FEATURED SLIDESHOW
Who Is The Worst CEO?Mad Money needed new inductees for its
Wall of Shame, so we asked viewers for
nominations.
RECENT POSTS
- Cramer: Buy These Banks, If...
- Time to Buy Treasurys?
- Lightning Round: Las Vegas Sands, ADC Telecom, Satyam Computer and More
- Lightning Round OT: Knight Capital, Ebix and More
- Is Lear, Back From Bankruptcy, a Buy?
- Sanofi-Aventis Falling Off a Patent Cliff?
- Cramer: Your Thanksgiving Week Game Plan
- Cramer: Next Week Should Define Rest of ‘09
- Mad Money: Mad Mail: Buy RIM or Apple?
- Lightning Round: Cisco Systems, Citigroup, Baidu.com and More
MAD MONEY FEATURES
PODCASTSWatch the Lightning Round whenever and wherever you want.
FULL SHOWSMissed an episode of Mad Money? Watch the lastest show here.
OFFICIAL MAD MONEY WIDGETGrab this all-in-one application and get recaps of the show sent right to your desktop or blog.
CRAMER'S SOUNDBOARDAdmit it: You’ve always wanted to hit the “They know nothing!” button. Here’s your chance.
CRAMER QUICK PICSCheck out the Mad Money host on set, back to school, behind the scenes and more.
VIDEOSGet all your favorite Cramer clips right here.
SHOP FOR MAD MERCHANDISEBuy Cramer books, bobbleheads and other Mad Money merchandise.
RING TONESPick up the phone! It’s Cramer! New Mad Money sounds for your cell phone.
TEXT MESSAGE ALERTMad Money’s mobile. Get show highlights sent to your phone.
Text Size 
 |
Cramer knows what these people are thinking: “You can’t lose much money on an under $2 stock,” they’d say. Or, “The government owns 78% of AIG [AIG
Loading...
()
], so the stock is safe.” But this reasoning couldn’t be further from the truth. Investors can still lose every dime they’ve put into AIG.
The company’s problems go far beyond the financial products division that sold those now infamous credit default swaps. Cramer found out that an extended recession would force eight of AIG’s subsidiaries to raise $6.8 billion. And that’s on top of the billions and billions in government handouts already received.
AIG’s insurance businesses have grossly underperformed the rest of the sector, as both the funds available for policyholders and asset values are down. The life, health, property and casualty insurance businesses together lost $7.9 billion in capital just in 2008. Investors should keep these points in mind while they’re rationalizing the company’s “mere” $4.4 billion first-quarter loss.
Some people have pointed to AIG’s assets as a sign of strength, saying they could be sold to pay back the government, but Cramer shot down this argument as well. Attempts to unload these assets have been slow moving, and they’re generating barely enough cash to pay the interest on the company’s debts.
To make matters worse, AIG’s businesses are declining in value. So potential buyers are less likely to pay more than book value – what the business would be worth if all of its assets were liquidated – for them. Cramer mentioned that International Lease Finance, the company’s aircraft leasing business, might fetch just $5 billion despite an estimated book value of $7.5 billion last year.
And there are even more problems. Namely, the $17 billion in mortgages that AIG holds. That can’t be good if commercial real estate turns out to be as bad as expected. And the $1.5 trillion of counterparty exposure could blow up in the company’s face as well. Then on Wednesday CEO Ed Liddy told Congress he could not promise that he wouldn’t need more government help, or that taxpayers would get all of their money back. Given this, why would anyone want to buy AIG?
“I cannot think of a single reason to own the stock,” Cramer said, “while there are countless reasons to worry that AIG could get even worse.”
For that reason, AIG is staying in the Sell Block.
Call Cramer: 1-800-743-CBNC
Questions for Cramer?
Questions, comments, suggestions for the Mad Money website?
Data is a real-time snapshot *Data is delayed at least 15 minutes