TomArmistead

http://www.investorplaceblogs.com/users/toma47/
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122 Comments

    • Mon Nov 17th 18:23 PM | Rating: 0 0
      Commented on:
      Oh Mamma.com: SEC Charges Mark Cuban With Insider Trading
      This is kind of like the Marth Stewart thing.

      The SEC goes for something with publicity value, to provide cover for the fact they have done nothing substantive about the serious problems that plague Wall Street.
      View article »
    • Thu Nov 13th 19:08 PM | Rating: 0 0
      Commented on:
      AIG: The Fed Is a Really Bad Trader
      I listened to AIG's conference call and read the documents involved. The banks are made whole, and AIG takes the loss. The facility buys at the market price and holds for appreciation. AIG gets 1/3 of the salvage.

      Judging from the conference call, some of the banks have been unwilling to close the deals on fair terms - they preferred to hold the collateral and continue to collect on the CDOs, most of which are performing just fine. The question comes up, does the insurance go with the bonds, or could the bonds be sold and the insurance retained? That sounds like something GS would do.

      The Federal Reservie is doing the negotiating because they know how to talk to the banks, some of it may be offers they can't refuse.
      View article »
    • Tue Nov 11th 18:55 PM | Rating: 0 0
      Commented on:
      AIG: New Math for Understanding What Went Wrong
      I never thought of it that way. You could be right.
      View article »
    • Mon Nov 10th 19:39 PM | Rating: 0 0
      Commented on:
      AIG Bailout 2: Why?
      I listened to the conference call, there were a number of questions about how much the vehicle formed to buy the CDOs would be paying. Answers were evasive, the Federal Reserve is going to be doing the negotiating as it has more standing with the sellers than AIG does. There is something people are not talking about - maybe some of those who have the 30 billion of collateral would just as soon hang on to the money.

      There is the possibility that much of the mark to market losses on the CDOs will revert over time as many of the underlying assets are still performing. AIG would get approximately 1/3 of the salvage, the Federal Reserve would get the rest.

      The way I understand the transaction, AIG will be booking the entire mark to market loss, the special purpose facility will pay approximately market price because AIG will have taken the loss. Then if the CDOs are worth more, AIG gets 1/3 and the government gets 2/3.

      The payoff for AIG is they can stop posting more and more collateral every time the market for the CDOs goes down further. Per Liddy, "we need to stop it, we need to stop it now."

      The vehicle for the RMBS from the securities lending operation will hold the assets until values recover. AIG will get 1/6 of any salvage, the government will keep the rest. Again it appears the facility will be paying market prices, and AIG's motivation is to cap the losses and move on.

      The usurious rates of interest and short term of the bridge loan were onerous and would have forced AIG to sell valuable assets at fire sale prices. The revised bailout will avoid fire sales and as such will promote market stability.
      View article »
    • Sat Nov 8th 14:10 PM | Rating: 0 0
      Commented on:
      AIG Bailout Redux: The Perils of Open-Ended Liability
      AIG's mistake was agreeing to post collateral based on the market price of what they insured. AIG's book is mostly 2004 and 2005 Vintage sub-prime and actual losses when defined as principal and interest will most likely be manageable. MBi and ABK, who also wrote insurance in CDS form but are not required to post collateral, have experienced much less liquidity pressure even though the risks they insured had much more 2006 and 2007 vintage subprime.

      Another mistake, making collateral requirements dependent on maintaining their ratings from S&P and Moody's.

      I don't see the Federal involvement as an open ended liability - it is, as originally reported - a bridge loan, and needs to stay in effect until credit markets are restored to sanity. There was no need to add usurious interest rates and the confiscation of shareholder property to the equation.

      I agree with Jim O'Sullivan, AIG's property and casualty operations are very well-repected in the industry and it is a real shame if their value is trashed by the stupidity of a small group of financial products employees: especially when the difficulties are caused by panicked credit market conditions that will eventually return to normal.
      View article »
    • Fri Nov 7th 22:48 PM | Rating: 0 0
      Commented on:
      Why Would Treasury Cut AIG's Interest Payment?
      The series of decisions and actions on Bear Stearns, Lehman, AIG etc were not self consistent. The AIG deal was bad, the usurious loan and then the confiscatoin of 80% of the company. It destabilized the economy since it created a lot of fear and uncertainty about governments role.

      I saw an interview today with Hank Greenberg, he makes a wonderful case for AIG being given the same terms as the banks. As a fellow shareholder, I think Hank has it right.
      View article »
    • Fri Nov 7th 07:39 AM | Rating: 0 0
      Commented on:
      Trading Obama: Solar Stocks, GM Debt, Ambac Calls, Lorillard and Goldman Puts
      re: long ABK calls

      I have been playing ABK with Jan10 calls but reduced my position out of concern that the company could not survive a long/deep recession.

      I guess from a logical point of view ABK would be a beneficiary if an Obama administration elects to solve the economic crisis by inflationary means - but with Paul Volcker as an advisor inflation seems a very remote possiblity.

      View article »
    • Fri Nov 7th 07:26 AM | Rating: 0 0
      Commented on:
      After Ambac Downgrade: How Will Treasuries Fare?
      fatcat:

      we're still here, just not saying much...
      View article »
    • Tue Nov 4th 15:06 PM | Rating: 0 0
      Commented on:
      Earnings Preview: MBIA
      MBIA is also suing ResCap, a subsidiary of GMAC, for reasons similar to why they sued Countrywide. ResCap and Countrywide provided something like 90% of the direct RMBS MBIA insured: so, if the suits are successful, losses will be greatly reduced.

      The complaints are available on MBIA's website and are worth reading. My impression after reading them was that MBIA will be able to prevail.

      MBIA was far less enthusiastic than Ambac about the possiblity of government involvement, perhaps because they don't need the help.

      My main concern in listening to the conference call will be whether management has changed the economic forcasts that underly their loss projections.
      View article »
    • Tue Nov 4th 14:57 PM | Rating: 0 0
      Commented on:
      Earnings Preview: Ambac Financial Group
      I recently reduced the size of my long position in ABK, because I am worried about the potential liquidity difficulties they would face in the event of a downgrade. They would need to post collateral on deals in their asset management business, and would need permission from the Wisconsin Insurance Dept. to make intercompany transactions in order to do so.

      I have been studying up on synthetic CDOs and have not been very happy about what I have learned. Some of the CDOs ABK insures contain a fair amount of synthetic collateral.

      Based on adjusted Book Value as computed by the company, there is a lot of potential value here - 15 per share - but since the collapse of Lehman created difficulties around collateral in ABK's asset management business, particularly in view of Moody's potential downgrade, I regard the stock as speculative, since the creation of value depends on government assistance.
      View article »
    • Tue Nov 4th 14:38 PM | Rating: 0 0
      Commented on:
      CDS Prices Trend Calls Another Downturn in Equities
      There is a disconnect somewhere: however, it is possible that the disconnect lies in the relationship of CDS spreads to the actual risk of default.

      Perhaps the CDS spreads on GE are too high, driven by speculation or a desire to hedge against a deep recession.
      View article »
    • Sat Nov 1st 15:53 PM | Rating: 0 0
      Commented on:
      Not All Preferreds Created Equal
      Good article - this encouraged me to do some research and take some good advice on similar ideas.

      Ambac "preferred" AKF was trading at 5, par is 25, for a company that is rated AA by S&P and Aa3 by Moody's. Hardly risk free but as Full Deck suggested it was a potential 5 bagger at the price, so I bought some and was rewarded with a quick run up to 7.40....

      I halve a lot of AIG but I will probably try a little AFF..
      View article »
    • Thu Oct 30th 19:17 PM | Rating: 0 0
      Commented on:
      JP Morgan Analyst: Johnson & Johnson Not Worth the Sum of Its Parts
      My method for a steady earner like JNJ is to use 5 year average EPS. Based on its normal multiple to that metric, the stock is extremely cheap, especially when compared to where it traded in 2002, when its defensive characteristics made it very highly valued.

      I have had good luck buying calls at 50, LEAPS, and now might be a good time to try that strategy again.

      The last time I did the sum of parts thing JNJ looked undervalued to me.
      View article »
    • Thu Oct 30th 18:51 PM | Rating: 0 0
      Commented on:
      Home Price Reality Check
      Maybe these people don't believe the Case/Shiller numbers that make the headlines every month.

      Case/Shiller does only 20 metropolitan areas and overweights recent transactions. The decreases they give out reflect the worst case - someone who bought at the peak and got foreclosed.

      Mark to market accounting doesn't apply if you don't have to sell.
      View article »
    • Thu Oct 30th 18:40 PM | Rating: 0 0
      Commented on:
      Volkswagen Saga: Major Short Squeeze
      This could not have happened to a nicer bunch of guys. Notice how quick they are to cry foul and demand a bailout.

      We need more of these short squeezes.
      View article »
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