Revisiting the Paulson Put Theory and MBIA/ABK
After seeing MBIA lose $2.3bn, or (-$18) per share, I thought I would go back and grab the ASAP Fed loving bubble boy's comments on why it was a good idea to buy these things on Nov. 13. I have included the post below. How is that Fed put working this time around buddy? I hear the same dumb argument from folks around my office, good thing about being young is you take a new fresh objective look at things and as the 3 resident bears on this blog have aggressively voiced this time is different than the past. the great credit bust is way too powerful for the Fed to do anything about it. They can take rates to zero and it will only make things worse. I do not feel bad for people though, everyone loves the Fed and 15% credit growth in an economy that has had negative real gdp and flat real income growth for years, they love huge 6% of gdp trade deficits so that they can afford cheap shit at walmart, they don't seem to care about a massive budget deficit that is set to gap to unheard of levels in the next decade when old people start collecting on their communist welfare payments aka social security and medicare. I hope John McCain gets elected and that bernanke destroys the currency.
Gold is the ultimate truth meter and it is calling bullshit on the western imperial financial system. But toppe why don't you keep praising the Fed and buying stocks, or names like MTG, ABK, and MBIA - which are down 10%, 33%, 60%, and 75% since you posted about your Paulson put option theory.
BTW, Gold is up 20% since then and has outperformed stocks by 30% and ABK by 80%.
Le Silver Bullion...No More Dollar said...
one thing to add to Myth #5: See 1928 to 1934 when gold went up by 5.5x and the equity market lost 85% of its value and long term rates went down to under 1%. GOLD is the only asset to own right now.
8:40 PM
El Cid said...
For the record, I bought both ABK and MTG on November 13. I just sold MTG today after seeing Warburg Pincus is giving them $1b. My thesis was someone would want their business and apparently someone does. I am out of mtg. Maybe I will give it all back in ABK or maybe the real money is over the next month. For now, I dont care, a trade yielding 40% in one month is fine with me.
1:57 PM
El Cid said...
Funny, I misread the headline and thought MGIC was getting the cash infusion rather than MBIA. Fuck it. Still made 40%.
3:45 PM
Le Silver Bullion...No More Dollar said...
Recommendation: Take your money and run. I repeat take your money and run. In their masterpiece "Security Analysis", Graham and Dodd write that every mortgage broker and mortage servicer went bankrupt. I would not be bottom fishing in these waters, might get your calf bit off by a reef shark.
5:53 PM
MattKelly54 said...
What is funny is that I wonder who is not in this trade?
I cannot tell you how many people call me every day. My neighbor's cousin who is an amateur, "I'm buying WM"
Cid: I am buying MTG.
People from Asap: we are buying WM.
World and Bill Miller: We are buying Countrywide.
PMs that I know: When are we going to buy MBIA.
Fannie and Freddie PFD are oversubscribed.
Who is not in this trade and why are spreads where they are. This is obviously the largest no brainer out there. Everyone I know is doing it. Why are spreads still blowing out. Why is CFC-a term loan at 85? Why is it not coming up?
Why does everyone want me to be bullish on this business?
Why do they call me and try to give me a heart attack.
Why do people hate homebuilders which are hardly levered, but love the banks which are levered 10 to one.
Why do people hate the banks, but love the people who insure their mortgages?
Why do people hate the insurers but hate the federal reserve and our worthless currency?
7:37 PM
MattKelly54 said...
Cid. You should buy commercial paper at 0.50 on the dollar. That is what it is trading at.
7:38 PM
MattKelly54 said...
Or better yet the ABX AAA index 06-01 for 0.60.
What is wrong with Tootsie Roll, Hershey, UST, Kraft?
Why is everyone that I know trying to be a hero?
In my opinion I can beat the game by getting safe money in things that I understand, over 100% downside scenario events.
One thing that i do know is that is much cheaper to buy 10 million houses right now, than 1 house.
7:41 PM
El Cid said...
I have 50% in cash and 3% in gold. I have no financials other than ABK. I have no small cap stocks and, other than 1% split between KSS and JWN which I bought last week, I have no consumer stocks. I never did put on the homebuilder trade. I have a shitload in CL, PG, KO, MSFT, CSCO, SLB, BUD, and PFE. My portfolio is allocated for appropriately for an 80 year old.
Give me just a bit of credit for making a couple of accurate assessments. 1) There would be a mortgage bailout in some form. Maybe I only stated it at work and not here - I forget what I say where. This was too obvious. 2) The potential disruption in the muni market will lead to some effort to protect the bond insurers.
You think Florida is shitting right now because they own some CDO's? Wait til they have to raise taxes because they cant raise funds in the muni market. I guarantee you Paulson has Uncle Warren and Hank Greenberg on his 5 right now. I dont care if you agree with the politics or not, it's a put option on the stocks. Or I am a fool because everyone else is betting on the same thing. You know where I stand.
Gold is the ultimate truth meter and it is calling bullshit on the western imperial financial system. But toppe why don't you keep praising the Fed and buying stocks, or names like MTG, ABK, and MBIA - which are down 10%, 33%, 60%, and 75% since you posted about your Paulson put option theory.
BTW, Gold is up 20% since then and has outperformed stocks by 30% and ABK by 80%.
Le Silver Bullion...No More Dollar said...
one thing to add to Myth #5: See 1928 to 1934 when gold went up by 5.5x and the equity market lost 85% of its value and long term rates went down to under 1%. GOLD is the only asset to own right now.
8:40 PM
El Cid said...
For the record, I bought both ABK and MTG on November 13. I just sold MTG today after seeing Warburg Pincus is giving them $1b. My thesis was someone would want their business and apparently someone does. I am out of mtg. Maybe I will give it all back in ABK or maybe the real money is over the next month. For now, I dont care, a trade yielding 40% in one month is fine with me.
1:57 PM
El Cid said...
Funny, I misread the headline and thought MGIC was getting the cash infusion rather than MBIA. Fuck it. Still made 40%.
3:45 PM
Le Silver Bullion...No More Dollar said...
Recommendation: Take your money and run. I repeat take your money and run. In their masterpiece "Security Analysis", Graham and Dodd write that every mortgage broker and mortage servicer went bankrupt. I would not be bottom fishing in these waters, might get your calf bit off by a reef shark.
5:53 PM
MattKelly54 said...
What is funny is that I wonder who is not in this trade?
I cannot tell you how many people call me every day. My neighbor's cousin who is an amateur, "I'm buying WM"
Cid: I am buying MTG.
People from Asap: we are buying WM.
World and Bill Miller: We are buying Countrywide.
PMs that I know: When are we going to buy MBIA.
Fannie and Freddie PFD are oversubscribed.
Who is not in this trade and why are spreads where they are. This is obviously the largest no brainer out there. Everyone I know is doing it. Why are spreads still blowing out. Why is CFC-a term loan at 85? Why is it not coming up?
Why does everyone want me to be bullish on this business?
Why do they call me and try to give me a heart attack.
Why do people hate homebuilders which are hardly levered, but love the banks which are levered 10 to one.
Why do people hate the banks, but love the people who insure their mortgages?
Why do people hate the insurers but hate the federal reserve and our worthless currency?
7:37 PM
MattKelly54 said...
Cid. You should buy commercial paper at 0.50 on the dollar. That is what it is trading at.
7:38 PM
MattKelly54 said...
Or better yet the ABX AAA index 06-01 for 0.60.
What is wrong with Tootsie Roll, Hershey, UST, Kraft?
Why is everyone that I know trying to be a hero?
In my opinion I can beat the game by getting safe money in things that I understand, over 100% downside scenario events.
One thing that i do know is that is much cheaper to buy 10 million houses right now, than 1 house.
7:41 PM
El Cid said...
I have 50% in cash and 3% in gold. I have no financials other than ABK. I have no small cap stocks and, other than 1% split between KSS and JWN which I bought last week, I have no consumer stocks. I never did put on the homebuilder trade. I have a shitload in CL, PG, KO, MSFT, CSCO, SLB, BUD, and PFE. My portfolio is allocated for appropriately for an 80 year old.
Give me just a bit of credit for making a couple of accurate assessments. 1) There would be a mortgage bailout in some form. Maybe I only stated it at work and not here - I forget what I say where. This was too obvious. 2) The potential disruption in the muni market will lead to some effort to protect the bond insurers.
You think Florida is shitting right now because they own some CDO's? Wait til they have to raise taxes because they cant raise funds in the muni market. I guarantee you Paulson has Uncle Warren and Hank Greenberg on his 5 right now. I dont care if you agree with the politics or not, it's a put option on the stocks. Or I am a fool because everyone else is betting on the same thing. You know where I stand.
posted by Not Sure if Al Gore or Global Warming is a Bigger Joke at
8:04 AM
3 Comments:
You must have a selective memory disorder.
1) I made money on the MTG and ABK trade. I would sooner be wrong and make money than vice versa.
2) I stated the return was not enough to compensate for the risk
3) It is obvious my thesis was wrong and I said as much on a subsequent post.
4) I thought the Fed would act more aggressively, sooner. Key error, no doubt. Bernanke is spending too much time listening to bubblephopics and not enough time doing his job.
5) Between a hefty cash cushion, gold stocks, and good stock selection, my portfolio is doing just fine.
I could have more to say but I am on my way to LA and Vegas for 4 days.
good to hear, have fun in vegas. buddy you are my favorite guy to pick on, no hard feelings your the man.
enjoy vegas
New editor of the WSJ.....Le Silverado.
First they adjust the gold price for inflation. I have never seen that done by the mainstream media.
Then Gata has a full page ad in the finance section. Oh my God. I am doubling down on the Journal and NWS.
Good job guys.
How is anyone here going to beat the market now?.....
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