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Assured Guaranty Ltd. Message Board

  • hounddawgie hounddawgie Jul 29, 2010 12:50 PM Flag

    Is AGO heading for a triple-bottom?

    I am no expert technician, but AGO looks like it wants to put-in a triple bottom. If earnings aren't up to snuff, we may well have big problems.

    Actually, I am not a techician. I have always been one to look at how things are going inside of a company.....the fundamentals. After PMI reported earnings today, that were very bad along with a crummy outlook, I am nervous about my long position in AGO as we approach earnings on Aug. 5th. I hate buying PUT insurance when the stock appears to alrady be washed-out.

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    • The problem with AGO is that Buildamerica bonds have absorbed 40% of the muni new issuance, which are gov guaranteed rather than private guaranteed. Thus, AGO's market is half the size it used to be. Even as the only real survivor in muni guarantees, with the BAB market taking over, it's hard for AGO to grow and in reality are likely to lose market share to BAB until the government stops supporting the market. Throw in the tail risk of muni's defaulting as so many state can't balance budgets right now, and I'd just avoid this stock for a while, or wait until it gets pounded so bad that you just have to buy it as a flyer. Even Buffett questions the future business model of muni insurers. Just not a good time right now... My guess is that AGO does similar earnings to last quarter, in the 40-50 cents range.

      • 2 Replies to pvigo123
      • BAB is not their issue. AGO's issue is capacity. Because there are no other players in the space they cant take on any more in a certain sector or municipality-for concentration reasons.

      • you make some good points. On the other hand, the loss reserve set-asides at AGO should begin to ease or even reverse. Also, there's a lot of muni credits out there that do not participate in the BAB market and can use credit enhancement to help sell the deal. The noise of muni defaults is actually making spread wider even when the high ratings suggest very low default probability. The biggest boost to AGO will come when the rating agencies take off the negative outlook, especially Moody's. That may not happen until mid 2011 per their last report.

        I was hoping AGO would run up to $18 ahead of earnings so I could buy puts.

 
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