Thanks for your kind remark. I confess I know a lot less than you give me credit for. I had a quick look and here are some "Blink" impressions- the kind I criticize Cramer for all the time.
1) I like financials generally, but prefer insurance specifically for reasons I've posted in the past- I have no idea what banking will look like in 5 or 10 years. I don't even know what money will look like then: virtual currencies, direct internet financing, credit card "almost" banks, banking apps for phones, etc... That shyness about banks kept me out of trouble with BAC, which is where most of my money would have been had I not decided that the business model for insurance is more stable and less subject to disruption. 2) LYG is a sprawling $100B company with a fair amount of leverage. If LYG stumbles, don't expect a quick turnaround. Citigroup took years to get out of the woods, BAC is still struggling to do so 7 years after the meltdown. LYG would require great patience and it's too complicated for me to understand. 3) On the positive side, I'm more comfortable with a company doing business mainly in British pounds than dollars. If LYG is a good investment, it might also be a good currency hedge against the dollar. While I generally support the Fed's actions, there's no guarantee this won't end badly. I hope this helps and won't give you cause to regret asking for my opinion.
Hey j0n, I've always found your posts insightful including this one. Side question, do you see any potential in LYG? They've had their share of pain since the financial crisis and thought about getting in back when it was 2 bucks, that ship has sailed but now that the divy is back and possibly going higher I'm revisiting the potential. Thoughts?
Mark Twain once said, "Get your facts straight first. Then you can distort them as much as you like." Fact: AIG was the rug under which all other bank's and financials were allowed to sweep their dirt. Hank Paulson make sure of that. Fact: AIG still paid back all of their bailout, plus a $22 billion profit for Uncle Sam. You're welcome. Fact:: Bubbles are a malfunction of the whole ecosystem, not just a few greedy guys at the top. Many of your "victims" knew, or should have known better. Fact: AIG no more resembles the company it was before 2007 than Coke resembles IBM. Fixating on a name, without reference to the reality behind the words is immature. Fact: I lost most of my bankroll in the "great recession". I'd love to see a few bad actors do jail time myself. But if I can pick up the pieces and move on, maybe you should too. We are living in an age of unparalleled prosperity. We have more to be grateful for than to complain about. Fact: Life is not perfect. Your self-righteous blather has no resonance with me. Go build something. Earn the right to complain and you will find less need to do so. .
They got a bail out and caused all this market collapse #$%$. They must pay .I say sell sell send them to the pits. IT has all been one massive pyramid scheme by FED. Trying to manipulate a paper recovery only. They then got all other central banks/ governments to play same stupid game with rates. Bad thing is they made prices go up so high they are more poor than ever. Now we bail out all the por world wide at tax payers expense. Wake up America???
Any interest rate hike will be a small token. There's a global currency race to the bottom and we stand to lose trade and jobs if rational interest rates keep our currency too strong. However, Yellen & Co. know all too well that when the deflation/inflation tide turns, inflation could build like a tsunami. A small, but reasonable, interest rate bump at least gives her some options to respond in either direction.
In the meantime, AIG has to focus internally. Yellen cannot help them as much as they can help themselves. Peter seems to get that. Progress has been maddeningly slow. He seems to be on the right road, just moving well under the posted speed limit. I'm inclined to give him a pass though. His initiatives all seem to take several quarters, if not years, to bear fruit. Nevertheless, using Buffett's litmus test. If I couldn't sell AIG for another 10 or 20 years, this is how I'd want AIG managed.
suggests to me that people expect Yellen will stay the course of expected interest rate hikes in September.
Interest rates hikes are very helpful to insurance companies, especially those who invest in as much government paper as AIG does. We have become so accustom to low interest rates, that it is hard to visualize a normalized environment.
The Apple iPhone has never existed in an economy with an interest rate hike. Think about that for a second.
Alternatively, you could convert the 1000 AIG shares also to 2200 AIG warrants or keep 500 shares and buy 1100 warrants.
Sentiment: Strong Buy
We are fortunate that so many other companies are buying their shares too. This allows AIG to continue unnoticed. I'm a bit miffed by the general complaining about buybacks, particularly among the business channel "gurus", and including Hillary's recent comments. The logic being that it's too easier and safer to buy shares, rather than invest in expanding the business. Nonsense. If the stock is well undervalued, management owes it to its shareholders to use excess cash-flow to reduce the float. The market is telling the company it wants to reduce its capital base by discounting it. I know a lot of companies are overvalued, but AIG isn't.
Nobody complains about dividends. Buybacks have much the same effect, except they give management more flexibility to return capital to shareholders as market conditions warrant. If there is a better place for that capital to be reinvested, it's up to the shareholders to find it. What does Hillary think happens to those buyback dollars anyway? Investors either spend it or invest it elsewhere. AIG has enough cash left to grow their business and manage their debt. Buybacks are the most prudent use of what's left after that.
I would peg 3Q at around $1.5-2.5B and I anticipate that trend to continue for at least 6 more quarters. Wall street discounts buybacks as nothing but the effect of them over time is unbelievable. Especially since with rising rates AIG will start to earn much much much more each quarter. I plan to hold my 1,000 shares for a very long time.
As I understand you mean the current quarter - should be around 3-3.5 billion US$. Big question is how much AIG will buy back in the next quarter(s). 6-7 Billion + non-core =AER sale were mentioned after 1st quarter for this year, so we could see another 1.5-4 B US$ next quarter (3rd quarter). We should not forget that additional to the sale of assets AIG is also making money (tax free because of DTAs) as an insurance company, which can be added to buyback and debt reduction. However, patience guys we will all know after August 3rd :-)
Sentiment: Strong Buy
As a warrant holder, I'm all over buybacks. But I have no clue how to predict how much management will commit to them. My emotional self says , by God, bet the ranch before the market figures out this is a buyout "selfie". A company can literally buyout (most of) itself. But I get management''s snail's pace buybacks. Their measured pace has allowed them to keep buying without drawing attention. Larger buybacks signal a sense that "the cat's out of the bag" and that the window of opportunity is closing. Anything between $1.5 B and $4 B, will be a good sign. More or less, will signal that the game's about to end. Long term holders want this recovery to continue with buybacks.
Sorry I can´t help you more - is it so difficult to go to the AIG website, then go to investor relations - read SEC filings (POSASR 7/1/2016) and then please apologize for being not right.
Sentiment: Strong Buy