User 169224

Assured Guaranty: Vulnerable to Continued Bond Market Troubles

by the issuer), so the reason that deal matters is counterparty credit if BofA deal falls then CFC is your counterparty hence a very shaky counterparty. Although the loss range given is wide 0-100MM the base case outcome is 30MM of which 18MM was reserved in Q4.
5) Muni Credit- Can't have it both ways, on one hand you say there are losses in this sector on the other hand say that all these issuers can go direct and still get AAA
6) Worst time to allow Muni's to go direct what are the sources of revenues for Municipalities? Taxes, what is happening to Property taxes, personal taxes, Business Taxes? all are going down making Muni's a shakier credit
7) Corporate Pooled obligations- 35% subordination, no issues there

Now lets talk about why this will be the best opportunity you will see in Finance barring the Title Insurers. At the risk of oversimplification this is no different than buying a reinsurance stock after a hurricane has hit for major losses. Look at RNR as an example post major events.
Here are the facts why this is a great stock
1) Pricing is up between 50%-300% across lines
2) Risk goes down, you attach at higher points just read the ACF release on FSA deal
3) Competitive Landscape decimated, FGIC Gone, SCA, Gone, CIFG Gone, Ambac and MBIA on their Deathbed out of the market for 1 year minimum
4) In every catastrophe someone always wins-
AGO Market Share
Jan 07 Dec 07 Jan 08 Feb 08 March 08
1% 9% 23% 34% 47%
5) Unlike Reinsurance where you have reinvestment risk after 2 years in this case the tail is 10-15 years so no reinvestment risk
6) Wilbur Ross provides just in time capital which is good for shadow ratings

I can go on and on but some investment are simple when 60% of your competitors are out of business and you had a 1% market share you don't have to be a genius to make money.
Earnings power will be closer to $4.00 in 2 years book ex the CDS MTM losses is at 28 you be the judge on valuation metrics based on your own approach but hard to not own this one here.

Assured Guaranty: Vulnerable to Continued Bond Market Troubles

Barking up the wrong tree, these high level Macro logic worked for Ackman on MBIA & Ambac as those two truly wrote shitty business. Here are the facts
1) 1% of the Par outstanding is below Investment Grade
2) No CDO of ABS written since 2003
3) $6.3B of Net Par is Sub Prime which attaches at 39% ie close to 40% of the deal has to go kaput so even if defaults rise to 50% and you lose 50% on the house losses don't go beyond 25%
4) HELOC Risk is the only Risk at a total of $2.1B from two Countrywide deals. The way these deals are structured once losses escalate these deals start trapping cash to protect the AAA investors, also any new draws (HELOC are not fully drawn) are jr to existing holders so by the time the excess spread builds your attachment points are north 0f 10%. Management has said if BofA deal goes through 0 loss (because the draws are funded b