The Bailout Bus Keeps Rolling......

Looking into the PMI Investor Presentation & MGIC Investor Presentation and their "sky high" ( not just a few billions.... ) in exposure it should be clear that this is also another "hidden" bailout for the banks......The knowledge that the "Bailout Bus" keeps on rolling might explain Cramer´s Bull Case For Banks.... Even if he wasn´t honest enough to mention the "moral hazard trade" in his 10 reason to rush into the banking sector.....;-)

Ein Blick in die PMI Investor Präsentation & MGIC Investor Präsentation die einen "astronomisch" hohen Betrag ( rede nicht nur von einigen Mrd... ) an versicherten Schadensfällen ausweisen genügt um zu erkennen das hier neben den PMI Aktionären und Anleihebesitzern vor allem die Banken begünstigt werden die seinerzeit die Versicherung gezeichnet haben......Genau diese Bailoutgarantie erklärt auch Cramer´s Bull Case For Banks... Schade nur das er nicht so ehrlich gewesen ist den "Moral Hazard Trade" unter den 10 Kaufaurgumenten in Sachen Banken aufgeführt hat.... ;-)

H/T Matson

Insuring Against an End to Moral Hazard WSJ

The bailout bus keeps rolling. Last week's programs to forgive mortgage principal were good news for mortgage insurers. But PMI Group's share-price surge had an extra lift from Freddie Mac.

The mortgage giant gave a new PMI subsidiary the green light to write insurance for loans that Freddie guarantees. PMI needed the blessing—and got a similar one from Fannie Mae—because its main subsidiary may be banned in some states from writing policies if it breaches regulatory capital rules.

If that happened, PMI's future would be in even greater doubt. The company lost nearly $1.6 billion over the past two years and warned that "as a result of continued losses, we will need to raise significant additional capital and/or achieve significant statutory regulatory relief."

What is curious is that Freddie's and Fannie's support potentially puts taxpayer dollars at risk, while helping PMI shareholders—the company's stock jumped more than 40% last week. The moves also come as debate continues over how much skin in the game homeowners should have.

Help for PMI, and for Mortgage Guaranty Insurance Corp. last month, is also notable because Freddie has suggested that firms like this mightn't be able to meet future claims.

Freddie in its annual filing said "some of our mortgage insurers lack sufficient ability to fully meet all of their expected lifetime claims-paying obligations to us as they emerge." PMI has the lowest credit rating of Freddie's rated mortgage-insurance counterparties.

With the government, through Fannie and Freddie, willing to play such games to keep small fry like PMI and MGIC alive, it shows quite how far away Uncle Sam is from a real solution on "too big to fail."

See also As GSE Delinquencies Hit All Time Highs, What About The Monolines? ZH

Got GOLD ?

When facts don't matter / fleckenstein

he focuses his attention on the latest market reaction to the dell news. click on the headline to read fleck´s frustration. same could be said to almost every other bad news news recently ( maybe new changed this).......

wenn ihr die frustration von fleck in sachen dell nachlesen wollt bitte auf die überschrift klicken. mir geht bzw. ging es bei etlichen allen news oft ähnlich. evtl. hat aber die new century news etwas geändert.....

As anyone who focuses outside of tech can attest, that mind-set thrives in many sectors. Take the housing ATM, for example. Last Tuesday, insurance giant MGIC Investment announced it was buying Radian Group ), which is an insurer of more-questionable mortgages. What was stunning was not that Radian rallied but that MTG exploded for 10% as well.

Two days later, in an ironic twist to the MTG/RDN saga, subprime lender New Century Financial imploded, with the shares dropping by about 33%. The same day, HSBC Holdings upped its mortgage-loan-loss reserves from $8.8 billion to $10.6 billion.

So it goes in Drink-It-Pretty City
Thus, it's now good news when you raise guidance, lower guidance, your CEO/CFO stays, your CEO/CFO leaves. Higher oil prices are bullish, as are lower prices. We are in an environment that is 100% concept-driven. Facts matter little, though on occasion they seem to matter for a few moments.

As I suggested at the outset, this is the zaniest moment I have ever seen. The 1998-2000 period was silly ("new era" thinking), but it was just about massively overpaying for nonstop good news. Today's mentality is: We can do anything we want because there is no downside.

Market peak plays hide-and-seek Obviously, this level of lunacy can't continue indefinitely, but while it goes on, it can reach any magnitude. There's no determining in advance whether it lasts for five minutes or 90 days.

One can only try to tell when it has exhausted itself. All I can say is, the spectacle that I see on a daily basis is really something for the history books.