Ishortyou

@VIC: A Radically Different Context for Value Was Going On Outside

I think the FDIC has to stop being a thug and stay away from Citi, Wachovia and Wells Fargo discussions, so far its hormonal imbalance thugish behaviour is making the negotiations difficult, instead of stabilizing the banking sector its making it worse, so stay away FDIC!

Did Buffett Kill the (First) Wells Fargo-Wachovia Deal?

Wachovia got rid off the prior toxic risky wasted bank subsidiaries and kept the good ones. Now it can start from scratch to build a new banking subsidiary with safe practice together with its remaining good outstanding subsidiaries. The current subsidiaries of Wachovia make it look like “Merrill Lynch without the toxic risky waste”, good job from management it separated the good bank from the bad bank overnight, plus its CEO Bob Steel is one of the top rated mutual fund managers. Wachovia will keep the valuable human resources and the talent that have expirience in the banking business saving them for the new banking subsidiary. Buying the municipal bonds or the auction rate securities will give the inflow of cash as long as its hold even to maturity. Some investors are taking money away from Hedge Funds going wild and putting that money into accounts manage by people that know what they are doing, Bob Steel is one of those people that know what they are doing, dont be surprise some of this money will go to Wachovia subsidiaries. Earnings will be adjusted accordingly, like simple arithmetics they will manage its expenses vs its earnings to come ahead in capital and start piling up cash (saving cash a hard job for most of us that live on debt), this new cash will give them the jump start of a new banking subsidiary without even thinking about to sell its remaining subsidiaries.Forgot to mention that Wachovia owns a hudge Insurance subsidiary which is making money and has sound book of business. Lehman debt is bonds most of them senior, as bankrupt as Lehman is those bonds get paid. ARS are Municipal Bonds as bonds they get paid, hold into maturity they get paid in principal, those ARS are cash flow. Preferred dividends will get paid accordingly because the holding company does not own the banking subsidiaries anymore so modification are going to be made. Getting rid off the toxic waste risky bank related subsidiaries is a good strategy and converting the remaining broker one to a new bank subsidiary with clean sheets is a good one too.

Seth Klarman, Meryl Witmer and Marty Whitman - Q2 2008 Portfolio Moves

Lets assume the worst and that is the Fannie and Freddie stock go bust to zero, the government take the GSE's, so what? are we going to h*** for that? are the mortgages in their books go bust? are we going to crush? the answer is no! all those mortgages in their books will automatically be backed up by the government and even be rated as triple A, that will upgrade the books of all of those holding them into CDOs, MBS, SIVs and cause massive write ups! so what is the nonsense in here? that would be the best case scenario for bond and mortgages insurers, I am sure there are many of them praying for the government to take over the books of Freddie and Fannie.

Seth Klarman, Meryl Witmer and Marty Whitman - Q2 2008 Portfolio Moves

The best opportunities are in finantials right now even if Fannie and Freddie are in trouble, going long with them won't go wrong.

Tempting Buffett

time to buy some berkshire stock!

Whither Municipal Bond Insurance?

"MBIA Inc said in a statement in January that all remaining assets of Hudson-Thames had been sold and all of its senior liabilities were fully paid. In December 2007, Hudson-Thames ceased operations, MBIA said." This means they have already starting deleveraging slowly but surely since the last year, so now is a matter of time for book revaluation in the next quarters to come.

Whither Municipal Bond Insurance?

you are right, deleveraging gradually from those CDO's is key, because they already have decided to keep and save the cash. Most of the risky CDO's are backed by the housing market, that means those excessive housing inventories have to clear up first, the builders need to die for a while till those inventories cleared up, and by default the risk status of those CDO's will diminish, obviously that will upgrade the book value of the bond insurers.

Whither Municipal Bond Insurance?

You are right but now saving the cash and deleveraging gradually quarter by quarter from those risky CDO's or obligations, is the key strategy to reassume triple A status and write new low risk public bond insurance business.

Whither Municipal Bond Insurance?

in respect Ambac and MBIA, they need to keep and save their cash that they have already collected and will collect from existing businesses, deleverage from annoying debts, obligations, and bad bets, stop paying dividends to increase their BOOK VALUE and once the BOOK VALUE is adequate and sound reinstate their triple A ratings again to start writing down new government bonds insurance only in low risk areas of the market. This strategie is simple to execute and the key is in the DELEVERAGING of liabilities at this point. MBIA already is in the right track announcing that it will save the cash, so just now is a matter of deleveraging and time for the book value to come up to adequate levels for a triple A reinstatement.