Small thoughts, from the little people

It’s a little scary that the world’s largest insurance company hasn’t planned for a rainy day.


As one of the little people, that thought did cross my mind. But you aren't one of us, you are a highly influential opinion maker. As such, your recent reticence to forthrightly express your opinion is as scary if not scarier. (Not meant as a criticism just an observation.)

I dunno why AIG is in so much trouble. Elliot Spitzer himself went through all that trouble to get their management changed to help the stock-holders.

"New York Gov. David Paterson said Tuesday that American International Group Inc. (AIG) has just “a day† to raise capital to keep the giant insurer afloat. “I think they have a day, but I think that this is the moment - we’re in the moment right now as to whether or not they can put something together,† Paterson said on CNBC. "

-- Patterson didn't say how rainy that day would be.

Is that a quote from someone? If it is, please give the source.

Anyway, as with Kent, I had a similar thought about the insurance companies after 9/11, when their whole
attitude was, "Oh, gee, we can't possibly be expected to come through when really, you know, unexpected
stuff comes along..." It's not like that's why people buy insurance or anything.

No one that I know of ever said that market corrections are not painful. In fact, every economics and finance course I have ever had emphasized that the market is totally unforgiving. The point is that market economies fare better overall than planned economies in the long run. Bad companies fail (and the investors loose their shirts) while well run companies survive and grow. And their investors profit. Unless, of course, paternalistic, social equality government types confiscate the profit of the surviving companies and their investors and give it to those that have failed to prepare for their future. This process has several names: highly progressive income tax; alternative minimum tax; windfall profits tax; capital gains tax. Just to name a few.

my muse is Alanis Morrisette - Isn't it ironic? Don't U think? :).

The world's largest insurer?
Allianz is a larger insurer than AIG, both in terms of assets and market cap (even before today). Its shares lost a mere 2% today.

9/11 did not lead to bankruptcy of the main re-insurers Munich Re and Swiss Re. There was just an argument over how much they would have to dole out. They have a fiduciary duty to both shareholders and their other insurance holders to not pay more than they have to.

"It's hard to run around proclaiming that the market corrects for everything and beat the deregulation rah-rah drum at times like these."

Actually, it's quite easy. First, you ask why, for example, Berkshire should be punished for doing things the right way by the government propping up their competition and subsidizing how that competition does business. You wonder why, for example, you should be punished for not taking out an excessive mortgage, or leveraging up chasing alpha.

Next, you realize that the only rationale for the bailouts is fear. You ask yourself to what extent do previous regulations set up an environment where companies can get huge to the point where everyone is terrified that if they go out of business. Size matters, and a real free market likes it small.

You wonder to yourself what regulations we have already that hasn't stopped a damn thing this decade. Then, you shrug, say to yourself "I don't need to be an expert in regulation or an expert in failure, that's the lefties job" you buy some Berkshire stock and get on with your specialty.

Comments for this post are closed