in an effort to maneuver the economy through the uncharted waters of our current credit crisis, the united states government has resorted to communism… er, socialism, but communism has a more pleasant ring to the ears (not to mention shock value). on tuesday evening, the USSA/R bought out AIG in an $85 billion deal, with warrants that entitle the fed to 80% of the equity of AIG. $85 billion for a company whose market cap at the end of business today was just over $5 billion.   the math is rough, but that’s like you going out and paying $40 for a loaf of Wonder Bread.
so who really owns AIG now? YOU DO!!! (if you’re an american taxpayer). we all do. your uncle sam just took your money and bought stocks, or should i say, tried to catch a falling knife. in the investment world we call these folks bagholders. the ones that hold on to a stock that is surely headed under. so victoria, you are now a bag lady. by the way, had AIG been bailed out over the weekend it would have only cost us $40 billion. $20 Wonder Bread. you’d probably pay $20 for a loaf of bread if you were dying from hunger… at $40 i’d probably just let myself starve.
in the process, treasury secretary Paulson ousted the current AIG CEO and put in his place former Allstate chief Liddy, who happens to be on the board at GS. wait, didn’t Paulson come from Goldman Sachs? i thought the connection purchasing was only done in China. American International Group: Comrad Paulson, surely you and your schemers could’ve come up with something less suspicious than “American International”.
and if you want a true sign of the times? on tuesday the Reserve Primary Fund (not to be confused with the federal reserve), the nation’s oldest money market fund (MMF), “broke the buck”. NUCKING FUTS!!! if you’re not familiar with money market instruments, they are touted as “cash equivalents” and are regulated under Rule 2a-7 to invest only in the highest quality short-term debt with the goal of preserving a share price of $1.00 and paying the rest out in interest. the Reserve Primary Fund is priced today at $0.97. this is only the second time in history a MMF has broken the buck, and only the first time a retail MMF. to make matters worse, two other Reserve funds broke the buck as well.
so what happened? i hope to answer that and more. tomorrow i will cover how all this affects you and where you should put your money… i’ve been meaning to write about rollover IRA’s since so many of you have asked me in the past year. friday i will revisit how our newly communist government made an example out of lehman bros. and recap the tumultuous week. pretty much we all got screwed and we all got screwed a long time ago. if you can’t understand this chart then you’re probably not alone. the basic problem IS that most people can’t understand that chart and that is part of the financial engineering that is going on to mask how bad things really are.
our money is now stuck in a failing insurance firm whose balance sheet should be called an IMbalanced sheet. this is on top of the bailout of Fannie and Freddie earlier this month where THE AMERICAN TAXPAYERS bought out mortgages, up to 40% of whom are set to default. thanks a lot uncle sam. i used to think you were my rich uncle. now you’re just my lunatic uncle who we don’t even see at thanksgiving. the fed launched a campaign to teach financial literacy on monday. what a bunch of hypocrites. your lose regulations got us here in the first place. up yours, uncle sam, you commie bastard.