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For those who are new to the blog, I have had heavy short positions and a lot of research performed on the monoline insurers as far back as the 3rd quarter of last year. It has paid off handsomely, despite the fact that many pundits had argued, tooth and nail, against my findings. Well, the market has spoken, and all of the monolines negatively blogged have reached the ending that I anticipated, if not worse. The business models just do not make sense for the derivative markets.

See my AGO primer and the full forensic analysis. These are some of my comments on the other monolines last year when they were trading in the 60's and 70's:

  1. A Super Scary Halloween Tale of 104 Basis Points Pt I & II, by Reggie Middleton
  2. Tie-in to the Halloween Story
  3. Welcome to the World of Dr. FrankenFinance!
  4. Ambac is Effectively Insolvent & Will See More than $8 Billion of Losses with Just a $2.26 Billion
  5. Follow up to the Ambac Analysis
  6. Monolines swoon, CDOs go boom & I really wonder why the ratings agencies are given any credibili
  7. More tidbits on the monolines
  8. What does Brittany Spears, Snow White and MBIA have in Common?
  9. Moody's Affirms Ratings of Ambac and MBIA & Loses any Credibility They May Have Had Left
  10. My Analyst's Comments on MBIA/Ambac/Moody's Post
  11. As was warned in this blog, the S&P downgrade of a monoline insurer reverberated losses through c

 

Here is a blurb from Bloomberg regarding AGO's price movement today:

 Assured Guaranty Plunges, Bond Risk Soars on Review (Update1)

By Christine Richard and Shannon D. Harrington - Assured Guaranty Ltd., one of two bond insurers with a AAA ranking from the three major ratings companies, fell as much as 58 percent in New York trading after Moody's Investors Service said it may downgrade the firm.

The cost to protect against a default by Assured Guaranty soared to a record. Credit-default swaps on Financial Security Assurance Holdings Ltd., the unit of Europe's Dexia SA that was also placed under scrutiny by Moody's, also rose to a record.

Moody's review is a blow to Hamilton, Bermuda-based Assured Assured Guaranty and Financial Security of New York, the only two bond insurers to maintain their top ratings as losses in the industry crippled competitors. The companies are dominating new municipal bond insurance and seeking to fend off Warren Buffett, whose new bond insurer was awarded a Aaa rating. Without a Aaa stamp, former market leaders MBIA Inc. and Ambac Financial Group Inc., have seen their new business plunge.

``Potentially all the legacy companies are gone now,'' said Rob Haines, an analyst with CreditSights in New York. ``It has huge implications for the municipal bond market and for banks that may have to take another round of writedowns. It's just a mess.''

What makes this interesting is that there are now (or soon will be), no more Aaa rated insurers that will wrap derivatives. These wraps are what the commercial, mortgage and investment banks relied on to get AAA rated ABS and MBS securities, CDOs, CLOs etc. To put this in other words, its curtains for all of those products that didn't take a big haircut due to their alleged superior "investment grade" status. These banks, as I type this, are currently rallying as they have been doing for the last few days. One would think that the SEC should be doing something about this problem in lieu of trying to administratively discourage short sellers on a few favored stocks. The fundamentals sucked before, I won't even lower myself to the levels of vulgarity needed to describe what they are now. GSE AAS rated debt, hah! Super senior AAA wrapped tranches, hah ha ha hah!