Wednesday, June 25, 2008

What do you get when you have your insurance company asking to void your policy

if you havent read lately mbia and other monoline insurers are attempting to void their contracts on 125 billion dollers of credit default contracts. This should be a huge redflag to people. Its bascially telling people the insurance company is going to suffer huge losses. Its kind of like your insurance company coming to you, a week before hurricane season, asking you to void your hurricane insurance. Your going to say no right. The bigger question you have to ask is why are they even asking, is it even worse then they think. Ok back to mbia brown resfusal to send 900 million down to the insurance arm of the company. They claim they have more then 7.5 billion in free cash to pay claims. If they have so much money, why would they want to void those contracts. Common sense. the next key date is mbia payment date for their noteholders. If they dont pay, this would be mbia first big default.

Friday, June 20, 2008

Mbia downgraded to A, worst case scenerio is here, I would not be surprised if they fall 50 percent or more friday

mbia has it worst case scenerio, after the bell today. It was downgraded to single A rating. Alot of investors dont know this but since they are downgraded to A, according to their 10q they will now have to post billions in collatorol, and pay out termination payments. Their 10 q doesnt list their termination payments, but their free collatorol, adjusting for their new capital base from 16.8 to 16 billion they will have 8.4 billion in free collatorol. and if you assume they have to pay out as much as they put in as collatorol, they will have less then 2.4 billion left. And with billions of payments left for the year, they are literally garanteeing bankruptcy. and with no way to raise new money, its garanteed. Note this is only from one section of their 10q. By going throught their 10q, their are more monetary concerns, such as their investments in ambac and other insurers, conduits, line of credits, bank notes,etc. I think tommmorow, mbia will fall hard, to low 2's or even lower. this is a death sentence for mbia, its all in the numbers.

Thursday, June 12, 2008

Why I hate Mbia

So what does mbia do? Well basically there an insurance company that reinsures bonds, of *supposedly* riskier businesses, and use their own high credit rating for those bonds. The result is a cheaper bond for the companies issuing debt, and a bond that people who want safe bonds can buy. For more information go to .

Ok first off if I'm here, talking about a bad company, and spending the time to create a blog about why i think its a crappy company, then you know its a crappy company. Heres why I hate it. Ok this business is the business of insuring large amount of bonds, based on a really small company. Mbia insures hundreds of billions of dollar of bonds. and if those bonds go into default, which means that the people who issue those bonds cant pay the interest on them, mbia has to pay them off. So a company with less then 7 percent of the capital needed to cover the outstanding bonds covered, is supposedly a reliable and sustainable business. Unfortunately for mbia they insured of all things housing debt. If you haven't heard about it, the united states is going through the worst recession in housing they have ever seen. The people in the business the longest, like Robert toll, calls it a depression So now mbia is stuck with billions in losses. that's not the end of it. This company doesn't keep their promises, and they at worst lie. They made promises to send 900 million to their insurance company. if you don't know they structure their business into a holding company and insurance business. That's tied together intricately. Since last January they promised to send the money. And as of last week they promised, and they backfired. The promises to note holders, clients, rating agencies, and regulators broken. so their liars. there is no real reason why there keeping the money. They say their insurance company is adequately funded. So no need to send it. If its adequately funded why not send the money, it wont hurt. The reason is that once that money is in there it has to be used for their clients, and not management mismanagement. Now management wants to start a new insurance company. Ok first off if I were NY regulator's would I allow a company and management that has mislead them over and over again, and willing to leave clients to the wind start another company and even allow them to get the licences, I would revoke them and not allow them in the country. it would be at worst a pr nightmare, and at best idiocy. Brown is in a dream land on that. I have no idea what he is thinking about. Ok and then another option is that he wants to use that money for a dividend. OK if I were a cynic, I would be thinking he just wants to bail out his stock positions, since he sunk allot of his money into the company. I doubt the people he raised the money from would allow it, and I doubt regulators would feel that would be wise, and would rush in to shut down the insurance arm. Same idea for a buyback. If I were NY insurance regulators, the ratings agencies like Moody's, s p , and Fitch i would be going, is management worrying about their own stock, or are they are worrying about their insurance company and clients. And to brown's idea, his first fiduciary duty as a insurer is to his clients. if not, then he should allow the NY regs to take over, b/c he is not fit for the job.