tag:blogger.com,1999:blog-30643134.post2041628078695210347..comments2023-12-26T01:10:26.319-05:00Comments on Accrued Interest: AMBAC: This is not going to workAccrued Interesthttp://www.blogger.com/profile/05096191765979971184noreply@blogger.comBlogger39125tag:blogger.com,1999:blog-30643134.post-50309264605543825942008-09-27T00:56:00.000-05:002008-09-27T00:56:00.000-05:00When you are right you are rightWhen you are right you are rightYouhttps://www.blogger.com/profile/08063592529801342925noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-89379978041616534962008-01-24T22:35:00.000-05:002008-01-24T22:35:00.000-05:00SCA is getting this type of chatter on other blogs...SCA is getting this type of chatter on other blogs tonight.<BR/>To me , they are in the same fragile state as MBI and ABK, but I agree with you. SCA should explode upside<BR/>( if you can really use such superlatives to describe a beaten up stock)<BR/>MBI and ABK are also going to run as Buffet lead the way on the M&A train.<BR/>ABK already up in after hours trading, as is SCA<BR/>The bailout appears to be in the wings and if you have investment in this junk, at least you got to see ABK ride up 80% this week, with a probable 100% further upside. SCA should hit 6 bucks by the time it is "saved<BR/>The munis are this month's momo playsAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-11449976761170940412008-01-24T22:26:00.000-05:002008-01-24T22:26:00.000-05:00Fitch lowers the ABK rating and 24 hours later, th...Fitch lowers the ABK rating and 24 hours later, the stock rallies when either bailout or buyout rumors develop.SCA is next.. Popped on the 23rd, down 30% today on a Fitch downgrade and will pop 30% plus tomorrow IMO<BR/>We just saw this movie...<BR/><BR/>Now SCA might be a frozen target if the downgrades extend, but they will now run this stock on the buy or bail model...<BR/>If the stock does not blow past 5 by Monday, I would be surprised.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-41749015891795590332007-12-07T08:13:00.000-05:002007-12-07T08:13:00.000-05:00If you wrote the comment I just deleted, please re...If you wrote the comment I just deleted, please read this:<BR/><BR/>http://tinyurl.com/ytfrkp<BR/><BR/>Then rethink your comment. You are welcome to repost if you have something of substance to say.Accrued Interesthttps://www.blogger.com/profile/05096191765979971184noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-66398550948605213772007-12-07T04:08:00.000-05:002007-12-07T04:08:00.000-05:00This comment has been removed by a blog administrator.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-91199851300378716752007-11-30T10:32:00.000-05:002007-11-30T10:32:00.000-05:00My $2 billion was for their whole RMBS position, w...My $2 billion was for their whole RMBS position, which is $53 billion.Accrued Interesthttps://www.blogger.com/profile/05096191765979971184noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-66713797025819599882007-11-30T10:20:00.000-05:002007-11-30T10:20:00.000-05:00BK has $8.8B in notional exposure to direct sub pr...BK has $8.8B in notional exposure to direct sub prime RMBS. You are assuming they lose $2B. Based on an average subordination of 22%, you would never get to $2B in losses on the ABK layer, given the default rates you are projecting, AND that is assuming they are all of the worst vintage, which they are not, that they are ARMs, which they are not, and that they are from the wors servicers/originators, not again. Will not take a stab on CDO2, because who knows on that one, but if direct losses are much less, whole capital raising will not be necessaryAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-16495827330437027622007-11-28T02:11:00.000-05:002007-11-28T02:11:00.000-05:00Interesting post. I really don't like the concept...Interesting post. I really don't like the concept of rating the insurers using one criteria and using mark to non existent market for others. This sets up a situation where you have both regulatory and rating agency arbitrage opportunities. Everything is mark to market (regardless of likely outcomes), but any security with credit enhancement gets booked at par. As a thought experiment, suppose that instead of the super SiV, Citi just set up a bond insurer, capitalized it with a few billion, and insured the super senior AAA stuff -- not their own, mind you, but lots of it which would then stabilize the markets, etc. Obviously this wouldn't fly. But the existing credit insurers are getting grandfathered on this.<BR/><BR/>These insurers simply aren't AAA. Traditional AAA credits (not synthetics) don't default, or have a highly remote chance of default over a rather lengthy period. However, if they get downgraded, then they are dead, since they have no future revenue.<BR/><BR/>I am not sure that I agree with your logic about booking losses. It almost sounded like you were saying that they book the losses when they pay out cash. I think they have to accrue their best estimate of ultimate losses based on estimates, models, etc. Maybe they can discount for the time value of money, but it isn't pay as you go.<BR/><BR/>Therefore the idea that they can count on future earnings instead of raising capital for losses on their current portfolio doesn't really make sense. Unless the rating agencies allow them to make optimistic estimates.<BR/><BR/>I hadn't even considered GIC exposure. That could bring them down. Disclosure -- I have a couple of puts on mbia, but it was just an emotional investment decision.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-63918918484154273802007-11-27T17:27:00.000-05:002007-11-27T17:27:00.000-05:00Berkshire owns General Re I think. Could this late...Berkshire owns General Re I think. Could this latest news be a back door atte mpt for Buffett to enter the bond insurance business?<BR/><BR/>Buffett's right hand man with the reinsurance brains is Ajit Jain, and he might be getting excited about the carange we are seeing.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-32251334839896144352007-11-27T17:18:00.000-05:002007-11-27T17:18:00.000-05:00News out.."The chief financial officer at Ambac Fi...News out.."The chief financial officer at Ambac Financial Group Inc on Tuesday said the bond insurer would consider reinsurance transactions to free up capital as investors worry about Ambac's exposure to subprime-related assets.<BR/><BR/>Ambac CFO Sean Leonard said the company will continue to defend its triple A rating, and added that there's a lot of opportunity for the company to reinsure its transactions. He said about 85 percent of the company's portfolio is non-mortgage related.<BR/><BR/>Leonard made his remarks at a Bank of America bond insurance conference in New York. Other options Ambac would consider to raise capital include issuing debt or equity, executives said.<BR/><BR/>Bond insurers face questions on whether they have enough capital to absorb losses on their guarantees against defaults. Ambac executives said the company's excess capital tops $1 billion. ""Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-82315188899414110272007-11-27T16:34:00.000-05:002007-11-27T16:34:00.000-05:00Today AMBAC showed another graph about vintage of ...Today AMBAC showed another graph about vintage of their CDO squared.<BR/>It shows peak vintage at Q3 2005.<BR/>There is almost no exposure to 2007.<BR/>There is little exposure to the second half of 2006.<BR/><BR/>They also showed a graph showing loss development of 2005 vintage to be just like older years, while 2006 is higher.<BR/><BR/>Let's look into more detail of the largest exposure: deal 26 with $1.4B of par value.<BR/><BR/>This deal has 30% subordination below AMBAC. This means 30% of the inner CDOs need to go bust for AMBAC to incur any losses on the outer CDO.<BR/><BR/>The original vintage of underlying RMBS in this deal is approximately: <BR/>2007: 1%<BR/>2006 Q3/Q4: 7%<BR/>2006 Q1/Q2: 23%<BR/>2005 and earlier: 69%<BR/><BR/>The inner CDOs are 94% AA rated and 6% A rated, while the underlying collateral of those is primarily BBB.<BR/><BR/>So, we have quite a bit of information here.<BR/><BR/>Next step: figure out the risk that a lot of the inner CDOs will go bust.<BR/>Who knows how to do that?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-74535479249229268212007-11-27T12:40:00.000-05:002007-11-27T12:40:00.000-05:00accrued interest said:"1) AMBAC has $29 billion in...accrued interest said:<BR/>"1) AMBAC has $29 billion in ABS CDOs they've insured, including $2.5 billion in CDO ^2. All but $500MM was 2007 vintage."<BR/><BR/>What's most relevant to RMBS concerns is the vintage of the underlying collateral. That's broken out in section B of their disclosure:<BR/><BR/>http://www.ambac.com/pdfs/CDO.pdfUnknownhttps://www.blogger.com/profile/03051741215077298454noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-90275152732591979972007-11-27T12:21:00.000-05:002007-11-27T12:21:00.000-05:00AI - I would be very interested to read your analy...AI - I would be very interested to read your analysis on muni default probabilities -- present tense-- if you have any. It is an area I have very little experience / expertise, and I have found GASB regulations to be very frightening (in an Enron sense). I readily admit I have little knowledge about municipal finance-- but every time I read about a swap deal blowing up, its pretty obvious the public finance officials don't understand it either. Jon Corzine, with his Goldman background, allegedly had a lot of trouble understanding some of the swaps NJ municipalities had entered.<BR/><BR/>Anyway, I know that municipal defaults have been somewhat rare the past 50 years or so -- but I am not sure it is fair to extrapolate that history forward:<BR/><BR/>Government was much smaller and fiscally conservative before the new deal / World War II. Lots of projects that might be considered public today, like building the Erie Canal, were privately financed until around the new deal or so. Lots of projects, like the Hoover Dam, were depression era "make work" projects. The interstate highway system resulted from Eisenhower seeing the Autobahn and the need to mobilize the U.S. for the cold war.... so in short, a lot of public spending finance is "recent", the last 50 years plus or minus.<BR/><BR/>During that time, municipalities had the wind at their back. After WW2, the U.S. economy had zero competition for a decade or so (everyone else had been bombed in the war). On top of that, demographics were hugely in public finance's favor.<BR/><BR/><BR/>Obviously no way to predict the next 50yrs, but it seems like a lot of trends will turn against public finance. An aging population generates less income (paying less taxes)-- but needs a lot more health care spending. I already mentioned how lots of infrastructure needs repair / expansion. There are lots of debts (public employee pensions and OPEB) that do not appear "on the books" according to GASB, but they are real. And unlike 50yrs ago, municipalities are starting the next 50yrs from a far far more leveraged position.<BR/><BR/>I agree that municipal defaults have been <I>historically</I> rare, but I am not sure whether or not that trend can be extrapolated forward. Defaults may or may not rise, but I don't think history is necessarily a good guide.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-78433045592730860292007-11-27T11:41:00.000-05:002007-11-27T11:41:00.000-05:00LOL, I think you guys will have fun reading this p...LOL, I think you guys will have fun reading this paper...look at the author. Its available through JSTOR and maybe google scholar. If you're interested but can't get access, let me know and I can get you a PDF.<BR/><BR/><BR/>"The Credit Crunch" by Ben S. Bernanke; Cara S. Lown; Benjamin M. Friedman<BR/><BR/>Brookings Papers on Economic Activity © 1991Richiehttps://www.blogger.com/profile/08613606577369476902noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-91735242207045575012007-11-27T09:17:00.000-05:002007-11-27T09:17:00.000-05:00Well Walt, I think there are two things I understa...Well Walt, I think there are two things I understand better than almost any blogger out there: munis and CDOs. Most so-called industrual development bonds, which would finance something like a shopping center, hotel, sports arena, etc, are not backed by tax revenue. And if they are, its usually property taxes collected on the project itself. So actual governmental revenue isn't at risk.<BR/><BR/>Now, <I>property taxes</I> are a real risk. I think there is a slim chance of that actually causing muni investors to lose money. Think back to California. They had big time problems due to reduced capital gains tax collection in 2002. All those Silicon Valley billionaires suddenly had no taxable income! But there was no default. In fact, the state remained investment grade the whole time.Accrued Interesthttps://www.blogger.com/profile/05096191765979971184noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-47176429006792838252007-11-27T08:51:00.000-05:002007-11-27T08:51:00.000-05:00"Most of the defaults in municipals occurs with .....<I>"Most of the defaults in municipals occurs with ... hospitals, housing projects, private schools, etc."</I><BR/><BR/>Yes, and that's interesting because there must be municipalities which have gotten out on a limb with shopping centers, housing developments, etc. That's a vector -- in addition to general markets turmoil and tax revenues falling from the housing implosion that's still happening -- for the housing crisis to start upsetting munis. I wouldn't use the "virtually no" default history as a forecast for what's now out there.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-55306287315127138812007-11-27T08:34:00.000-05:002007-11-27T08:34:00.000-05:00Alright every one, sorry for being an absent blogg...Alright every one, sorry for being an absent blogger. I'm going to post a more detailed description of my AMBAC analysis. Here are a couple quick points:<BR/><BR/>1) AMBAC has $29 billion in ABS CDOs they've insured, including $2.5 billion in CDO ^2. All but $500MM was 2007 vintage.<BR/><BR/>2) I'm obviously being facetious when I said munis "never" default, but the default history is stunning. Moody's has never rated a general obligation municipal bond which defaulted. Including NYC, which never actually missed any payments to regular bond holders. And including Orange County, which did default on some of its pension obligations, but did eventually pay all interest and principal.<BR/><BR/>Most of the defaults in municipals occurs with "corporate-like" obligations. In other words, operating companys (either for or not for profit) not governmental entities. So that's hospitals, housing projects, private schools, etc. The history of municipal utilities, public universities, transportation authorities, etc. defaulting is very very very rare.Accrued Interesthttps://www.blogger.com/profile/05096191765979971184noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-91224216042126348152007-11-27T02:10:00.000-05:002007-11-27T02:10:00.000-05:00Naive question: Could Ambac raise capital without ...Naive question: Could Ambac raise capital without diluting shareholders through a rights offering? (Why did Countrywide, for example, give away equity to Bank of America rather than to existing shareholders through a rights offering? Is there some downside to a rights offering vs. selling the convertible?)Havochttps://www.blogger.com/profile/12359522241119487168noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-76067897739671783752007-11-26T21:21:00.000-05:002007-11-26T21:21:00.000-05:00I work at a financial guarantor managing firm capi...I work at a financial guarantor managing firm capital. While you are correct directionally, I think in the short-term the bigger risk to AMBAC is the likelihood of further downgrades on their CDO portfolios and what the lower rating translates into in their stochastic simulation capital model. Such models tend to be highly penal of substantial downgrades.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-52128925923552877062007-11-26T11:15:00.000-05:002007-11-26T11:15:00.000-05:00My opinion on a couple of issues discussed here......My opinion on a couple of issues discussed here...<BR/><BR/><BR/>ON AGO<BR/><BR/>I just took a cursory look and it certainly seems safer. The stock price certainly reflects that.<BR/><BR/>Although they didn't write any CDOs in recent years (very smart move), they have huge exposure to RMBS from the last 2 years. Check out page 2 of this doc:<BR/><BR/>http://www.assuredguaranty.com/App_Assets/Public/2789e7c4-f7d9-48f8-b898-e644dc8658ad/Subprime%20disclosure%20-%20final%20-%20revised%20-%2008-03-07.pdf<BR/><BR/>(source: http://www.assuredguaranty.com/faqs/Risk_Management_and_Surveillance.aspx#q1926)<BR/><BR/>Anything 2006 and 2007 is risky and most of their RMBS is from that period. Overall it's still safer than Ambac but I'm not sure if it's better than MBIA (MBI has low chance of needing capital but has potential for big losses). <BR/><BR/>Another point one should consider is that attractiveness of a security depends on PRICE!!! AGO is only down around 20% versus 50% to 70% for MBI and ABK. MBI is trading at around 66% of book value; Ambac at 45%; and AGO at 86%. <BR/><BR/>Given all the uncertainty and risk in these monolines, I'm not sure I would want to buy anything close to book value (the 14% discount isn't enough IMO). Yes, all these companies traded above book for most of their life, but now they don't. You may never get a P/E expansion back to their earlier levels for years so buying close to book is not attractive in my eyes.<BR/><BR/>Now, if you think that they can steal market share then it may be attractive. But if you are conservative and go with historical trends then AGO is not cheap. <BR/><BR/>If I wanted something a bit safer, I would consider MBIA. Having said all that, I think if you pick one that does not go bankrupt or get diluted like crazy, then you will likely outperform the market for years. I don't think it matters which one you pick. I can see all of them--that don't fail--doing well. (these monolines are also not economically sensitive so if the US slows down they'll be ok)<BR/><BR/><BR/>----------<BR/><BR/>ON AMBAC RUNNING OFF THE BOOK TO RAISE CAPITAL<BR/><BR/>If Ambac needs capital injection, I don't think they will be able to run off the book. The reason is because rating agencies may not give them enough time. They'll probably give them 1 or 2 months and that isn't enough time to increase capital via the existing cash-flow positive deals.<BR/><BR/>Fitch is supposed to release their opinion soon and I think Ambac may need capital. But the tricky thing for investors sitting on the sidelines is that it's not clear if the stock market is ALREADY discounting that. For instance, the whole sector rallied when CIFG received some capital injection (although this was with holiday trading with low volumes). You would think that the market will sell off these stocks sharply given that dilution is a possibility for almost the whole sector. So it looks like the market is pricing in some dilution.Sivaram Vhttps://www.blogger.com/profile/06361276466660862882noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-33019620168023708462007-11-25T21:54:00.000-05:002007-11-25T21:54:00.000-05:00A Lehman Brothers index comprising U.S. TIPS is up...A Lehman Brothers index comprising U.S. TIPS is up 11.7% since the start of the year and 10.4% in the past 12 months through Nov. 21. By contrast, the Standard & Poor's 500-stock index is nearly flat year-to-date and up 1.2% for the past 12 months through Nov. 21.<BR/><BR/>Didn't you have a negative article on TIPs about 6 months ago? Yes, I thought so and figured it was a good contrary indicator.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-52711179646002526112007-11-25T18:50:00.000-05:002007-11-25T18:50:00.000-05:00I probably should have written that last bit more ...I probably should have written that last bit more clearly...<BR/><BR/>In the last few years, many mortgages were made under the (implicit) assumption that the housing boom would go on forever. They need continuous HPA (house price appreciation) to work. Call it over optimism during a bubble.<BR/><BR/>Well, that "over optimism" wasn't limited to just mortgages. In many cases, governments saw increased property tax and stamp tax (tax on transferring the property deed) rising with the housing boom -- and they too linearly interpolated this trend indefinitely into the future.<BR/><BR/>Well, the housing bubble is over Property related taxes are going to be much lower than expected / planned for. A lot of the new spending is perennial and ongoing, but the expected tax revenue has proven over-optimistic.<BR/><BR/>Lots of governments like to talk tough about spending cuts, but mostly these cuts are relative to an assumed increase. Instead of 9% increased spending, we "cut" the budget and will only spend 7% more than last year. If you look at government spending over time, it is always increasing-- only the rate of increase changes.<BR/><BR/>Will municipal workers accept having their pensions slashed by 30% (which supposedly is the average underfunding nationwide)? Can you cut welfare and health care spending by double digits? If you don't fix the roads, businesses can't deliver goods as fast, so they do less business at the margin, and the govt collects less taxes. And of course, all the above things are going to attract voter attention.<BR/><BR/>On the other hand, defaulting on bonds owned by a bunch of rich people is politically a lot easier to do. The "rich" are small in number (and in votes).<BR/><BR/>P.S. If living within our means was a viable option, we wouldn't be talking about a mortgage crisis.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-66616265523570798532007-11-25T18:19:00.000-05:002007-11-25T18:19:00.000-05:00"muni's never default..."First, holders of NY city...<I>"muni's never default..."</I><BR/><BR/>First, holders of NY city debt in the early 1970s would beg to differ. I don't trade munis, so that is the only case I can think of off the top of my head. I suspect there are others.<BR/><BR/>Why would anyone bother to get ratings or buy insurance if there was never a default? I would hope Warren Buffet (or anyone) would ask that question before entering the muni insurance business-- the opportunity has been there a long time (and he hasn't grabbed it), so maybe he already asked...<BR/><BR/><BR/>Wall St "analysts" (is this considered an oxymoron yet?) are very fond of saying munis cannot default "because they can always raise taxes". I think people like Hugo Chavez and Fidel Castro might agree-- but more learned people would say its not quite that simple.<BR/><BR/>Clearly, a city or state could raise taxes by a certain amount without a huge issue-- but its rather absurd to suggest taxes are an endless source of funds.<BR/><BR/>Higher taxes tend to discourage economic activity and/or encourage more black market / off the books economy. People have the option to move to more fiscally conservative locations.<BR/><BR/>Obviously, AMBAC's exposure to to mortgage debt is getting all the attention, but their muni exposure shouldn't be considered "risk free". Remember: their mortgage exposure was thought to be risk free 6-12 months ago.<BR/><BR/>Many cities and states have <B>MASSIVE</B> off balance sheet debts: inadequately funded pensions, and totally unfunded health care obligations being high on the list. Many govt "accounting standards" make Enron look fiscally conservative. In addition to the sometimes discussed "off balance sheet" liabilities, state/local govts face rising social spending (both welfare and health care related) much of which will not be reimbursed by the Federal govt.<BR/><BR/>Some state/local govts (I am thinking major urban centers in particular) have allowed their infrastructure to literally rot. Roads are covered in potholes and divots; and quite a few are completely clogged with traffic from dawn to dusk. Look up the effect that bad roads have on third world countries -- at best they limit commerce, which is just another way of saying they limit the tax base.<BR/><BR/>With all the growth of housing and commercial property (aka suburban sprawl), many water, electricity and sewage systems are stretched and in need of expansion.<BR/><BR/>Somebody is going to reply to me and say "yeah, but those costs are born by the sewage or water authority, not the state"... Authorities are the original off balance sheet entities, long before Enron. Look it up: the NY State Turnpike Authority was created to circumvent voter imposed limits on debt issuance.<BR/><BR/>Raising taxes "directly" or raising taxes via an off balance sheet "authority" is just window dressing from an economic perspective. Either way, a government entity is taking money away from Joe and Jane Public.<BR/><BR/>To a certain level, this is "no problem" -- but there are limits before people rebel. Sometimes literally, sometimes by moving away or shifting to a black market economy.<BR/><BR/>Let's not forget that almost all state/local govts increased their spending in response to the "windfall" property taxes they received during the housing boom. The windfall has proven to be short term, but a lot of the new spending is repeating.<BR/><BR/>Since states/local govts have so much existing off balance sheet / unreported liability already, a future tax increase is already baked into the cake... future tax increases are already spoken for.<BR/><BR/>That means if finances become strained, many muni issuers will find they cannot "just raise taxes" -- and muni insurers will find themselves on the hook for a business they thought was just "printing money"Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-27206437815335590472007-11-25T16:16:00.000-05:002007-11-25T16:16:00.000-05:00I forgot to mention above that, based on Ambac's d...I forgot to mention above that, based on Ambac's disclosure, 35% of their CDO squared exposure is from the 2006-2007 timeframe. So that amount is less than $1 billion.Unknownhttps://www.blogger.com/profile/03051741215077298454noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-60001908870329307152007-11-25T13:24:00.000-05:002007-11-25T13:24:00.000-05:00There are a lot of details about Ambac's CDO and d...There are a lot of details about Ambac's CDO and direct RMBS portfolio on their web site. http://www.ambac.com (look under "Highlights" on that page). It's clear that the deals labeled 24-28 with the mezz CDO and CDO squared are the most risky. Their par value totals about 2.5 billion. It's important to note that these deals have subordination levels between 30% and 57%, so loss estimates could vary widely with detailed assumptions about defaults and recoverys (e.g. one could imagine that 10% loss on the ultimate underlying portfolio would be no loss for Ambac and 14% could be almost total loss in those CDO squared deals). I disagree with the analysis that if they do need to raise capital then the value is just the franchise name. While it is possible that Ambac needs to raise capital, it is likely even in that event that the estimated runoff of the existing overall portfolio is substantially cash flow positive, so it should provide good collateral for a credit facility even in stress test scenarios.<BR/><BR/>Disclosure: I have no current position in Ambac, but I regard RAMR, with its 5% RMBS portfolio (maybe 1% subprime) to be very attractive at these levels.Unknownhttps://www.blogger.com/profile/03051741215077298454noreply@blogger.com