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The Toybox

people for the conservation of limited amounts of indignation


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random drive by AIG moment
children of dune - leto 1
seperis
A couple of days ago I was talking about how the market, as far as I can tell, is schizophrenic.

Example:

American International Group (AIG) is currently being raked fore and aft over that entire messy bonus issue. Late last week, it traded at less than fifty cents a share. I know this because I have a spreadsheet, and you know, I'm anal. You would think--you know, in a world where the market had something to do with what was going on in the actual business end of a company--this would be bad for the price of shares. Yeah, I would too. You know. Until this morning.

However, I cannot login to my account right now, as suddenly and inexplicably, there is too much trading right now. This was new, and I went to pull my spreadsheet and realized things looked wrong, as there was money there that really shouldn't be, since come on, it's not like I'm using logic here in my buying sprees.

This is because AIG tripled in price*.

Let me point this out again. AIG is being investigated for bonus stuff and is going to get ass-raped by the government with government subsidized lube which is also known as sandpaper and this morning the shares reached two dollars each. Bank of America is also still trading above seven (as of the last fifteen seconds), and see, this is why when people look grim over the state of the economy because the DOW looks unhappy, I kind of laugh. The DOW is not unhappy. A whole bunch of hedge fund managers and assorted brokers just bought new BMWs and are making a down payment. Check car sales in the area. Or you know, whose child was arrested recently. I mean, seriously.

*taps fingers on desk*

So far, two hours of high trading and counting. This is hysterical. And I cannot participate in this historical moment. Not that I would. But I do like to boggle at it in real-time.


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I know right? It's like when Alan Greenspan finally admitted there was a "flaw in his worldview" because he expected the people running public companies to behave rationally. The stock market has NEVER been a wholly rational venture; the Tulip Mania of the 1600s wasn't a bug, it's an endemic feature of the system.

It just blows the mind, doesn't it? *facepalm* Welcome to human psychology, Greenspan.

Because it doesn't really have anything to do with AIG, persay. You've got two things going on here. The first is that national numbers are starting to look better: less layoffs planned, a smidge more hiring, the housing numbers are good. The market is seeing a floor, and the market likes floors. Personally, I think 'floor' is the wrong term here, but so says the economist I live with, so thus do I call it. Anyway. Everything is edging up slightly, and staying consistently up if you can call 'a week' consistent, because of that. It's got nothing to do with specific companies.

The second issue is specific to AIG: what the AIG CEO said to Congress yesterday. He played mea culpa. Granted, it was a smarmy form of mea culpa, but it removed the war of chicken AIG and the government were involved in, and it put both parties back on their respective sides of the street. Frankly, Congress' new measure to tax AIG's benefits may have long term repercussions, in that it might kill the way the industry has come to rely on bonuses (I am so wanting that to happen) but when it comes to AIG and how the financial business operates, the short term is negligable to irrelevant. This is an outpouring of anger: it's not a genuine solution or even a real punishment. The only people genuinely punished are the ones who got the bonuses and who haven't done anything wrong.

Also, they live in England and may or may not pay US taxes. Which makes Congress' new act equally as irrelevant.

But basically, in a serious way, AIG won. They are not going bankrupt (today; we'll see about tomorrow). The government is not coming in and taking over, as an 80% shareholder could actually do. Right now, the response from the government is angry but not particularly effective. They won.

So AIG stock prices rise with everyone else's. Although it probably won't go very high, all told.

The only people genuinely punished are the ones who got the bonuses and who haven't done anything wrong.

I would disagree flatly with that.

How so?

Sorry, didn't mean to sound so argumentative about it.

Can you explain, though? Because everything I've read so far (and there are conflicting reports, totally) says that the employees who received the bonuses weren't the same employees who played fast and loose with the market. It's a separate division.

Edited at 2009-03-19 04:06 pm (UTC)

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Exactly. This is what the billions handed over to AIG are a proof of: we cannot allow AIG to go under, regardless of what it takes.

Moreover, speaking as a non-specialist -still, with a finance degree and a finance career of 20 years behind me, so an educated amateur if you will- the stock market is GAMBLING, no different from Las Vegas and anybody who says different wants your money or is under-briefed.

I am not saying it's immoral to invest in any stock out there: feel free. But you are gambling this money and if you lose it... well. I don't mean you personally by the way, I mean a general you for people who invest in the stock exchange. Unfortunately, that's everybody because banks do. Retirement pensions do. 401K plans do. We all do it directly or indirectly.

So short of keeping your cash under the mattress -which I do not need to explain is not a solution- there's no way to escape this and we will all be paying for a handful of rich guys who have so much money and influence it ensures that they never will pay for their part in the current situation (remember Enron? The bad guy died before he was supposed to end up in jail as his money delayed matters until he died of old age. He was pretty decrepit to start with, granted).

The wonders of capitalism at work.

Oh man, it is gambling. I think that's why I enjoy watching and very low-priced playing with it. So it's pretty much always an eternal mystery how anyone who doesn't do this professionally can make money except by accident (literally, the only time I've made money was with Bank of America buying and selling bumps, and I was doing it for very low returns, mostly just to see if I could) or on purpose. And not have some kind of nervous breakdown. Unless, you know, they have weight in how it goes, which is kind of obvious they do.

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I can't think of another reason. It was just bizarre to watch though.

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MY LOVE IS PURE. *GLEE*

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