MBIA … a bullish view

As I am a trader, I am always interested in both sides, the bullish and the bearish.

Funny and interestingly enough, sometimes the bleakest outlook creates the best (buying) opportunities.

Today afternoon, I read the title story of tomorrow’s edition of BARRON’S … not really known to the world as a bullish subjective magazine

Here are their views:

1. MBIA should have resolved the issues of the rating agencies by raising their capital by 2bln$.
2. The market prices now in a 70% chance of MBIA going bankrupt within the next 5 years, which is … so the magazine … by far too negative.
3. MBIA should profit from the fall of competitors as ACA and Ambac as it will be able to sign new business.
4. MBIA has way less of subprime exposure than its competition.
5. They say, MBIA passed the rating agencies’ stress test with the new failure rates successfully.
6. Barron’s says, that market does not understand the nature of their business. Even the highest so far called out numbers of losses are manageable as they will be stretched out over the next 20 years only. (They mention 10bln$ loss potential on 652bln$ bonds insured)

All in all, they say, maximum “yearly payout” is under a “Armageddon-like-worst-case-scenario” around 250mln$ a year. MBIA thinks, it could even WITHOUT new business create between 1.2 and 1.4bln$ per year.

Conclusion: MBIA is way underpriced, a fair breakup value should be between 30 and 40$ per share … OOOPS
Warburg Pincus is said to would like to take over the whole company …

So, IF this is the case, again we have a company or maybe even a sector, which is extremly wrong priced AND MIGHT go belly up on the ALWAYS STUPID rating agencies

They (the rating agencies) created the mess and now are overreacting. WHO is supervising these bigheaded valuedestroying brainless monsters???

Tags: ACA, Ambac, bond insurers, MBIA, ratings, subprime

This entry was posted on Sonntag, Januar 20th, 2008 at 18:59 and is filed under FDAX. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.