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Ambac announces an operating loss of ($7.03) vs. est. of ($3.50) - as if the consensus means anythin |
| Written by Reggie Middleton | |
| Tuesday, 22 January 2008 | |
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This should put to bed the notion that monoline insurer's books shouldn't be marked to market. The reason why Ambac has big operating losses is because the stuff that they insure is worth less and taking big losses. It's just that simple. If you allowed them to keep "fake" values on the books while the real stuff is tanking, then when the insured losses are actually realized, shareholders will get slammed very, very hard. If the mark to market losses are truly inaccurate, then when things are realized, the company will be able to book a gain. Until then... The losses are real, and market pricing cannot be circumvented for any significant amount of time without the perpetrator having to pay penance. 'nuff said! (for those that ever followed Stan Lee:-) ) Add this page to your favorite Social Bookmarking websites         
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Comments (12)
  written by fernando oliveira, January 22, 2008
but man,the mark they are making is related to the abx which is different from their high grade cDOS. the high grades have some 30% credit protection, they can lose 30% before ambac takes a hit
 written by M M, January 22, 2008
Is this a joke? It's all downhill from here any way you look at it. The Government is considering the re-capitalization of a WEAK company who made poor business decisions. ABK has stated they are excited about the prospects and parties involved in regards to possible partnerships. If your not part of the solution, your part of the problem. Get outta here.
written by Capital Gain, January 22, 2008
If they're excited about their prospects now they will soon be downright hysterical.
written by fernando oliveira, January 23, 2008
I'm not a joking. Im just trying to keep my mind open. I'm short MBI but THERE ARE RISKS TO IT. dont deny that. one HUGE risk is DUMB MONEY. a stupid private equity firm bidding the stock at the premium to the current value. another risk is a goverment bailout that infuses tax paymer money to save these companies. yet another risk is the fact that these companies underreserved the structured financed portfolio but VASTLY OVERreserved the municipal portfolio since they virtually never make payments on that side.
written by M M, January 23, 2008
I WAS short MBI/ABK. After today's run up, I'm thinking of milking the cow again. However, other prospects are more appealing. Yes, the monoliners will prob not fail. I just don't like talks of bail-out and re-capitalization. "If you're weak, you get eliminated." Longer term, to me, it just supports greed without any discipline. Sign me up!
written by Jon Pearlstone, January 23, 2008
I keep thinking about the Muni Bond Market--I have been a buyer for 20 years and cannot find underlying ratings on most of my AAA rated FULLY INSURED bonds when I get the perspectuses (perspecti?)
anyhow Considering it's likely that most munis were rubber stamped thanks to our friends at the mono's and the rating services, it's a good bet defaults are going to rise on munis Track record of little to no payments on munis in the past does not impress me--now a lot of those houses are empty, and property tax rates will be dropping significantly--if the municipalities can get the taxes paid at all. It's just a matter of time before their muni insurance starts to actually have claims to worry about--and lets not forget about credit default swaps, auto loans and all the other crap these guys insured--is the government gonna back all of this (I asked Reggie this question on his 1/23 post), short term I have covered and am staying away from the monos, but if they skyrocket with a bailout that does not really bail them out completely, I would seriously consider trying to make the same money twice on these guys--and maybe a lot more.
written by M M, January 23, 2008
If the government steps in and implements a partial-full debt issuance guarantee plan or some type of private partnership agreement arises, how do you think it will affect shareholders? I would think they're looking out for the policyholders first and foremost. Imagine if one of these monos went under? 600 point intraday swing on the DOW and market sentiment upbeat on "TALKS" of a bailout? Amazing. We haven't seen capitulation yet. Let feasting began on the next leg down.
 written by Johnny Lay, January 24, 2008
I'm guessin I'm the only one here that doesn't understand.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aKEcPpZod2fQ&refer=home Credit-default swaps tied to the bonds of MBIA plunged to 825 basis points a year, down from 22 percent upfront and 500 basis points a year yesterday, according to CMA Datavision. That means the cost to protect $10 million in MBIA bonds for five years fell to $825,000 a year from $2.2 million upfront and $500,000 annually yesterday. Contracts on Ambac fell to 900 basis points from 22 percent upfront and 500 basis points a year, CMA prices show.
 written by Reggie Middleton, January 24, 2008
I've been gone for about a day. Very, very nasty stomach virus took out the whole family and friends. As for the bailout, policy holders should take precedent. Hopefully, the govt won't make the mistake of trying to bailout investors. If this is the case, the back stop shoi;d come after all investment capital is consumed. Lender of last resort. That should serve to punish speculation but still protect the policy holders. I have a lot of stuff coming up today, but am still rather week. We will answer GGPs press release with one of our own, go through foreclosure scenarios, and post the full analysis of Bear Stearns. Next week we will visit he riskiest bank on the street. Even when I am ill, my analysts are still working.
written by M M, January 24, 2008
Can anybody explain what "run off" would entail? I'm assuming they just keep things as is with no interference? Thanks in advance.
written by Mark Edmunds, January 24, 2008
Run-off means that Ambac would stop writing new business (i.e., credit protection via insurance policies for munis and credit default swaps for structured finance). The existing contracts would remain inforce and run-off over time. If there is anything left after all contracts expire and obligations are met, then this amount would ultimately be distributed to shareholders. There are lots of different things that could happen in a run-off scenario.
My investment sentiments are same as moodys. Hopefully, the Wilbur Ross rumors and/or the hot air issued by the Wisonsin commissioner will cause the share price to jump, and it will provide another opportunity to short or buy puts.
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