glassbox

Will TARP Cover Both Ambac and MBIA?

Fulldeck

I did check up their debentures before. They are very very illiquid and very hard to get at. The float is small to - I believe its not even US$300MM in total isze. In fact, I was looking for bonds of bond insurers to buy earlier this year as I was concerned about dilution risk. And this led me to realise that the bond insurers are not funded by borrowings but rather by equity - quite a difference from all the bond and preferred offerings we have seen issued by the other financials.


On Oct 07 09:36 AM Fulldeck wrote:

> Tom-
> If you're that bullish, i.e. ABK to $15, why wouldn't you rather
> buy their 100-year debentures- AKF and AKT? That are now selling
> at $5-ish, yielding in the 30% range, have a call value of $25, and
> would be senior to the common in a (brrr..) bankruptcy! They have
> the same 5-bagger potential, more safety, and pay 30% while you're
> waiting!

Ambac, MBIA: Moody's strikes again

CDS market regulation - long long overdue!

Ambac, MBIA: Moody's strikes again

buddhatt

I wished SEC would have disclosure rules that require disclosure of stocks lent by longs and disclosure of shorts and where they borrowed their scrips from. This woudl minimise any opportunities to create stinking trades.

Ambac Collapse: Anticlimax of the Week

Moody's and S&P's business model is premised on the fact that the market will buy and believe their ratings. What they have done in the last one year is basically to negate the trust that the market has with them - firstly by overrating what was not worse credit and then at the bottom of the crisis, to keep moving the goal post downwards.

With the current state of affairs, the problem is not with collateral posting, the problem is 'who can you trust'? At the end of the day, what is called to question is the integrity of the management running the companies and the integrity of the market system allocating the capital. I must say at this point, the latter is sorely lacking.

Ask most of the management of the companies (other than the wall street investment banks which I have a different issue with) - I think they are working harder than anyone to restore any semblance of stability and trust in their operations. Yes, perhaps some of the mistakes were their undoing but I think the fact remains that they were operating under an environment that have certain assumptions which are now being severely challenged. The job of regulators is to ensure that systemic risks like what we are seeing now do not go out of hand and creates a self fulfilling prophecy of downward spiral to be taken advantage of - sadly, all that neglect of this objective is now coming undone.

Come on, stop putting the sole blame on management for what on hindsight looks like a flawed business model. Going by the number of requests of companies who were not included in the SHO list requesting to be put on it just shows that there is something very flawed with the system in which the market operates, perhaps more so than the business model the company is operating with.

ABK collapse is really one worst case depiction of the failure of the system - at this point, can one really say they 'trust' Moody's downgrade?? I am actually more prepared to trust the management as they have demonstrated positively trying to recover my money. I don't have the answers cause the whole thing baffles me. I certainly hope that the market is capable of coming to its senses and logic in the midst of all that fear, mistrust and uncertainty.

Moral Hazard: A Danger to Our Financial System

Tom, this is a very good article. But I'm afraid not many of the generation that has not retired (i.e. those 55 years and younger) actual understand the meaning of 'moral'. Sadly, I think its a lost principal in many business dealings these days. Hence, a blow up almost every few years....

For many, the law of the jungle rules, so caveat emptor....

Is MBIA's Executive Compensation Fair?

Hi! I'm surprise by this vesting conditions. Whilst it sounds like it aligns my interest, it does however increase the danger of the management team more interested in managing stock price rather than profits or stability of business. That said, I'm new to these sort of vesting conditions and wonder what is the impact so far on this stock and others.

Restoring Credibility to Ambac and MBIA

Dear both Tom Arm and Tom Brown, thank you for taking the pains to explain your views on ABK and MBI. In a world that has atrophy as a natural law, it certainly takes more guts and conviction to look into the future and be positive than to be negative. The pay offs are definitely worth it at this point. If I short the stocks at this point, all I make is the price but if I stay on - my gains are unlimited.

From a pure game theory perspective, the conclusion is very clear. Of course, this is pure game theory. But if we do our numbers, the probability tells me that it is more likely to go upwards than down. The shorts will be fighting against all the positive energy that is being put into restoring the stability and credibility of this industry.

I would not bother engaging the shorts on their points - their agenda is never 'investing' but 'destroying'. Value is created by building businesses, not destroying them. Its amazing how many shorts (incl hedge fund managers) are able to get away with murder in the last few years.

I'm long ABK and happily so. Will stick to these position and wait out. At the worst, its a perpetual option. At the best, I hope it will be at least a 5 bagger in the next few years.

Who's Buying Financials?

Banking 101 - the multiplier effect. $1 given to the bank allows the bank to lend up to $10. The point on banks is not so much the leverage but how they balance their maturity and liquidity gaps. As long as banks are able to refinance their fundings, they will continue to remain solvent - even if their leverage is high.

MBIA Turns Thuggish

Salmon, I ask you. If you were a shareholder of MBIA and you know very well that there is one guy out there always ready with a loaded gun to shoot you on every move you make. This guy is not a shareholder, in fact - his intention is to shoot you. What would you do? I hazard one can do 2 things: sell the stock and cease being a shareholder and secondly: fight for what is rightfully yours. As the appointed CEO of MBIA, Jay Brown has a duty to all the shareholders (yes only to shareholders, not shorts) to protect the integrity of operations and that includes industrial criminal acts like espionage/rumour mongering and the likes. What is the point of engaging in a so called 'gentleman debate' when you know the other side's objective is to shoot you. You can only 'debate' when the guy is prepared to put down the gun and work a way out that is win win. Unfortunately, Ackman has come out very clearly that he is prepared to have only one winner and a dead target.

The Emperor (Mr. Ackman) Has No Clothes

Don't forget bond insurance for public infrastructure related projects and international markets demand for such products. The guys at ABK and MBIA have been in the business long enough - this is the time we can hopefully sieve the wheat from the chaf. Long ABK for at least a 12 month ride - believe it will eventually go back above their internal adjusted BV of at least US$17. Well, if it doesn't, at least is a US$4+ perpetual option bet.

Earnings: MBIA Completes the Bond-Insurer Trifecta

Good Tom for doing all that. Shareholders should start doing something for the stocks that they own. What have non-shareholders got to do with stocks that they don't own? They are just poking their nose into business that is not theirs and always in the name of 'creating liquidity'.

Ambac, MBIA: Thinking About Book Value; Looking Forward to Earnings

vaduz, the mark to market CDS pricing gives you the pricing of only participating market participants - not necessarily all participants. Its skewed as much as the price reflects what those participants think. The CDS prices tells me nothing of whether this company is going to make it or not - although it does tell me what the participants think. Just because somebody thinks so it does not mean that is in reality the case. My point on the article was the deficiency in the accounting principles premised on conservatism that failed to account for the value in the future premiums. The problem with using 'the market' is the fallacy that the market has predictive value. If it had, I don't think we need any analysts anymore. Anyway, market's predictive value is really bad - market predicted ABK was 1.04 at the low not too long ago - that prediction has been busted. So, I would not count too much on that to make the overall judgement.

Ambac, MBIA: Thinking About Book Value; Looking Forward to Earnings

Thank you shorters - for giving me the opportunity the buy these stocks at such depressed prices!

Excellent article - especially on the deficiency of the present accounting principles to fully reflect the nature of the business. Those who bother to read into this will understand the true risk of the business and evaluate it more objectively.

Selling the Short Sellers Short: Another Sign of Trouble

flashrob, well, I'm sorry if you are making losses on your shorts. But shorting is a dangerous game and if you managed your risks well, you should have know that there is this risk known as regulatory risk - the risk that regulators can change rules and therefore your holdings (short or long) will have its price affected. I don't see anything wrong here with them changing rules - they are regulators after all. Its just part of the capitalist system. If they listen too much to the big money guys and the shorts, then they would not be listening to the longs. You see, shorts and longs are on opposite sides. You cannot want to be a long and also want to borrow that same stock to short. If you want to take the latter view, then you should just sell what you have. Meanwhile, the one who wants to short the stock without the stock has no business in the whole affair and if he claims he is just part of the efficient market system - let me tell you he is just meddling with it.

Selling the Short Sellers Short: Another Sign of Trouble

The shorts are typical sour grapes at this point. They are obviously hurting playing a leveraged game - the very same risk that banks took which the got them into the trouble that they are in now. Don't they know that short selling is a derived position - a position they are allowed to hold only on the dispensation of shareholders of the company. Now they are crying foul, that the SEC changed rules blah blah blah. Come on, wake up, shorting is dangerous, so eat your losses. What hypocrites!