KNOW WHAT YOU ARE PLAYING!
Our conversation earlier about AGO got me thinking, so I wanted to pass some thoughts along. Why do I like to play this one to the down side? Well, they guarantee all kinds of municipal/local/state debt in US and Europe etc. As local gov have had their revenues shrink, and with the massive exposure these guys have guaranteeing these debt, any default hits them hard. I tend to agree with Buffett on this one (he does not want to play in this insurance field) that there is too much downside potential here. Sooooo, here are some thoughts. While the US has had a very easy winter so far this year, you would think that local gov. would have extra bucks laying around as they have not had to do much plowing of snow, salting streets etc. Should be that these local entities will have extra cash on hand from their budgets therefore should be less likely to default. But, if my models are correct, the weather pattern in the US should stay around normal, with some extreme weather a big possibility this winter. Extreme weather is much more costly than regular snow fall. And have we EVER seen any gov. just sit on a temporary budget surplus, or do they spend it? Of course, spend away!!! So at this particular time, I doubt that AGO will be a home run on the downside, but my philosophy of "letting home runs come to me" dictates that I play these type of plays when the market appears to be going south. Eventually they can play out for a homer, and if they don't, at least we should be green on the trade. AGO is off from it's highs this year so won't be able to fall as badly as it could, but exposure to the "dogs" when we expect red mrkts is a fine play in and of itself, and if we eventually get a bit of luck and bad news comes with red mrkts, we win big. By understanding the fundamentals of what you are trading - both to the upside and downside, we increase the average amount of our returns and hit a few out of the park:)
News 
Market Data 
Discover 
AI
