So Jain no thinks insuring muni bonds is getting riskier!
The interesting thing about Buffett getting into the muni bond insurance line is, and Jain's comment makes this obvious, he really does not understand the business, what it really is and how it works. A sure formula for someone to get his ass handed to him. The only trouble is, in the process of getting his ass handed to him, the 800-lb monkey will screw up the market for everybody else.
You are incorrect. Study the operations of the bond insurers (at least the successful part of the model, the muni business) and you will understand why you are wrong. There is much more than simply "price" involved.
No question that economic slowdown increases the risks, but it is apparent that you do not have a firm grasp on the business, either.
As I recall Orange County CALIFORNIA went bust not so many years ago. Supposedly one of the wealthiest place in the USA. So Omaha recognizes rising muni bond risks, why is that cause for you to throw rocks? Recession and depreciating real estate values can cause far less money rolling into state, county, and city treasuries. I am glad Omaha recognizes rising risks. ABK and MBI managements have only themselves to blame for muking up that muni bond insurance market. Don't blame Omaha for offering a AAA life line.
As for PGR having 'excess capital' that is truly non-sequitor.
You recall wrong. The treasurer of Orange County did some things that created a certain amount of distress, but the bonds continued to perform. The bonds were insured by MBIA that never laid out a penny. Get your facts right.
I will repeat that Omaha by its public statements demonstrates that it does not know what the business is that it is getting into.