tag:blogger.com,1999:blog-6798074091942701235.post8411468745063476981..comments2024-03-27T11:08:31.557-04:00Comments on Can Turtles Fly?: Reggie Middleton: Ambac InsolventSivaram Vhttp://www.blogger.com/profile/06361276466660862882noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-6798074091942701235.post-62566056919716950352007-12-01T10:30:00.000-05:002007-12-01T10:30:00.000-05:00That's not my report so if you are giving credit, ...That's not my report so if you are giving credit, it should go to Reggie Middleton. <BR/><BR/>Don't say it's prescient because the game is not over until it is. Until these companies go bankrupt or their business models fall apart (sort of like how the dot-com business model from the 90's fell apart), awarding the prescient title is a bit premature :) After all, the market is filled tales of irrational pessmism which turned out to be completely wrong...<BR/><BR/><BR/><BR/>I'm not sure I agree with the insolvency view. I will read this report soon but from his prior post on MBIA, I didn't find it convincing enough to change my view.<BR/><BR/>As Accrued Interest has mentioned several times, the problem is that all the outcomes are EXTREMELY SENSITIVE to the numbers. A slight change in the default rate can mean the difference between the AAA tranche of a CDO taking a loss versus not taking any loss.<BR/><BR/>To make matters worse, the underlying securities, such as CDOs, are not transparent so no public investor really knows exactly what's in them.<BR/><BR/>Given the lack of transparency and sensitivity to the numbers, you can end up with all sort of scenarios, ranging from a total insolvency of a particular bond insurer to very little loss over the term of the bond insurance contract. This is why it doesn't surprise me when I hear extremely bearish arguments. You CAN make a superbearish case if you assume defaults, losses, recovery, etc are slightly worse than what the market expects.Sivaram Vhttps://www.blogger.com/profile/06361276466660862882noreply@blogger.comtag:blogger.com,1999:blog-6798074091942701235.post-60110212263458642612007-12-01T08:19:00.000-05:002007-12-01T08:19:00.000-05:00That is an awfully prescient and realistic comment...That is an awfully prescient and realistic comment. You have earned my respect with that one. Take the time to go through the numbers in the downloadable pdf available in the blog post.Anonymousnoreply@blogger.com