Harold Maass of The Week The Best of Today's Business

NEWS AT A GLANCE

AIG loses $7.8 billion on bad credit bets

American International Group, the world's largest insurer, reported a $7.81 billion quarterly loss and said it will raise $12.5 billion in the next few months to replenish its balance sheet. The loss was much bigger than expected, and AIG shares dropped 7 percent in extended trading. (AP in Yahoo! Finance) Also, credit rating agencies Standard & Poor's and Fitch lowered AIG's credit grade. Most of AIG's losses stem from bad investments on credit default swaps and other once-lucrative complex instruments. (The New York Times, free registration) "One of AIG's constant weaknesses has been its complexity," said UBS analyst David Havens. "It's come back to bite them." (Bloomberg)

Oil tops $125 a barrel

The price of oil rose above $125 a barrel on the New York Mercantile Exchange for the first time early today. Analysts cited a number of factors in the rise, which follows a larger-than-expected increase in the U.S. crude inventory reported earlier in the week. (AP in Yahoo! Finance) Geopolitical tensions, a run-up in heating oil prices, and speculative investment from funds were all seen behind the record oil price. (Reuters) To head off the public outcry over high oil and gas prices, the American Petroleum Institute has launched a multi-million dollar public relations push to make its case that the high prices aren't being caused by the U.S. oil industry. (The Washington Post, free registration)

Citigroup turnaround plan on tap

Citigroup CEO Vikram Pandit, in a meeting with investors and analysts today, is unveiling his plan to turn around the No. 1 U.S. bank, reportedly including a goal to sell up to $400 billion in non-core assets over several years. (Financial Times, free registration) Citigroup lost $5.1 billion last quarter, and has booked more than $40 billion of credit losses and writedowns since late last year. Pandit is widely expected to resist calls to break up the sprawling company, and announce plans to cut annual expenses by 20 percent. (Reuters) "My fear is they are going to do the great sacrifice at the altar of cost cutting," said Peter Sorrentino at Huntington Asset Advisors. "Nobody makes big money cutting costs." (Bloomberg)

Killing the spokesapple and the red wig

Among the victims of the U.S. economic slump are the Applebee's "spokesapple" and Wendy's odd red wigs. Both ad campaigns, launched last year, were pulled quicker than normal, after failing to immediately boost the restaurants' bottom lines. The ads, one in which a red apple cracks jokes and the other where men in fake red ponytails demand fresh burgers, were seen as maybe too edgy for the family-oriented chains. But some analysts say the ads could have succeeded if given time, like Burger King's popular but wierd "King" campaign. The spokesapple "gave some attitude to a brand that was lacking it," said restaurant consultant Malcolm Knapp. "Applebee's is not a cool brand." (The New York Times, free registration)

BEST COLUMNS OF THE DAY

Monetary policy can't tame inflation

Inflation is like that "boor" who barges into "the hottest restaurant in town without a reservation," says Michael Sesit in Bloomberg. You can accommodate it, hope it'll leave, or have the bouncer kick it out. The U.S. Fed is hoping this "unwelcome customer" will leave on its own -- and although it has undermined its "credibility" with seven rate cuts, it might have a point: "there's probably not much that central bankers can do to control" today's inflation. The bursting of the credit bubble should be deflationary, but energy and food costs are driven by global factors outside the realm of monetary policy. Slow U.S. growth probably will "shackle core inflation," but if price hikes become "self-fulfilling" prophesies, we'll need "a bigger bouncer."

Inflation isn't our biggest worry

Everyone's worried about inflation, says Fortune's Colin Barr in CNNMoney.com, but we face a "bigger problem" in "the lingering effects of the credit crunch." The "hawkish" comments from central bankers in Europe and the U.S. carry "the implicit threat of inflation-quelling rate increases." But while fears about the financial market crisis may feel increasingly distant on Wall Street, the effects have only just begun "to be felt on Main Street." This slowdown will probably see a rise in unemployment, even as lenders continue to "tighten their purse strings." And the economy won't recover until the housing market does. With "no sign of an antidote," though, we'll just have to ride it out.

GOOD DAY FOR: Swiss fries, after Switzerland eased potato import restrictions to prepare for a glut of soccer fans when it cohosts the Euro 2008 tournament in June. The Swiss potato industry said it needs an extra 5,000 metric tons of spuds to feed the expected demand for French fries and other potato snacks. (Reuters)

BAD DAY FOR: Micro-brewing, after Diageo said it is closing two small Guinness breweries, in the Irish towns of Kilkenny and Dundalk, and building a huge new brewing complex outside of Dublin. The company also said it's renovating the St. James's Gate brewery, which houses the Guinness museum, Ireland's largest tourist draw. The changes will cost $1 billion and 250 jobs. (MarketWatch)

NOTED: General Motors agreed to pony up $200 million to help settle a bitter 10-week strike at a parts supplier, American Axle and Manufacturing. About 3,600 United Auto Workers members are on strike at the supplier, seriously hobbling production of GM's pickups and SUVs. The money would be used to supplement reduced wages and pay for buyouts. (AP in Yahoo! Finance)

This column was written by Peter Weber and edited by Harold Maass of TheWeekDaily.com.