I just did with Ambac’s results the other day.
So they made $2.19bn in Q3, out of which $2.13bn was a revaluation of credit derivatives assets.
That’s accounting gimmickry, but that’s fine by me.
The real surprise to me is that they can continue trading:
They have negative equity and their portfolio had more than $400bn of assets. So they are insolvent but yet, they are liquid enough.
If the municipalities in the US or the mortgage outlook were recovering, you could buy this stock and make 50x your money, but all the US states are now in deficit and more local institutions in even bigger trouble. Delinquency rates are at an all-time high and recovery rates an all-time low.
Still, they continue to rake in the premiums, more than $200m a quarter. This will even accelerate as bonds are bought back, refinanced. So it will be a revenues and an asset portfolio revaluation orgy. Maybe they’ll make billions in paper profits over the next few quarters.
Yet, they are still bankrupt and have not published their regulatory capital numbers.
Are we then missing a rare opportunity to buy into the credit market recovery with a lagging vehicle?
Do you know more about them? I have to say, I struggle to understand what is going on.
My only source of negative opinion is the fact their share prices have not recovered since March 09. Those stocks are up only 3-4X after going down 98%.
Week-end wink:
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