Gtarras

MBIA and BofA: Thoughts on Litigation

thanks Tom
Problem (and maybe a blessing) with CDO of ABS is that this product is super sensitive to assumptions in individual mortgage losses. Subprime losses seem to be leveling off though, so I wanted to give MBI another look. Did not know the BV is mid-30s per their calc. Could be close to the fair value because their major problem is CDO of subprime ABS.. hmmm... Thanks!


On May 14 11:37 AM Tom Armistead wrote:

> dok tari and Gtarras,
>
> Reason to be long, nonGAAP metric adjusted book value stands at 37.61,
> and does not include any possible recoveries from litigation. In
> the past MBIA traded at roughly 1X this metric, so a successful resumption
> of writing municiapl bonds and a resolution of the questions about
> the cost of their CDO liabilities could entail a recovery to that
> area.
>
> There are a lot of uncertainties but it's a 6 bagger if it works
> out, from 5.90 as I type this.
>
> I have a negative reaction to BAC due to the situations noted in
> the article, whether they can create value from what they bought
> is not something I want to guess at, hence neither long nor short.
>
>

MBIA and BofA: Thoughts on Litigation

Tom
would be interesting to know your thoughts on WHY you are long MBI (hopefully for other readers as well). Maybe you can write it up? :)))

I have thought about buying MBI long time ago, but after some research realized that without knowing details of their complex CDO transactions, it is impossible to figure out how much value it is there. I am not sure MBI themselves know. I tend to think they will climb back to $30-440 range but it is a game of hide-and-seek.

Btw, i would not listen to anything Ackman says. He is all about show. So completely wrong with MBI and ABK back in 2002!! Yes it did work out for him in 2008 because they plunged into CDO of ABS disaster (from 2005 on), but Gotham were laughable in their attempt to bring these two down 7 years ago...

Derivatives: Just One Reason to Short the Banks

what a hogwash piece.

Housing Data Lifts the Markets

Did NYT account for the cheapest money EVER as a source to buy homes? ALso, as an analyst for almost 15 years, I know a thing or two about the 120 YEARS of historic data they bring up. Most certainly, its total garbage.


On Mar 18 08:58 PM The Mad Hedge Fund Trader wrote:

> Look at the long term trends. I am more convinced than ever that
> real estate has another 25% to fall, and best case, it is dead money
> for another five to ten years. The New York Times produced some insightful
> data on inflation adjusted home prices for the last 120 years, which
> baselines at a $100,000 for a single family home in 1890. Few people
> realize how superheated the recent real estate bubble really got.
> Past bubbles very consistently peaked at $125,000 in 1896, 1979,
> and 1989. This last one peaked at $205,000 in 2005, almost double
> the previous record highs. And while we have dropped 34% since then,
> to $135,000, we haven’t even fallen to the past all time highs yet.
> If you look at historical lows, my call for a further 25% slump looks
> positively bullish. We saw lows consistently around $66,000 in 1920,
> 1932, and 1942. Postwar lows came in at $105,000 in 1976, 1983, and
> 1996. These figures suggest the best case low is down a further 28%,
> and the worst case is down another 51%. I think I’ll go find something
> else to trade.

Housing Data Lifts the Markets

the Four Bears Chart is amazing in that the current plunge is as bad or even worse compared with the 20s. Meanwhile, the economic stats are not even close to the GDs, and are better than 70s and probably 80s. On top of it all all, the government is methodically delivering jab-jab-punch-uppercut to to the head of this bear and it surely feels like a medical attention will be required soon enough. we know where you stand, yea, keep on shorting America...

Why Bank Nationalization Will Never Happen

I wonder how many people yapping here on the comments board actually went out and did their DD in terms of what the books of these banks look like? Did Roubini ran the numbers himself? Please... He is to busy flying all over the world, and propping himself up on financial entertainment TV.. and the TV gnomes just love it...

Roubini's model of OVERALL losses is based on IMF model, when did IMF do a good job ever? Goldman and Citi produce loss numbers much lower than Roubini and IMF.. Maybe the reason for that they actually get all the shortcomings of FASB rules (like 157 etc), because they are in the tranches every day, unlike ivory tower economists?

There is a good reason why Geithner wants banks to run "stress tests".. Lets see what they produce first... Before screaming "nationalization"..

Also, before you jump on this "nationalization" bangwagon, look at Russia which suffocating without foreign credit.. Why you ask? Because of Putin nationalization fear... If you start nationalizing everything, do you think private money will ever want to invest? Wake up people!

Financial Stocks: Playing the Mark-to-Market Suspension

Expect to be trashed in the comments section by the folks who are glued to the financial entertainment gnomes... what are you talking about?! we all know that the financials are dead meat (they preach it to us on TV)...!!

My view: FASB 157 is the single most important reason the financial system, and the economy is down the toilet. without it, we could have handled the subprime bust..

Is Bank of America Actually Behind Citigroup on the Problem Bank List?

Agree 100%.

Example. In my line of work I calculate MTM on super senior corporate tranches (with subordination of 10%). they will experience 0 loss ultimately. Yet, on a billion dollar portfolio, we might have $100MM-$200MM paper loss. Scares the hell out of people. Makes it easier for shorts to push, and maybe even to have a run on the bank.

At some point, these paper losses will become paper gains. That will be fun to watch.

On Feb 10 06:50 AM ironpants wrote:

> Mark-to-Market claptrap has basically ruined the valuations of many
> otherwise well-run firms with BAC being one of them.
> The eggheaded insistence that fair value be assigned present market
> value has been corrosive to capitalism in general.
> Let's let companies mark to model based on some explicable, realistic
> assumptions regarding future value of their investments.
> We have to let firms exercise some foresight and judgment as they
> invest or they will have no incentive to do so.
> Enough talk about the so-called 'insolvency' of BAC. That's a smokescreen
> for shorts who want such entities to collapse for short-term gain.

Obama's TARP 2 Signals an End to Mark to Market

Thanks for this.. you are going to get hammered with usual slew of critics here who view the current mess through a prism of lazy american worker, drunk with foreign credit money.. In my humble opinion, this is true only to some extent.. But i think, stupid policies like FASB are the major reasons to blame, and should be abandoned!

Where did the crisis start? Subprime.. Then it spreads to business, prime etc etc.. Why? And how did it happen so fast? Because the financial industry takes a HUGE hit of confidence... Why?

Well, MTM rules played a DISASTROUS part in it.. Forced to mark to paniced markets, banks showed humongous MTM losses, which triggered even more panic, and on and on and on it went... Now these paper losses will be realized.. we got what we wished for...

How did we get from $300 billion subprime issue to trillions of depression style problems so fast? Perception, IMO. Induced by paniced MTMs.. All my opinion..

Citigroup's Derivatives Reduce Bailout to a Non-Event

Has anybody thought about billions in write-UPs for the big money center banks which are coming when spreads start to tighten? The tightening is already underway..

"the rescue plan fails to address the potentially disastrous impact of a crumbling derivatives portfolio in the face of a rapidly deteriorating global economic environment"
+
"Citigroup’s exposure to credit derivatives stood at $3.2 trillion (notional value)"

I do not have a position in Citi (or any other bank), but looked at Citi's CDO exposure earlier last year. The biggest chunk of it, as far as I remember, were super senior tranches (both ABS and corporate). These exposures tend to give you the wild swing in earnings (because of their sheer size), due to FASB 157 rule. Well, when spreads widen, Citi's earnings get a horrid MTM hit because of the exposures.

Watch out when the spreads reverse the course. All this false write-downs will be becoming write ups..

I am thinking to go long UYG.

What's a Super-Senior Tranche?

Bravo. great description. this market is what i do for living.

i would add one thing. ISDA adopted standard doc for mortgage backed debt only three-four years ago. but this short time was enough to build up these exposures that wiped the desks out. wow. high leverage helped though.