User 305589

MBIA and BofA: Thoughts on Litigation

The cruicial point here is the reorganization of mbia. obviously, they want to strip assets off to another subsidiary. Which, if allowed by the courts, could severely impair the value of MBIA's common stock and the MBIA bonds.
Yourt fixation on some adjusted book value is grossly misplaced, imho. Even marty whitman, a long time defender of mbia, is severly dispappointed by mbia's mgmt and sees enormous risks for the surplus notes from the asset-stripping. which, of course, rank far superior to the common shares.

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.
>
>

Nothing Is Ever Truly 'Off the Books' in the Financial World

I agree with most of the article - though i can't make any sense of the author's long position in ABK. After taking massive hits from their misguided insurance on cdo and mortgage papers the monolines face a potentially terminal threat from quickly deteriorating municipal finances. No other than Warren Buffet stated just a few months ago, that he wasn't even sure whether the muni-insurance business would really be profitable in the long run. And he talked about his freshly started muni-insurance arm, which has charged far higher premiums than abk and mbia ever did! the common stock of the former monoline insurers are tricking time bombs that could implode anytime. It may pay off, to hold some of their bonds, but the common shares offer an awful risk-reward profile imho.