lNOTICE OF DEFAULT FALLING - ANALYSTS CAN'T PREDICT MGIC PROFITS
STARTING IN Q2 2013 ANALYSTS HAVE NOT BEEN ABLE TO PREDICT MGIC PROFITABILITY BECAUSE THE NOTICE OF DEFAULTS ARE DROPPING MONTHLY SO, COSTS ARE FALLING MONTHLY
Starting sometime in the second quarter "notice of default"(nod) began to fall for MGIC. Notice of default are equivalent to delinquencies. When nod fall MGIC losses incurred fall because, MGIC doesn't have to set aside reserves for loan losses, which then increases profits.
It's difficult to estimate something that is changing unless you estimate the "rate of change" and, analysts don't seem ready to use complex mathematical calculations to do a better job of estimates. So, basically here's a table of the decrease in NODs:
Between the CFO, Culver and the Wharton Boys at all the Big Houses you say no one can predict, even conservatively, a earnings number....To Funny Tommie. This guys are not looking for the cure to cancer. They have trends and real time data to prognosticate. How about a simple statement "we see upside to our numbers" Then your short squeeze theory may have some merit. But what you just said helps the Shorts...
MGIC had a 100% cure rate for 12 month period ending April 2014. However, the cure rate in Q1 was 117%, when added to the other three quarters overall came to 100%. I believe they had 100% for Q2 2013 too but, Q3 and Q4 were less than 100%.
All the data to calculate the cure rate for the last seven quarters is at the back of each quarterly financial statement.
Q1 2014 was so powerful because, MGIC actually cured loan defaults from other quarters, which when put in dollar terms added up to about $30 million dollars. That one additional reason why analysts were wrong about MGIC actual Q1 earnings. During the EC one analyst ask the right question and got the answer as to why they were off in their calculations.
However, they will be off in Q2 because, they can't predict the number of defaults each quarter because of reasons discussed here.
Rick made a sad attempt explain how his algorithm works to predict the unknown but, seriously I would love to hear other thoughts on this problem can be solved. I only took calculus because I had to in college but, I am sure their others who like it and are good at it.