Are you still in your Mortgage Insurers trade? Looks like the bailout may lift all boats, except of course
Yeah.. still playing RDN and a few others. Can't find any argument that would dissuade me from believing that the MIs are in the "cat bird's seat" in this mortgage mess. Still believe they were the primary corporate victims of (or the least culpable for) this mortgage debacle. They were the first major financials to be taken out as Ackman's wolves said "look at how undercapitalized they are!!.. They're on the hook for all of those depreciating mortgages and CDOs and they are going to have to spend all their capital making people whole".
But now as we're discovering more and more fraud on the part of the banks, or just banks wanting to unload their CDOs but can't because they transferred their voting rights to the insurers, I think the MI's are gaining more traction, legally and financially.
They're no legal obligation for an insurer to pay out, nor do I believe is there a legal obligation for them to refund the premium they were paid, if they've been defrauded. And looking at the recent headlines where Jefferson County, Alabama is claiming JPM's defrauded them, folks are speculating that insurers like SCA (spun off from XL Insurance), which have considerable exposure, will be off the hook, being replaced by JPM.
Either way, the MIs are a very interesting sector. No ETF for them that I can find.. Book values to share price are incredibly distorted (RDN has a $30 book value, but trades at $5). And even if they just shut down new underwriting and go into "run-off", they should be worth more than the market's representing.
Feel free to tell me where my logic is screwed up!!
Hawk |
