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

To: Jurgis Bekepuris who wrote (29841)	1/24/2008 11:42:29 AM
From: Madharry	Read Replies (1) \| Respond to of 78757

after reading todays research note from goldman sacks I added to my position in abk. they analyst says run-off valuation of $15, bail out valuation of $35. limbo-$10. I am arbitrarily estimating the odds of a bail out at around 70%. Its actually inconceivable to me that the banks and the government would risk the possible downgrade to hundreds of billions of credits when it could be mitigated by providing some $5Billion of support. so assuming 30% chance of $15 and 70% chance of $35 I get an implied value of $27. So at these levels it looks like a bargain. PLG.to is up some 11% today but is still trading at a big discount to its share of DGC which hit a new high today on more drilling results.

To: Jurgis Bekepuris who wrote (29841)	1/26/2008 1:46:00 AM
From: Spekulatius	Read Replies (3) \| Respond to of 78757

Bond insurers - like in the "Big Lebowski" words, the bond insurers are the "carpet that holds the room together". Problem is that it's a small carpet now combined market cap of MBI and ABK is 3B$ and the sums that I am hearing are needed are >100B$. reuters.com Raising that amount of capital is not feasible for any private institution, so it would have to be some sort of a government backstop. I am not sure that this would leave ABK and MBI operating as they are but it sure would beat bankrupty. Then there is another assumption that a few B$ might be enough to have them keep the AAA rating and banks would provide that capital because it be cheaper for them to keep the bond insurers afloat then let them be down graded, which leads to market- market losses at those banks with the myriads and hundred B$ of papers that has been insured (and Armageddon scenario I described earlier). this idea sounds like the Munchausen story to me where he managed to pull himself and his horse out of the swamp by pulling on his own hair. What is really going to happen is hard to tell. What I do know is that I don't want to be part of this. I don't own US bank stocks (except for overcapitalized thrift conversions maybe), much less so the bond insurers. Sure there is money to be made but there is also the very real potential for total wipeouts. I try to stay out of the crossfire for now. Better to buy a 1$ note for 80c, when I am 90% sure about the value than the same note for 50c when I am only 50% sure to be correct.