Cramer Last Night -- Eureka Moment on AIG

This was a golden performance by my favorite Jim Cramer last night. He pins it just right on Hank Greenberg:

Jim: Listen up! Those who run AIG (AIG)… If I were you, I would do a gigantic secondary offering right here in the high $40’s… we read about how cash strapped this company is practically every single day… now we have a GAO that to me pretty much confirms it… the situation is pretty darn hopeless… but the report was dismissed… and AIG’s stock has been powering higher and higher until the secondary chatter today… which I think maybe I started when I was buzzing around about it in the TheStreet.com, Real Money section… torpedoed the stock… now I do not know what really drove it down.. it has been up endlessly… but I, it does not matter… the stock is still up huge from where it started.. and AIG’s management needs to take advantage of the move that ended today… while it still can… and sell a bunch of new shares… that way the company will not have to fire sale meaningful divisions… that could be worth much more if people believed that AIG were not in short term trouble… and that was my Eureka Moment...

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AIG (AIG) has got a narrow window of opportunity to raise this money… and even though there was chatter today that the government won’t allow it… I don’t care… it is the right thing to do…. AIG has been what we call in the business an up stock… meaning that it has been one way up since they did the split, the 20 for 1 reverse split… and that is because of endless unconfirmed rumors and just gossip that something good is about to happen… emanating, frankly, from someone who should be made to, let’s say be quiet immediately… Hank Greenberg, he is the man who sowed the seeds of AIG destruction even though he created the company.Now, we cannot blame everything on Greenberg’s successors… which is what he seems to want us to do… I mean Greenberg is the guy who set up the rogue London office… he is the one who commanded the company to insure financial products, not just physical ones… as always when I talk about AIG I urge you to go back to the December 2007 analyst meeting… to see just how long this company was doing stupid, stupid things… like ensuring banks to allow them to get around European capital requirements… Greenberg somehow takes no responsibility whatsoever… is never called out on this… and shamelessly hypes the company as under valued at every media outlet imaginable… this man is really off the reservation.The second reason why AIG is running despite of what I consider pretty horrible news… is the uncharacteristic hyping by its new CEO, Robert Benmosche, got in just like his predecessor did and said a lot of rosy things before doing any homework… AIG is an incredibly complicated company and you cannot just wing the valuation… I did not get Benmosche’s point at all when he insisted that the company would have no problem in paying off its huge obligations to the government… excuse me… they are unfathomable… most likely unpayable… Benmosche is a legit insurance guy out of Met Life… he should know better… but the last guy who ran it, Ed Liddy, he was out of Allstate, he did not seem to get it either… he came in all rosy and positive too.Now, I am not looking for someone to say look, this is the worst company in the world… it is a total ward of the state… just the total dregs of the earth… I am not asking the CEO to say that… I am simply saying keep your mouth shut and try to fix it for heavens sake… Greenberg and Benmosche goosed what had looked like to be an excellent short… and it has created a brutal short squeeze… that is what is really moving it up… you cannot borrow the stock… in the past the vast majority of all reverse stock splits have led to almost immediate declines when they were completed… the short sellers looked at those odds and went nuts with this thing after the 20 for 1 reverse split… with short selling representing 50% of the trading in the stock for weeks on end after the split… and that is what is going on… those guys are caught.
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The Bottom Line!: AIG’s run on huge volume… but it is still thin given the fact that most of it is owned by the government… if I were running the company I would go out there tomorrow morning to take advantage of the short squeeze… take some money in… I think the secondary is a natural… but I also think that AIG’s management may not know how the stock market works… and therefore may not grasp that all the hype that has given the shares new life… from both Benmosche and Greenberg… remember, you have got to divide the stock by 20 to figure out the price… have given you a once in a lifetime opportunity that you should not even have… if AIG, if I were you… I would simply bang the market right here… the worst case scenario, you break the short squeeze… but AIG still gets the money… they do this, and maybe the government… meaning you and me, the taxpayers…. has finally a shot of getting some of its money back.

Greenberg's Responsible

http://dealbook.blogs.nytimes.com/2009/03/02/aig-smackdown-liddy-vs-greenberg/

A Red-Letter Day For Blogging!

Transcript!!! Hank Greenberg and Meredith Whitney, Gretchen Morgenson and Carol Loomis!

Bernanke interrupts....

AIG!

Let me start with a personal insight: trading again after ten years (after all the investment advisors screwed up my money, why can't I do the same thing and have fun doing it?) I note that no sooner than my finger is off the mouse with a "market order" to buy GE it is "executed." Not a milisecond wait. Literally!

Suppose I had bought 10 million shares instead of 260 shares? Supposing I made a mistake on that 10 million shares.

In trading "slippage" happens. When it happens with big money, big bad things happen. More later. This may or may not be relevant to what follows.

AIG!

Let's start with the NYT's excellent interview with legal authorities:

http://roomfordebate.blogs.nytimes.com/2009/03/17/when-bonus-contracts-can-be-broken/

But I came into the kitchen 10 minutes ago because of such a wonderful first 1/2 hour of Charlie Rose just now (an hour delayed),

http://www.charlierose.com/guest/view/838

also on AIG.

The discussion was so important that it temporarily changed my view of Hank Greenberg from negative to possibly positive, and introduced me to at least one new hero: Carol Loomis of Fortune.

This Charlie Rose is so important that I am going to take my laptop and do a verbatim while rewatching the 1/2 hour (the other 1/2 hr deals with Pakistan). Then I will put it in below (above).

But first the incomparable Dowd on this topic!

http://www.nytimes.com/2009/03/18/opinion/18dowd.html?_r=1

From that piece:

"Boiling mad that A.I.G. made more than 73 millionaires in the unit that felled the firm, Cuomo called the company’s counsel on Monday to demand that she stop payment on the checks. Cuomo was informed that the money had already been direct-deposited in the accounts of the derivative scoundrels with the push of a button."

Again:

"...[T]he money had already been direct-deposited in the accounts of the derivative scoundrels with the push of a button."

And Friedman, clumsy and unknowledgeable on financial matters, (he misdescribes credit default instruments of AIG, but so what) still highly relevant on this topic of AIG:

http://www.nytimes.com/2009/03/18/opinion/18friedman.html

Leonhart chimes in, not so artfully:

http://www.nytimes.com/2009/03/18/business/economy/18leonhardt.html

But Ah! Morgenson!

http://www.nytimes.com/2009/03/18/business/18aig.html?ref=economy


"Even though A.I.G. finally disclosed the names of the institutions that received so much of the government money that was thought to be going to A.I.G., the idea that it took six months still rankles some market participants."

“'The system was undermined by asking the American people, under the veil of secrecy, to bail out one company when in fact they wanted to bail out someone else,'” said Sylvain R. Raynes, an authority in structured finance and a founder of R & R Consulting, a firm that helps investors gauge debt risks. “The prospectus for the bailout was not delivered to the people. And it was not delivered because if it had been, the deal would not have gone through.”

Now, a partial transcript. I still do not know whether Hank Greenberg is blowing smoke up our asses...but his comments are interesting. "Meredith" is sensational!

(see above)

Now for Liddy's Washington Post Op Ed piece this morning.

http://www.washingtonpost.com/wp-dyn/content/article/2009/03/17/AR2009031703019.html

And from BlogDredd Blog, we see that it was a Milken team that started AIG's credit default swaps years ago, well before Hank Greenberg left! So he was blowing smoke up our asses last night with Charlie Rose.

http://blogdredd.blogspot.com/2009/03/out-on-false-front.html