edge with minorities and a narrow 5-point lead with women, though he trails among white women 53 percent to 40 percent.

If that under 30 crowd doesn't show up on election day then I think Obama may be sunk. It must suck to base your Presidential hopes on such a fickle crowd. The groups in McCains column are solid voters like my Dad who has voted in every Presidential election even when he was away in a foreign country.

The voters in Obama's camp may not vote simply because the polling place wasn't listed on Facebook or they figure "the election is fixed anyway so why should I vote." I have seen big support and enthusiasm from the under 30 crowd for Obama this election. However all of that will be washed away if they don't show up at the polling place in large numbers.

If they are absent for another Presidential election (this time for a candidate that thinks he is a rock star) then you can write off that under-30 group as a waste of time from here on in. All that "Vote or Die" or "Rock the Vote" stuff will be an exercise in futility. The under 30 crowd will only be good for Internet money but actually doing anything for them in the future will be time and money wasted.

Did Obama just Call Palin a Pig?

Oh oh, the Obama campaign puts its foot in its mouth again. I think he should just stop speaking off the cuff in case he calls Palin something that is going to lose him the rest of the Hillary supporters as well.

"You can put lipstick on a pig," he said to an outbreak of laughter, shouts and raucous applause from his audience, clearly drawing a connection to Palin's joke. "It's still a pig. You can wrap an old fish in a piece of paper called change. It's still going to stink after eight years."

McCain's campaign immediately organized a telephone conference call in response and called on Obama to apologize for calling Palin a pig. Obama's campaign said he wasn't referring to Palin; he had been talking about McCain immediately before the lipstick comment.

Obama May not Recind the Bush Tax cuts

I guess one of his economic advisors finally told him that raising taxes during a recession creates a depression.

Democrat Barack Obama says he would delay rescinding President Bush's tax cuts on wealthy Americans if he becomes the next president and the economy is in a recession, suggesting such an increase would further hurt the economy.

So at least we have until 2011 before the Bush tax cuts actually expire. Obama won't make them permanent but at least we have 3 years for the economy to improve. He is going forward with the $500 tax cut ($1000 for families) for middle income Americans and we might get another stimulus package out of the Dem Congress. Maybe a Carter second term will be delayed until at least 2011.

Palin Causes a 20 Point Swing in White Women says Poll

Now this is a very telling statistic culled from this article that should have the Dems running scared.

Voters, particularly women, seem to agree, according to new polls. An ABC News-Washington Post survey showed white women have moved from backing Obama by 8 points to supporting McCain by 12 points, with majorities viewing Palin favorably and saying she boosts their faith in McCain's decisions.

That is a 20 point swing in just a few weeks. That is a number that should keep the Obama campaign up at night. And I think that all of this anti-Palin attack pieces are what is fueling some of these numbers. I think some women are saying "would the media make up lies and post US magazine hit pieces about my family if I was picked to be VP?"

The media is making Palin into a scrappy fighter that is surrounded by media wolves biting at her family and even going after her minor daughter. America loves an underdog and the main stream media is making Palin into one. I think the white woman's vote is crucial for Obama to win and he can't afford to lose it by 12 points. His campaign needs to give US magazine and the New York Times a call and tell them to dial back the heat on Palin or it will sink him

Holy Crap they Love McCain/Palin

I thought this was just another Obama "the Rockstar" picture but that is McCain and Palin at center of this massive crowd. I think Obama may start worrying that his brand of Arena-rock has been stolen along with his "Change" mantra.