There was a significant court ruling that will be a big help to what has been one of our largest positions AGO.  MBIA which is a competitor to AGO in the same line of business one a ruling versus Bank of America about what they need to prove to show losses from fraudulent reps and warranties on insured mortgages.  This clears the hurdle for more multi-billion dollar settlements similar to the one that AGO reached with Bank of America last year.  I’m not going to bore you with the minute details but it really firms up our investment thesis that over a 3-5 year period AGO could go up 3-4 times.  It is up over 20% in the last month or two but I think that it will be a real bulwark in the future growth of our investments, as I’m a shareholder as well.
We’ve also been buying MBIA bonds in some accounts which are performing quite nicely trading at the low 70’s, which equates to a mid-teens yield to maturity.  They are likely to be paid off at 100 when they mature, but will likely rise much more quickly as these settlements come in over the next year or two
A logical question would be, is this bad for our investment thesis on the banks?  The US banks have reserved for the vast majority of these claims, and the percentage of potential losses in relation to their capital is much smaller than it is for the insurers which are much smaller companies.  There are some banks particularly in Europe such as Credit Suisse, that have not properly reserved for these issues, which is one reason why we have steered away from European financials.  Here is a link to a Bloomberg article which provides a quick cursory update: