Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: E_K_S who wrote (29783)	1/19/2008 4:08:29 PM
From: Madharry	Read Replies (1) \| Respond to of 78659

I dont agree with the article nor do I agree with your conclusions. Buffett is entering the business and I imagine aig will expand. Certainly a berkshire-hathaway aaa rating is worth something. My own sensibility is that I would not want to own the rating agencies anymore. why should anyone trust them? their models have now been proven false. I dont think anyone is ever going to soley rely on a AAA rating by an agency anymore. This will mean more employment for financial analysts. However with respect to ABK I dont know why they would not attempt a rights offering unless they feel that they are so tainted now that no one will accept their gty anyway so they should lay off most of their staff and go into runoff mode and that that is the best outcome for shareholders. Perhaps they could sell their business without the existing portfolio to Berkshire Hathaway. As a shareholder I could certainly live with that. I ll take some BRKB and the portfolio runoff.

To: E_K_S who wrote (29783)	1/19/2008 4:27:11 PM
From: Jurgis Bekepuris	Respond to of 78659

First of all, I have not looked at the financials of ABK, so take the rest with a grain of salt. Actually, I am not sure even if looking at the financials will help, since they probably don't disclose and don't yet know how much they will need to pay out on their insurance. IMHO, the announcement was somewhat positive to ABK if they don't have to go BK. I.e. with the downgrade they will probably not issue new business and just wind down the existing one as was mentioned in the investors letter to the management. If their book is not complete crap and they manage to wind it down while remaining in the positive territory on the balance sheet, they may come out even better than if they raised $1b now. I would not short or go long here though, since it's all a crap shoot from here, depending how their insurance book winds down. Regarding municipalities, it's not as bad as you would think, since BRKA is going to start the insurance business. Yes, they will charge more and possibly take only certain business, but the municipalities are not left with no way to issue and insure debt. There were also articles that some places decide not to insure their debt anymore - I don't have a clue how viable this is. Now for the rest, we'll have to wait and see. USA is not in the best place right now due to housing, credit, mortgage and budget deficit issues. On the other hand though, the low dollar is making US more and more competitive worldwide and overall economy is not that bad yet. I would not bet on a deep protracted recession and bear market... but then I would not bet on deep protracted recession and bear market in any case. ;)