My parents bought 2000 shares of AIG at $58 and 1000 shares of BAC at
$39 in 2005.  In July when it was around $20 with all this news on TV
I was wondering if they need to sell but it went back to $25. My
parents said no worry it's a long term investment.

Now it's $2 and I do realize that it may take a while for us to
recover our losses, but my parents seems upset now and my mom is
blaming my dad. I don't want to question them and make things worse,
but just curious what's going to happen to AIG? Is it going to end up
like Fannie Mae now that the government has 80% stake? What do you
think my parents should do now?

What about BAC? Do you think I should tell them to sell?

Thanks
Anna

My brother works wall street.
My sister-in-law works AIG.

So, uhm....
Go rant the Government or SEC or Greedy crooks for doing poor job.

http://www.bloomberg.com/apps/news?pid=20601087&sid=avTqlUhQQOfs&refe...

The reason why you can't get a straight answer is because no one
knows.  We are in uncharted waters with AIG (and for the whole market
for that matter).  What will the stock price be a month from now, a
year from now, or longer.   (By the way, I think that is a misnomer.
I think it is a loan.  Granted it's a loan at very unfavorable terms
but AIG did not receive a gift and they certainly have collateral).
Anyway, what should your parents do?

Okay, it depends on their situation.  If they do not need the money to
live then holding tight on AIG is a no-brainer.  They've already lost
their investment - the damage has been done.  So what if it goes to
$0, practically all the money is already gone.  As time goes by, AIG
will sell some of its considerable assets and get out of hock, I would
not be surprised to see the stock rise (if you look at the assets -
they will have no problem raising this money and coming out the other
side with a significant business portfolio intact.  Remember, AIG is
not insolvent - they are illiquid which is a BIG difference).  Will it
get to $58?  Who knows because there will be a little doubt that the
AIG that emerges after this will be different than what your parents
bought.

(Here's another option, as it appears that AIG is emerging and the
stock starts to rally, if your parents can buy it, they should.
Buying 1000 shares of a rising AIG at say $10/share will decrease the
basis of their current 2000 shares.  The basis drops to $42 for all
with such a purchase 2000x$58 + 1000x$10 = $126,000/3000 = $42.  Thus
it makes it an easier task to get to break even IF the stock is then
forecasted to recover some of its ground.  Be sure to read up on
what's happening as it happens though.

If your parents have substantial income elsewhere and need the
writeoff, they could take the loss and use it to offset gains on other
investments ("as if" in this market)!

As for BAC, your parents are not as in dire straits.  They are off
about $10 share as I write this.  Unless it is absolutely necessary to
do so, I wouldn't sell this stock yet.  BAC will be a survivor in all
of this, and as such, ultimately this may be a very good investment as
business drives to the survivors.

Maybe you should let your mom read this posting and hopefully she'll
understand that not many people saw this coming. And placing blame is
just putting a heavier weight on your dads shoulders! But the advice
above should help, and maybe your parents should look for a different
investment strategy in the meantime.

My mom is very emotional right now. We can't average down because we
have no more to put in. From $2 going back to $58 it seems very
impossible now even though it's up today :(

Anyway, thanks guys. All the best.

Tell them to sell whatever is left, go to LasVegas and chill!

As with any investing, always think long term (like to the tune of
eternity).

It's not about what you make or what you invest anymore, it's about
how you spend the money that you do have.
1) Your brothers will have to get jobs and attend community college.
2) Cut out the vacations and invest in a good marriage counselor
(really, I'm not joking, something like this can ruin a marriage).
3) Count your blessings.  This is a great time to explore what really
matters in life: God, family, friends and freedom. Thank God we still
have these.
4) Go invest in a great mutual fund with someone who knows what they
are doing.  The greatest are Sequoia Fund, Dodge & Cox, and my
personal favorite Fairholme, run by Bruce Berkowtiz.
5) Whatever you sell, take a percentage of it and give it to someone
who REALLY needs it, like someone who is homeless or a not-for-
profit.  It'll show you HOW MUCH YOU REALLY do have.
6) Read the bible.   It actually still contains the best investment
advice in all the world: invest in eternity.  A good third of all
Jesus' examples has to do with money: I guess because money/investing
is a universal concept?

Well, that's all I got. it's getting late. It's tough losing money,
but remember you can't take money with you when you die. It's just a
thing.  It comes, it goes, but eternity is forever.

One option I can suggest is that, lower the average price down when it
is still low.
It is just hard to predict the market these days since you just need
to expect unexpected.
I strongly believe that your dad is not the one to be blamed.

The bad news: AIG will never recover to 58$. It wouldn't be wise to
sell at the moment as the stock has been hammered along with the
entire financial sector. There should still be some life left to it.
However, now that the government has its grips on the firm, they will
run a very lean and tight ship. This means layoffs, reduced
compensation, reduced employee benefits, and an overall gloomy
organization in comparison to healthy competitors. A flight in top
talent will mean a reduction in earnings, investing activities...etc.
A loss in confidence will also be a huge shock to AIG's investor
base.

Keep the stock and do the research, there might be advantages to
purchasing more shares if the numbers work out. I personally think
it's a toxic investment for the reasons described above.

____
Also...I have a feeling Anna is some Fat middle aged dude who is just
getting off on people feeling sorry for him. BUT, Anna if you are
really who you say you are (and I hope you ARE) than SORRY to hear
about your hard times.

Personally own both and would buy both stocks at this time they are
both great companies and really really cheap at these prices.

We are going through a tough time in the financial and housing
industries and the government has been sitting on their hands as
usual. Because of their inaction they have had to bail out Bears,
Fannie, Freddy, and AIG at a cost much greater then if they had acted
sooner.

On top of this SEC has allowed the market to run wild by not enforcing
rules, something else the government does very well..

Things are changing and so will the market..

For those who bought @ 5+, dont dismay, think of those who bought that
higher than you..

I seriously think this stock has the potential to reach at least 7-9
once the 700bn is out.

in @ 4.88