February Stock Talk !!

 Time for a new thread..we last left Gunners making his first options move....and at least we start the thread on an up day in the markets.

Dow 12,552
S& P 1367

 Here is a pinata for you Wall...

Warren Buffett's latest proposal for the troubled bond insurance industry is no help to MBIA(MBI - Cramer's Take - Stockpickr) and Ambac (ABK - Cramer's Take - Stockpickr), but it could be the best free market solution for everyone else.

On Tuesday, the legendary investor and CEO of Berkshire Hathaway (BRKA - Cramer's Take - Stockpickr) disclosed a letter he sent earlier this month to the two largest bond insurers, as well as privately held Financial Guaranty Insurance, offering a second level of insurance on up to $800 billion of the municipal bond underwritings at the companies.

Buffett wants no part of the structured finance underwritings that have plunged the industry into turmoil in recent months amid a rash of defaults in collateralized debt obligations, or CDOs, tied to risky mortgage loans. He's offering to take over the most stable part of the bond insurance business, and leave the bond insurers to deal with the rest.

"This is probably the most palatable solution that the private market can come up with for the problems with the bond insurers," says T.J. Marta, fixed income strategist with RBC Capital Markets. "No one can expect a private party to take on these CDO exposures. That simply would not be rational. Also, the people who got involved in these CDOs deserve whatever problems are in store for them."

Ackman said that Buffett's offer amounted to calling the bond insurers' bluff.

"The bond insurers have said they're not going to end up taking material losses on all this structured stuff," Ackman said. "They say all of these market-to-market losses they're taking in the billions of dollars are going to revert to zero over time. Buffet is saying that if that's true then they can take the municipal risk off their books and everything that's left can be distributed to shareholders as profit."

Market is looking ahead 6-9 months.  Call me crazy, but I think a bottom may have been put in already.

I agree with the last paragraph.

Most of these mark to market write downs are probably not necessary. The MUNI market has ZERO risk of default if you ask me, and the CDO instruments arent in high risk either.

People dont understand that the stuff the financials hold isnt destructive mortgage CDO's, in fact MOST of the CDO's are corporate paper..a lesser percentage is the mortgage related instruments, yet these firms are writing down EVERYTHING, and in the short term that is due to an illiquid market, which means the longer term value of these instruments is artificially down because of the turmoil.

To me the issue ISNT the instruments, it is the LEVERAGE in which these insurers were allowed to operate, not that the instruments were toxic.

So these financial firms who are making these terrible write downs are going to realize longer term a gain when they mark to market down the road..

We have seen this before..when these firms clear the closet, then dump everything because they know the market isnt going to punish them as much and it gives them an advantage down the road.

The only severe loss for firms (barring a meltdown in the corporate debt arena) is the loss of premiums, since most know that the firms (ABK, MBI) cannot pay on the policies, and they know if they force said firms into BK on some claims that it will destroy the secondary market..which is more toxic than losing the premiums on the insurance.

This Buffett stuff really isnt even worth reporting to me. Why anyone would want to pay MORE to Buffett and his guys than what current market pricing exists is beyond me..but if a municipal wants to feel warm and fuzzy by having WB as the insurer, then go ahead and pay more for similar protection and cough up the dough. The real default rate on muni debt is so minute the whole issue is hilarious.  

This begs a question:why is muni bond insurance necessary at all then? If it is sucha  sure thing (and generally it is) and given that these lame ass companies could not resist blowing a perfect set up, why are they needed anyway?

 On other subjects:

Rogers emphasized, despite their rapid economic development, per capita oil consumption in China and India is still only a fraction of that of South Korea and other developed Asian nations.
Ten months ago Rogers told a Credit Suisse Asian investment conference that current per capita oil consumption in China is about one tenth that of South Korea. In the interview he noted that India's per capita consumption could double and it would still be only one tenth of South Korea's.It is amazing to me he told conference attendees,how many people dont understand this (Asian energy demand). It's something we need to understand because its going to change the world as we know it

 Any opinion on a suspected pump and dump stock, or is it a valid worht a small shot speculation? PPBV

the debt markets havent exploded yet, they're just frozen

at some point those worthless CDOs and SIVs will come home to roost

 

 KOAJ I agree that they are simply frozen, not imploded. However, do you really think that the CBs and Fed and Congress are going to allow them to implode completely?

 I suppose the essential question is, how much of the real, not projected damage, has been marked down already.

 Here is a spreadsheet of some popular pumped stocks...

https://oneguysinvestments.com/gumshoe/spreadsheet/gumshoespreadsheet.html

vermeer - we dont know whats been priced in, because we havent had all the shoes drop

this isnt LTCM which had $100m liquid leveraged to $4b (or more)...this is much much more

we havent even gone into individual company's balance sheets to see if they are invested in any of this crap (not banks...talking about tech companies, etc who have excess cash invested across the mkt)

from bernanke this morning "there is no end in sight to the downturn in the housing sector"
check the stock market's performance in 1980-83, 90-92 when we had the last two real estate corrections. now tie billions of derivitives leveraged off of mortgage debt that may not be paid back b/c of exploding ARMs

 Oh I agree that this is much bigger than LTCM..what is your best guess as to when these assets will finally be truly valued rather than asolutely only guessed at? One year? Ywo years? Five years?

i would hope sooner. the only way to let the mkt clean itself is to expose all of its wounds...which of course people are reluctant to do

Wall, what is making IDMI run today? 

Gunners,

No clue bro...but somthing is.

If I find anything I will let you know.

I sold at 2.76 which would made a 500 plus buck gain.



I think the entire CDO implosion event is overstated. On a percentage, what do you fellas think the CDO's are the stinky, nasty ARM kind? I think the number is VERY VERY low. The ARM portion of the instument is the lowest level of the instrument, and those were owned more by investors and Hedgies who were willing to take on the risk.

The majority of the mortgage CDOs owned by big financial firms are the HIGH grade, high quality loans..and loans in this group arent defaulting and arent as likely to decline in value.

Much of the decline in the other instruments is due to the turmoil going on versus the quality of the actual investment..

A similar example is when the ENTIRE market got nailed after 9-11, EVERYTHING went down and the markets were illiquid..same thing here.

Down the road the actual damage and loss will probably be nothing like what it is being forecast.

JMHO

Gunners,

Stock looking good to be honest.

It keeps bumping its head on the HOD, it wont shock me if the stock passes 3 today.

That said, I will wait for it to come down and I dont regret anything..ended up making 1k, not 500.

I had 1000 shares at 2.75, 1,000 shares at 1.75 (all posted trades) and sold at 2.76..so including commish that is a 50 cent gain on 2000 shares, or a 1k profit. I was thinking I had 1k shares for some stupid reason.

Net positive on the trade if you can believe that.

I know 1k isnt the biggest of trades, but on a 5k or so investment that is a healthy hit..

DRYS is treating me nicely lately, earnings after the bell today.

Me too.

I head for the exits too early on most of my gainers..and let the losers linger longer.

I thought it was passing 3 there a few minutes ago, it sure is fun to watch with the low float and all.

Blew right through 3.

350k volume in one minute.

WOW

 

what exactly is your background i likemoney ? you seem to remind me of a goodfellow i once knew who traveled alot to AC fron NY 

crazy!  did you see what CMO did today?  that 1 day chart is pretty wild

Yeah that is a wild ride on CMO, but on a percentage basis our IDMI is up 50%!

Huge volume..bigger players in trying to push it around. I bet it goes even higher.