.floatimg-left-hort { float:left; } .floatimg-left-caption-hort { float:left; margin-bottom:10px; width:300px; margin-right:10px; clear:left;} .floatimg-left-vert { float:left; margin-top:10px; margin-right:15px; width:200px;} .floatimg-left-caption-vert { float:left; margin-right:10px; margin-bottom:10px; font-size: 12px; width:200px;} .floatimg-right-hort { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 300px;} .floatimg-right-caption-hort { float:left; margin-right:10px; margin-bottom:10px; width: 300px; font-size: 12px; } .floatimg-right-vert { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px;} .floatimg-right-caption-vert { float:left; margin-right:10px; margin-bottom:10px; width: 200px; font-size: 12px; } .floatimgright-sidebar { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px; border-top-style: double; border-top-color: black; border-bottom-style: double; border-bottom-color: black;} .floatimgright-sidebar p { line-height: 115%; text-indent: 10px; } .floatimgright-sidebar h4 { font-variant:small-caps; } .pullquote { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 150px; background: url(http://www.dmbusinessdaily.com/DAILY/editorial/extras/closequote.gif) no-repeat bottom right !important ; line-height: 150%; font-size: 125%; border-top: 1px solid; border-bottom: 1px solid;} .floatvidleft { float:left; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} .floatvidright { float:right; margin-bottom:10px; width:325px; margin-right:10px; clear:left;}
Dear Mr. Berko:

Dear R.F.:

I don’t like AIG; I never did and never will. I haven’t liked AIG or CEO Maurice Greenberg since mid-1981, when I wrote an unkind article about the company. After my column was published, Maurice Raymond Hank David Greenberg told the CEO of my company that I should be fired. Now come to think about it, there are four kinds of men I don’t trust: (1) Men with multiple middle names; (2) men who use an initial for their first name such as J. Bruce Swindle; (3) men who use two initials and then their family name, such as H.E. Swindle; and finally (4) men who have a Jr. or a number after their family name. Did you ever wonder why this is common among men and unheard of among women?

Mr. Greenberg is known as a gruff, rough, tough, demanding, abrasive, dictatorial, egotistical man. However, his two sons, Jeff and Evan, lack the abrasiveness and ego of their father and are considered to be pretty good Joes.

Anyhow, you didn’t miss much while “officering” in Afghanistan. Your 1,000 AIG shares for which you paid $3 a share are now 50 shares at $50. The board had a 1 for 20 reverse split in July, reducing AIG’s 2.7 billion outstanding shares to 135 million and reducing your position from 1,000 to 50 shares. You paid $3,000 for that risky investment, and now you have (after the 1 for 20 reverse split) 50 shares at $50, worth $2,500. In effect, you’re out of pocket $500. The purpose of the reverse split was to reduce the number of outstanding shares and increase their market price. If you had been home in Aurora at the time of the split, you might have had an opportunity to follow “Berko’s Rule No. 46,” which states: “On the date a company affects a ‘reverse stock split,’ one can short the stock and buy it back some 20 percent to 25 percent lower in two or three weeks with a sweet profit.” It seldom fails.

AIG is alive because it truly was too big to fail, and because AIG’s nefarious and criminal involvement in the derivative market was holding the world’s financial sector hostage. Certainly the Fed, the Treasury and the world’s financial markets could have foundered, and confidence in the U.S. financial system could have collapsed with brutal consequences if the government let AIG go bankrupt. I’m not exaggerating! Hell’s bells, in late 1999 I spoke with SEC Chairman Arthur Levitt to tell him of the impending derivative dangers. He heard me, but he didn’t listen. Oh, well, at least I can say “I told you so.”

I’m not fond of the stock, even though some analysts believe AIG will post attractive earnings in 2010 and 2011; in fact, two of these guys tell me that AIG will post earnings in excess of $9 a share. If you must increase your AIG position, I’d recommend that you also consider the American International Group 7.70 percent preferred, maturing at $25 in December 2062. The symbol is AVF; the shares are rated BBB; they trade at $13, so the $1.925 dividend yields a sweet 14 percent. Then purchase an equal dollar amount of common stock to create an artificial convertible with a nifty 8.62 percent current return. Not a bad deal, and you get a dividend you need while you wait. So with a bit of patience and AIG’s earnings return, you might earn a handsome current return on the bond and the stock.

Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, Fla. 33775 or e-mail him at mjberko@yahoo.com. © 2009 Creators.Com