Replies to post #109 on Ambac Financial Group Inc (AMBC)

[FORDGT]

LOOKING LIKE A FAKE AND BAKE !!! THEY CAN'T KEEP THIS DOWN FOR LONG.....

[VPbanker]

Hey SIIX good to see you over here.... as you know I have a little more information then the average investor when it comes to the financial markets... here is my take on the current situation with ABK:

First we have the technical perspective:

Due to their AAA rating downgrade news (close of market-June 5th) I expected them to drop as they have. If you review the hourly chart from the 11th you'll note that the SP trended near $1.90 all day. This was the first day since the news was released (about the downgrade) that the SP was able to remain consistent.
This was the first sign that ABK had reached a technical bottom and selling had stopped-



Next you have the financial market impact perspective


In summary the government will most likely NOT tolerate the failure of ABK and MBIA due to their significant impact on mortgage securities and banks. The nation is in utter upheaval over the home losses, home value depreciation and state of the economy. These two companies INSURE the value of mortgage securities and the banking industry can NOT handle further write offs and losses.


The real jeopardy about ratings cuts in the monoline bond insurance sector is the implications for big banks and counterparties that hold contracts insured by Ambac and MBIA. Ratings are critical for bond insurers such as MBIA and Ambac, who must use their high credit rating to underwrite insurance contracts and backstop losses on debt from municipal bonds to more complicated structures such as collateralized debt obligations and mortgage-related securities. Bond insurers as a group insure some $2.5 trillion in debt that is held by pensions, insurance companies and big banks.

The below news says more then I can possibly explain:

Oppenheimer's Whitney Sees More Write-Downs At Citi, Merrill and UBS Due To Bond Insurers Downgrade

June 9, 2008 8:59 AM EDT

Oppenheimer analyst Meredith Whitney said Citigroup (NYSE: C), Merrill Lynch (NYSE: MER) and UBS (NYSE: UBS) may post write-downs of an additional $10 billion after the two largest bond insurers, MBIA (NYSE: MBI) and Ambac (NYSE: ABK), lost their AAA ratings last week.

Whitney said, "Without the top credit ratings, monolines will have a more difficult time generating new business. The limited earnings potential on monolines poses risk to the value of the insurance and hedges on the subprime related securities provided to the banks and brokers."