CrossProfit_

More on TARP and the Insurance Industry

Nice article.

As an aside, there are two new competitors on the block, Buffett and Citadil. If ABK's future is the reason for your 'spike and leave' conclusion, it may be premature to make such a call.

CrossProfit

Monoline Stock Price Rally Overdone

Author should have noted that CreditSights competes with S&P and Moody's.

The Real Risk: Ambac Loses its AAA Rating

Finally, someone is writing about the bigger picture. There is more to this, but this article is a start, even though the author takes an overly simplistic 'scary' venue.

It would be nice to see an article that incorporates how the banks perceive Buffett's foray into the muni business.


CrossProfit

The AMBAC Bailout Plan is Really About Banks Saving Their Own AAAsses

Luv your 2 cents!

We disagree with your premise that ABK can't survive no matter what. The munis is a solid money making business. The problem is how to split the company in two and how the CDO losses (referred to as toxic waste in other articles) will be divvied up.

Once this is resolved, ABK can get back to basics. Also, we haven't seen anyone write about the banks not wanting Buffett to get a strong foothold in this business. For the time being the banks will not state so openly, but they definitely prefer working with ABK and current competitors.

CrossProfit

Wall Street Breakfast: Must-Know News

"Iron ore price soars"

Seeking Alpha readers were aware of this trend already back in October 2007.

See:
www.crossprofit.com/ar...
or
seekingalpha.com/artic...

"A risk to our assessment for CLF (not the price of iron) is that current Australian port infrastructure may not be capable of handling much more volume without upgrading. This could take two years, postponing further benefits from the Australian acquisitions."


The trend was clearly pointed out again in a follow-up article in December 2007.
See:
www.crossprofit.com/ar...
or
seekingalpha.com/artic...

"In general, prices reset in January every year for iron pellets on all long term contracts. Different formulas are used for the various contracts with a partial resetting done on a quarterly basis...

Australia Portman acquisition benefits from hedged exchange rate and there should be a large price increase coming through in January"

There were at least two opportunities to go long below $95 since the first article and one opportunity since the second. We reiterate the closing paragraph from the first article;

"Should both iron ore and coking coal live up to predictions, we could see CLF trading at $160 in 2008."

CrossProfit (consensus)

Moody's Affirms Ambac, MBIA Ratings - Losing Any Last Shred of Credibilty

ABK has a strong long term pipeline from muni's. Unless there is a 1929 style depression (low probability), ABK should be able to weather this storm.

The $29B reinsurance is more Balance Sheet accounting than anything else. From a cash flow perspective, ABK shouldn't need to raise capital in 2008.

The Berkshire entry into the arena bodes well for ABK as this reinforces the basic business model as being sound and transparent (true to Berkshire primary investment criteria) and also as a prelude to Berkshire buying a chunk of competitors; ABK included as a primary target at the right price.

Disclosure: This is the opinion of a CrossProfit analyst and is the consensus at CrossProfit.com. No current conflicts of interest.