misleading.
when market is in panic on financial, both debt and equity are dropping like a stone, if u have to mark to market the value of equity (financial assets), why can't u do the same thing on debt?
Besides, after market bottom, financial asset price has beening increasing, how is debt price dropping?
Do u know how Ackman shorted mbi and abk, he was buying CDS on MBI and ABK, here is an explanation on what is CDS:
http://en.wikipedia.org/wiki/Credit_default_swap
This is what ABK has to say on the monthly selected data:
"The cost of five-year credit default protection against Ambac Assurance Corporation (AAC) default declined from 2,100 basis points at June 30, 2008 to 1,147 basis points at July 31, 2008."
What it means is that the price of insurance against ABK's default on its own debt dropped by half. So, market is saying ABK is much less likely to default on its own debt than the market thought at June 30. If ABK is less likely to default on its debt, will the price of its debt go up or down?
Why some financial companies are up so much so fast? because some of them were down as fast and as much when market was panicking. It is just a return to their fair valuation. Look at their valuation here:
http://blog.dwnews.com/?p=40973
I still have all my core holding on abk, mbi and ago.
when market is in panic on financial, both debt and equity are dropping like a stone, if u have to mark to market the value of equity (financial assets), why can't u do the same thing on debt?
Besides, after market bottom, financial asset price has beening increasing, how is debt price dropping?
Do u know how Ackman shorted mbi and abk, he was buying CDS on MBI and ABK, here is an explanation on what is CDS:
http://en.wikipedia.org/wiki/Credit_default_swap
This is what ABK has to say on the monthly selected data:
"The cost of five-year credit default protection against Ambac Assurance Corporation (AAC) default declined from 2,100 basis points at June 30, 2008 to 1,147 basis points at July 31, 2008."
What it means is that the price of insurance against ABK's default on its own debt dropped by half. So, market is saying ABK is much less likely to default on its own debt than the market thought at June 30. If ABK is less likely to default on its debt, will the price of its debt go up or down?
Why some financial companies are up so much so fast? because some of them were down as fast and as much when market was panicking. It is just a return to their fair valuation. Look at their valuation here:
http://blog.dwnews.com/?p=40973
I still have all my core holding on abk, mbi and ago.
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