oldlures1

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    • Mon Jun 16th 11:28 AM | Rating: 0 0
      Commented on:
      Disagreeing With Tilson on the Monoline Insurers
      apppro - I agree, although I'm not sure of the Berkshire's ownership in S&P. I do know they're a 20% owner (i.e. the largest shareholder) of Moody's. Will have to research the potential S&P connection. Regardless, their interest in Moody's certainly seems like an obvious conflict of interest.

      Consider this...

      1) Berkshire is the largest owner of Moody's, and has it's hands on the purse strings representing a large chunk of the rating agencies' earnings - by virtue of the annual fees pd by BK's numerous entities for their ratings.

      2) Berkshire just opened it's own bond insurance company, and stands to gain tremendously from the downgrade of the #1 and #2 monolines, which effectively keeps them from writing new biz - i.e. no competition for BK's new company.

      3) The rating agencies downgrade the MBI and ABK, offering no substantive evidence to support their action; none!, only that the two companies lack "financial flexibility" (at the moment) and they question their "franchise value"....both of which, ironically, were ellivated from fiction to fact with the downgrade!

      Setting aside, for a moment, all the conspiracy-esque talk, this matter taken as a whole; the way it has evolved, has been very disappointing. I no longer hold the rating agencies on the pedestal that I once did, and find myself less naive today.
      View article »
    • Sat Jun 14th 22:45 PM | Rating: 0 0
      Commented on:
      MBIA and Ambac: Monoline Malaise
      I don't blame MBIA for refusing the move the funds. It seems like a reasonable (and sensible) business deicision, particulary under the circumstances.

      This whole charade that has played out over the past six months reminds me of the well-known Peanuts scene where Lucy holds the football for Charlie Brown. Charlie continues to trust Lucy; and when he doesn't she manages to convince him that this she'll really hold. So, they reach an agreement; she'll hold the football and he'll kick it. But everytime, Charlie gets prepared, runs down the field, gives it his best shot and, at the last minute, Lucy moves the ball. In this case, Lucy is played by the rating agencies, and MBIA is Charlie Brown. MBIA is tired of Lucy's lies and misguidance, so he's taking his ball and going to play somewhere else.

      MBIA will get AAA status again; either by virtue of a new AAA-rated start-up, or it'll regain it's original AAA status in 12-18 months by virtue of reduction in its liabilities. And in the meantime, despite all the unsubstantiated garbage you read from the biased propogandists trying to manipulate, policyholders will be just fine.

      Again, I don't blame them; not at all.
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    • Sat Jun 14th 08:13 AM | Rating: 0 0
      Commented on:
      Is There Hope Yet for MBIA?
      Fair, and well-said.
      I'm bullish on MBIA. I think it has the makings of a great turn-around story. They've got the leadership and the resources, so we'll see.
      View article »
    • Sat Jun 14th 08:01 AM | Rating: 0 0
      Commented on:
      Bernanke's Statements: Blatant Lies or Wishful Thinking?
      More chicken little rhetoric. Gre-e-e-a-t.
      Moving on now...
      View article »
    • Sat Jun 14th 07:58 AM | Rating: 0 0
      Commented on:
      Why MBIA's Change of Plans Makes Sense
      I agree, it's a sensible decision. It's a business decision.
      Perhaps I'm a bit naive, but I remain confident that MBIA (or a subsidiary) will regain AAA status in the not-to-distant future. Frankly, I've seen nothing yet (i.e. hard evidence) from the rating agencies to support losing it in the first place, but I digress.
      As a shareholder, I truly believe that CEO Brown, along with the Board and the faithful supportive employees, will ensure MBIA's viability and long-term prospects for shareholders. Just keep your eyes on the horizon.
      View article »
    • Tue Jun 10th 19:01 PM | Rating: 0 0
      Commented on:
      The Stock Market: Searching for Signs of Intelligent Life
      Personally, I don't know that I'd crib Ackman, but if so, then I'd offer that an informed decision can only be gained by looking at both sides of the coin. As such, read (Third Avenue Value Fund) Marty Whitman's FY07 year-end and 1st qtr 2008 shareholder letters - there's a lot of discussion their large play on MBIA.
      View article »
    • Tue Jun 10th 18:53 PM | Rating: 0 0
      Commented on:
      MBIA and Ambac: Edge of the Cliff, Ratings-Wise
      Vittello -- good argument, and well-made.
      View article »
    • Sun Jun 8th 10:25 AM | Rating: 0 0
      Commented on:
      MBIA and Ambac: Edge of the Cliff, Ratings-Wise
      Crashof2008 - You're absolutely correct, MBI's new originations fell significantly this year. But in light of the bad press and mkt environments, does that really surprise you? I think what's important is that they're still writing new business...despite that challenging obstacles.

      I also agree that many states aren't, at the moment, utilizing the monolines to credit enhance new debt issues, but I suspect you and I disagree as to why. It's not that the states don't want insurance per se, but it's simply too expensive at the moment. The lack of muni defaults has provided for a stable underlying/spur rating, but bond insurance premiums charged by the few players exploiting mkt conditions are exorbitant. As such, the minimal rate differential of AAA vs AA isn't enought to substantiate today's high premiums for credit ehancement. It's easy math and an easy decision, so the states are foregoing bond ins for now. But make no mistake, bond insurance is here to stay, and once the dust settles, and competitions returns to the mkt, premiums will drop, the economics of the deals will work and states will get insurance.

      On the topic of muni defaults, I'd offer that you may see a increase in muni defaults. Over the past five yrs, many municipalities obligated themselves to many new projects, and the inherent funding obligations, based on tax revenue...revenue that is now falling. Keep watching the radar. If this happens, it'll reinforce the need/desire for monoline insurance.

      Again, bond insurance is here to stay. After all, if it's such a flawed business model, why is everyone rushing to start their own bond insurer?

      I'm not sure what you mean by "default" in terms of the monolines, but if you're opining as to their future insolvency, then I would disagee on that count as well, as their financial fundamentals (not media headlines) don't support this popular perception. In fact, based on the numbers, insolvency is highly unlikely.

      I'm also not sure what you mean by "offshore". MBI has a number of subsidiaries domiciled outside of the US for the purpose of writing international coverage, which seems logical given the nature of the business. If by "offshore" you're referring to their one Bermuda subsidiary, CapMAC Asia Ltd., then I would offer that it's "accounting"... as well as that of the other "offshore" subs, is incorporated and disclosed in the company's financials/10-K. With that said, Channel Re, a Bermuda-based reinsurer, has garnered some headlines where MBI is concerned. MBI is a 17% owner in Channel Re, but it is not a "subsidiary" of MBI, technically speaking, hence the reason MBI can't provide details of it. Unfortunately, that's not what you read in the headlines, let alone hear it in Bill Ackman's rhetoric. If Channel Re is a subsidiary of MBI, then Moody's is a subsidiary of Berkshire Hathaway (a 20% owner).
      View article »
    • Sat Jun 7th 13:15 PM | Rating: 0 0
      Commented on:
      The Stock Market: Searching for Signs of Intelligent Life
      I forgot to add to my comment...

      And while the mkt is distracted by the chaos, the AA-downgrade effectively shuts the monolines doors, thus allowing BK's newly opened bond insurer nearly unfettered access sans competition from those pesky #1 and #2 players, MBI and ABK.

      The rating agencies downgraded both ABK and MBI without conducting a review. That's a fact, and one you won't see pointed out in the headlines. [note: Moody's has initiated a review, to be concluded in the weeks ahead]. In either case, it's odd, wouldn't you say? Downgrading MBI and ABK impacts over $1 trillion in securities; quite a bold move in the absence of a thorough review.

      Furthermore, the rating agencies substantiate (albeit weakly) their actions now by questioning "franchise value"; the ability to generate new business. This too is odd, because if you look at the numbers, not the headlines, you'd see that MBI was the 3rd largest originator of bond insurance this year. Obviously, there IS franchise value...today...that would likely increase with time. But that door has been effectively shut by the downgrade, thus ensuring whatever franchise value they had is now gone! Again, doesn't this strike you as odd? It should.
      View article »
    • Fri Jun 6th 17:40 PM | Rating: 0 0
      Commented on:
      MBIA and Ambac: Edge of the Cliff, Ratings-Wise
      The ultimate question is why are MBI and ABK losing their AAA rating? Is it because of financial fundamentals, such as captial adequacy, impairment points of sr (& super sr) tranches, claims paid (ie. true loss), and the like. Of is it based on broad-based industry observations, vague innuendos about what might be happening in the insured portfolios and predictions about waining future business (i.e. franchise value)?

      With regard to my last point, I'd like to point out that MBI was the 3rd largest originator of bond insurance this year. But if you listen to the headlines, and follow the rating agency dictum, they're not writing any new business, at least not now...not that they're now downgraded.

      I liken MBI and ABK to boxers; they're in the ring, fighting the fight, because that's what they do. This is tough fight, and they're taking some blows, but if left to fight a fair fight, they'll finish the bout a winner. Unfortunately, there are forces at work to ensure that they don't finish the fight. So ask yourself, who would want that, and why?

      Policyholders are going to be paid; they were never in danger, and MBI and ABK's reputations were fine, that is, until they were trashed in the headlines. So why downgrade them? Why effectively take them out of the fight?

      Did someone say there are new entries to the market? How interesting.
      View article »
    • Fri Jun 6th 17:18 PM | Rating: 0 0
      Commented on:
      The Stock Market: Searching for Signs of Intelligent Life
      wobatus - I agree. Lot's of emotion floating around on this one, and little substantive evidence to back up claims. I started to offer my opinion, but frankly didn't know where to start; too many holes to plug. Nevertheless, I suppose you inspired me.

      I will offer this; generally speaking, I think there are a lot of bright minds in the investment community. They study the numbers, understand the fundamentals, and they don't fall victim to propagandist headlines and market manipulators (i.e. Buffet, the rating agencies, etc.).

      I don’t agree with the author’s overall message and underlying sentiment, but I do share his sense of wonder and confusion over recent events. After all, the market is behaving without rhyme or reason, flying in the face of conventional wisdom.

      I also agree with his lack of respect for S&P, but I’ll expand my disappointment to all three agencies, and offer in support of my mentality their downgrade of MBI and ABK (this is where I also disagree with the author). If you read the headlines as a harbinger of truth, then the agencies’ actions seem appropriate, but you’d also be terribly misguided. The financial fundamentals of both companies can pay policyholders, survive the crisis and continue as going concerns. But you won’t hear that, let alone see any evidence that supports it (that is, unless you read the financials, the 10-ks, are tear yourself away from the headlines). What you get as supporting rationale is irrelevant industry observations and vague innuendo about what might be happening in the insured portfolios. So why downgrade them? It doesn’t make sense, unless, of course, they have an underlying agenda and/or have succumbed to market perception.

      All told, I can explain the circus we’re observing (and unfortunately enduring) with two words: election year

      FNMA is going to be insolvent by year-end, huh? And I've heard elsewhere that ABK and MBI will be insolvent by year-end as well. Apparently a lot is happening by “year-end”. Want to know what else is near year-end? The election. Coincidence? I think not. Here’s the schtick: Create an environment of disruption and chaos, and don't allow it to settle. Fuel a sense of dejection and unrest. Lead "the people" to believe in the notion of impending doom; financial or otherwise, and the need for "change". Folks will look for an opportunity to create such change and....well...whatd'ya know, there's an election; just before "year-end"! How convenient! It's purely coincidental, I'm sure.

      At the risk of sounding like a complete whacko conspiracy theorist, I’ll leave you with something to chew on: Moody’s is 20%-owned by Berkshire Hathaway; a obvious conflict-of-interest (but you don’t see that in the headlines, do you?). Let’s make it juicy: BK just opened its own bond insurance shop, which stands to gain from by stifled competition (i.e. ABK and MBI). Now, let’s take it a step further, to a macro-level: Buffet is a well-known lefty, and has made his displeasure with the current administration quite obvious (and admittedly, as a righty, I share some of that frustration). By virtue of BK, Buffet (when not otherwise distracted by soap opera gigs) controls the purse-strings of many companies, all of whom pay annual fees to the rating agencies. Are you connected the dots? So, here it goes, downgrade one company, and the effect is contained in those four walls. But downgrade the two largest bond insurers, and you’ve effectively downgraded every security they insure, thereby fueling panic, turmoil and unrest in the markets, not to mention beat down consumer sentiment, thus helping to ensure an economic landscape more accommodating for a change in administration.
      View article »
    • Fri Jun 6th 14:42 PM | Rating: 0 0
      Commented on:
      Is ECB President's Call for a Tightening Cycle a Good Idea?
      iThinkBig: you and I share the same perception; one that, for me, is growing, particularly with the mkt gyrations and actions-taken over the past six months...and highlighted in the past few days. I'm a "free mkt" guy; I believe in it, but my foundation are getting shaken. Call me naive. But my naivety is being exposed, and what I'm left with is disappointment in what I thought was an impenetrable system; the "free mkt" may not be so..."free".

      It's as if much of what is the turmoil isn't the product of financial fundamentals; as it should be, but rather actions are taken with the intent of deriving a predetermined outcome - dare I say, manipulation. I've never been a conspiracy-minded individual; brushing such rubbish off as poppicock, but I'm getting swayed in that direction. How else do you explain it?

      Then it dons on me; it's an election year! Duh! I have to keep reminding myself of that. Little makes sense these days, and it won't until after the election is over (i.e. the incentive is gone).
      View article »
    • Wed Jun 4th 11:49 AM | Rating: 0 0
      Commented on:
      Muni Defaults Triple
      I agree with your "peanuts" perception; it's right-on, and concur that an increase in muni defaults will impact the monolines, but disagree on the magnitude of such impact -- I don't believe it will be material in the sense that it propogates the "walking dead", as you said.

      The mark-to-market adjustments that garner the headlines and fuel paranoia over the monolines, have little "cash" impact to the companies; they're only book-entries to comply with GAAP. So what are their "real" losses? In terms of real loss, the monolines are only required to pay P&I pmts on the bonds, not a lump sum upfront pay-out. With that said, I feel that MBI and ABK have built sufficient books-of-business and (importantly) investment portfolios, both generating sufficient earnings to fund losses (P&I pmts only) in the most unrealistic overly-aggressive worst-case scenarios. As such, they can absorb an increase in muni defaults and continue as going-concerns.

      Furthermore, I'd offer that an increase in muni defaults, while on the surface may seem adverse where the bond insurers are concerned, will actually have an indirect benefit to the MBI and ABK in that it will effectively derail recent efforts to decouple the monoline rating from the (underlying) issuer rating on the basis that (ironically) that munies have experienced such low defaults. An increase in muni defaults (micro) can be absorbed by the monolines and (macro) reinforce the need for bond insurance going forward, thereby helping to preserve the monoline's viability and future prospects.

      All told, I remain comfortable with MBI and ABK's prospects and eventual recovery....with one exception; that is, to quote Marty Whitman, "...the dangers of Rating Agency subjective considerations and capricious regulators."

      Disclaimer: I own MBI common stock.
      View article »
    • Tue Apr 29th 10:18 AM | Rating: 0 0
      Commented on:
      Ambac's Earnings: You Can't Make This Stuff Up
      Personally, on the matter of bond insurers, I take anything from Pershing with a grain of salt. At the very least, a reader should consider Pershing's opinion in light of probable bias, as Ackman has historically maintained a large short position on the insurers.
      There are always two sides to any story, and I believe this is no different. The informed reader is well-served to consider the alternate perspective, such as...
      -- Mar. 3 '08 article "Whitman takes on Ackman over Bond Insurers"
      -- Dec. 25 '07 article "Marty Whitman back bond insurers - says Ackman is wrong"
      I'm not saying Pershing is entirely incorrect, but rather, in this matter, contemplation of alternate opinion is a worthwhile exercise.
      View article »
    • Wed Jan 30th 17:42 PM | Rating: 0 0
      Commented on:
      The Monolines Need $200 Billion? No Way
      Reinko - what does $50 trillion in US debt have to do with monoline exposure? You lost me.
      Regardless, my point was that it is refreshing to see something quasi-positive, if not sensible, regarding the plight of the bond insurers. I don't know Mr. Brown, nor do I know his background, but I'm in his camp on the validity (or lack thereof) of Gross, Egan and Ackman's numbers. In fact, their combined temperment on the subject verges on fanatical, to the point I question if they individually have exceedingly large short positions on the Insurers(?).

      Is Mr. Brown correct in his allegations and position on the matter? *shrugs* Only tell will tell, I suppose.
      View article »
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