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Radian Group Inc. Message Board

  • cholofromchicago cholofromchicago Nov 2, 2007 4:52 PM Flag

    Radian making all the right moves

    Radian continues to make all the right moves in a very challenging market. New Senior Management to direct the flow premium business that will keep them in running with or ahead of the competition.

    Their market share is actually gaining. They have already and are taking the worse of the hits and will now be able to put CBass behind them and focus on future business development and capitalize on their excellent lender and agency relationships.

    No more CBASS hits. Thank goodness.

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    • Reread Third Avenue's July report...said that RDN won't need to access Capital markets at all to deal with imminent losses...

      Likely scenario is that 2008 draws own loss provision account on the Balance Sheet while new policies written rebuild the companies Book Value per share...

      I think these uys were very aggressive with theri Q3 writedowns...accelerating the damge so that they look better in Q4 and beyond...

      I guess we will find out net quarter....

      • 4 Replies to torontostewart
      • July was a very different time from November whatever your respect for Third Avenue. Check the price of RDN in July and that price now --- Was not the 200M draw down an "access to the capital market". Was not the sale of part of Sherman about turning a fixed asset into cash for luqidity.

        That may be your point. What we know from what you say of Third Avenue is that Third Avenue was clueless in July.

      • Expect one more pretty ugly quarter. Q4 won't be as bad as Q3 (no more C-bass (except maybe $50 million), NIMs and Seconds adjustements will be far less) - but it'll still be bad. After that, I think Q1 '08 will see things stabilize and get a bit better.

        The more they write off - and the sooner it is done - the better off shareholders will be. So far, they've been doing exactly that.

        It's Moody's I'm most worried about. On the CC, it sounded like they knew or thought Moody's was releasing soon. I sure hope the selling is not a leak of a downgrade.

        And of course the big question is: how long and how deep will housing fall?

        I expect plenty of rate cuts within the next 6 months. A good hedge would be going short the USD (or oil, gold) and long RDN. The worse things get, the lower rates will go, the harder the US dollar gets hit.

        I rarely agree with that bozo Richard Russell, but in this case he's correct - it's INFLATE OR DIE.

        Takes a real genius and courage to downgrade or knock Radian now, eh? lmfao. Pile on! heheh. It's mindboggling that anyone listens to these analysts or pundits. But I guess that's our edge.

        On the bright side, things don't have to turnaround for RDN to deliver a great return to buyers in this price range. Just a stop or slowing down of the current downtrend is all that's required.

      • Do you have a link to the Third Avenue report? TIA

      • Some of the charges were not even writedowns of the permanent sort - they were mark-to-market "derivative" adjustments that could reverse later - although, if markets continue to deteriorate, the derivative adjustments would eventually be "swapped" for real asset writedowns and/or losses. Listening to the Sept. 5 CC, the company predicted that there would be mark-to-market adjustments in excess of the announced writedowns, which is essentially what occurred. Which makes the market reaction and analyst downgrade difficult to understand IMO, although I suppose we should all realize by now that all analysts are stooges.

        OTOH, the company's "base case" of neutral home prices on a national level (isn't this how they defined it on Sept. 5 and yesterday, with some areas falling >10% but others going up?) may be too rosy. The "stress case", with some areas declining in excess of 20%, which would probably lead to a 10%-ish decline on a national level, is more in line with what most RE market observers are expecting IMO. Indeed, the final result could end up being worse than the "stress case". However, assuming that the current BV has been fully marked-to-market (???), current implied market expectations are still better than the "stress case", which forecasts the BV to fall to approx. $40 at its nadir. One question I have relative to the stress case is what base prices are they using for their 20%+ decline calculation - are they using peak home prices, or the most recent OFHEO figures?

        One potential concern is the risk that current MI business, which is apparently very good, could come back to haunt them if housing prices plummet substantially from here. I know that the company said the new business was more solid, but I would like to hear more about the potential downside of writing new business at this juncture.

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