Thursday, January 14, 2010

Bookkeeping: Adding to Assured Guaranty (AGO)

Now that moral hazard is a firm part of American culture, there seems to be no fear of defaults even at the municipal level.  Because Uncle Sam/Uncle Ben won't let it happen ... at least this seems to be the thinking...

If you've looked at any municipal bond ETF you will see what I am talking about - off the charts performance, even as I read about city after city, state after state flailing with their finances.

Moral Hazard anyone? (keep in mind this is not a chinese small cap stock, this is a municipal bond etf)

Anyhow, I am all about moral hazard since I try to keep up with the fashion.  Hence our position in Assured Guaranty (AGO) - who insures such offerings (along with some nasty legacy assets).  But really do we need insurance when the Bank of Ben is backstopping the entire United States?  It's almost like a waste of money to insure debt when the Bernanke Put* is in the back of everyone's head.

*Bernanke Put = like the now infamous Greenspan Put which helped support the markets for years - but taller, stronger, faster, able to leap short sellers in a single bound.

After building a nice base the stock could be beginning a breakout ... we'll see.  This has been sort of a slow mover for much of the time I have held it so I've been unable to really get a feel for how it trades since it's been on snooze control.  I am adding another 1.2%ish allocation to our current stake, in the $23.50s.

[Nov 25, 2009: Bookkeeping - Beginning Starter Stake in Assured Guaranty]

Long Assured Guaranty in fund; no personal position

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