AIG's CEO Is Out
Another finance CEO is out because of massive losses. The New York Times and other news agencies are reporting AIG has ousted its CEO. July 12th of last year a professional money manager, whose blog I used to read, wrote of why he was adding AIG to his portfolio. He provided a detailed analysis of why AIG was attractive and about to break out.
I posted on his blog that his analysis and balance sheet were far from pristine. And that insurance companies were eating risk fed to them by financial firms. And that the company's stock could fall by as much as 50%. At that time AIG's stock was about $70. Today, it's $34 and reporting losses greater than the income of many nations. I suspect I was wrong in my initial perspective. The stock is already down 50% and I expect a lot more downside to the equity markets before we get through this cycle. A lot more.
I am just amazed at how many professional money managers are getting clobbered. It's not like a negative analysis of AIG was prescient. If nothing else, it was common sense. Well, in addition to the fact that very few professionals in today's world seem to know how to do a fundamentals-based analysis on a company. To be fair, even if someone is capable of doing a fundamentals-based analysis, firms aren't exactly being honest about the foolish mistakes they have made. That is putting it mildly. Remember what I said some time ago - As the quantitative Frankenstein implodes, only a firm understanding of fundamentals-based analysis will provide safety from the freak show. Or as I just wrote a few posts ago, quantitative finance won't go away but what we see today is likely gone forever. Wall Street and society still haven't recognized what that means.
This is really a shame. It's a shame AIG is in serious trouble. Put there by a complete failure in risk management practices. But, it's even more of a shame that many money managers are throwing client's money down the drain. It's hard enough for people to save money in an environment like this. To have money managers make completely incompetent decisions only adds to the lack of confidence developing in global financial markets. A lack of confidence that is very well deserved.
I posted on his blog that his analysis and balance sheet were far from pristine. And that insurance companies were eating risk fed to them by financial firms. And that the company's stock could fall by as much as 50%. At that time AIG's stock was about $70. Today, it's $34 and reporting losses greater than the income of many nations. I suspect I was wrong in my initial perspective. The stock is already down 50% and I expect a lot more downside to the equity markets before we get through this cycle. A lot more.
I am just amazed at how many professional money managers are getting clobbered. It's not like a negative analysis of AIG was prescient. If nothing else, it was common sense. Well, in addition to the fact that very few professionals in today's world seem to know how to do a fundamentals-based analysis on a company. To be fair, even if someone is capable of doing a fundamentals-based analysis, firms aren't exactly being honest about the foolish mistakes they have made. That is putting it mildly. Remember what I said some time ago - As the quantitative Frankenstein implodes, only a firm understanding of fundamentals-based analysis will provide safety from the freak show. Or as I just wrote a few posts ago, quantitative finance won't go away but what we see today is likely gone forever. Wall Street and society still haven't recognized what that means.
This is really a shame. It's a shame AIG is in serious trouble. Put there by a complete failure in risk management practices. But, it's even more of a shame that many money managers are throwing client's money down the drain. It's hard enough for people to save money in an environment like this. To have money managers make completely incompetent decisions only adds to the lack of confidence developing in global financial markets. A lack of confidence that is very well deserved.
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