Monday, December 10, 2007

PMI rocks! As advertised!!

Did you miss this Thanksgiving post? PMI was at 10.19, it's now 16.6, up 60%! As advertised!

But here's the way to make money on this news. Mortgage and bond insurers Ambac (ABK 24.14) and MGIC (MTG 19.72) , whose counterparty risk was downgraded by S&P Wednesday, will now have a working model with the rating agencies on how to preserve their credit ratings. Without the ratings they're toast. But the biggest play could be bond insurer PMI Group (PMI 10.19)!

PMI owns 42% of FGIC. Market players may mistakenly think PMI's FGIC got the cash infusion. FGIC and CIFG are just a dyslexia twist away from being the same. (Don't think this doesn't happen. And the huge short base in this stock can cause crazy reactions.) Blackstone and Cypress Group each own 23% of FGIC. And they've already had discussions with the rating agencies about putting at least $200 million into PMI. So it's a buy as this news will soon hit.

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