Deerfield Capital (DFR) Big loss on impairment charges. Seels off to $2.75 from 52-week high of $17.44.

Thornburg Mortgage (TMA) Chapter 11 worries. Falls to $3.53 from 52-week high of $28.40.

Fremont General (FMT) Company may be on the block. S&P ratings cut. Down to $.58 fom 52-week high of $13.80.

Stereotaxis (STXS) Quartely loss and delay of catheter product. Runs down to $3.82 from 52-week high of $16.88.

Douglas A. McIntyre

Goldman Sachs has outlined ratings on this and other with several scenarios.  Its value for SCA in a run-off scenario now sits at ZERO.  It has been negative on financials.  Goldman Sachs previously gave a valuation matrix under multiple scenarios for the bond insurers.

SCA stock has traded over $30.00 in the last year.  Ambac Financial (NYSE: ABK) just cut its dividend to almost nothing.  Both it and MBIA Inc. (NYSE: MBI) are seeking rescue packages partly in order to keep their respective "Triple-A" ratings as well.  While their stocks have also been disasters, they might want to consider this scenario here.  The clock is ticking.

Jon C. Ogg
March 3, 2008

While we did not get a list of these, the two obvious ones are MBIA inc. (NYSE: MBI) and Ambac Financial Group, Inc. (NYSE: ABK).  Presumably the third one would be FGIC, or likely it could be Security Capital Assurance Ltd. (NYSE: SCA).  Most shares are higher after Buffett came on CNBC with his plan:
SCA +9% at $2.24; MBI +3% at $14.00; ABK +4.5% at $10.96.

• We previous noted, "Would Buffett Save The Insurers?"
• Berkshire Hathaway shares are also up about 3% since we noted that "The Barron’s Sell-Off Could Be Your Gain"

Mr. Buffett did note that this was initially a $5 Billion proposition and that he would keep all earnings inside the entities for a period of 10-years.  He also noted that one rebuffed his offer and two he has not heard back from.

What is important here is that this will at least take care of the municipal bond side even if those other bond insurance operations in mortgages, CDO’s, and CLO’s were to fail.  But Buffett is drawing his line in the sand on what risks he will take and which he will not take.  These plans would not include insuring mortgages, CDO’s and CLO’s.  That is why the bond insurers are not jumping at this offer.  They’d be giving away their top operations to feed their leeches.

He even made a note about how his new municipal bond insurance unit received a 2% premium merely to reinsure a muni that had already been insured so it could maintain its triple-A rating even if the bond insurer failed.  No wonder he’s willing to step up.  If you have a few billion dollars lying around and have a solid insurance holding company operations this sounds like a layup when you consider the fact that it takes the worst scenarios to cause municipal defaults.   

Perhaps the most important issue at hand is that this will at least put a floor on the blood-letting that has been seen in the municipal bond arena.  It won’t help the mortgage and CDO insurance operations, although there is an obvious tertiary benefit in that this at least in theory saves part of those businesses.

Jon C. Ogg
February 12, 2008

• Ambac Financial (NYSE: ABK)
• MBIA Inc. (NYSE: MBI)
• Security Capital Assurance (NYSE: SCA)

It is also listing these valuations under three different scenarios:

1. "run-off scenario" where the insurers won’t raise enough capital to satisfy ratings agencies and where they may struggle to write new business.
2. "ongoing concern scenario" assumes a capital raise in-line with losses with no added book value and a derivative mark-down.
3. "bailout scenario" as best case where the firms receive capital injections sufficient to operate as is.

        GOLDMAN SACHS VALUATIONS
STOCK    Run-Off      Ongoing Concern        Bailout
ABK              $15                    $10                           $35
MBI               $6                       $14                          $48
SCA              $0                      $1.50                        $13

Yesterday’s closing prices were ABK $13.70…. MBI $16.61…… SCA $3.79.

Jon C. Ogg
January 24, 2008

• Ambac (ABK), M B I A Inc. (MBI), and Security Capital Assurance (SCA) were downgraded to Neutral from Buy at Banc of America (that was real timely).
• Bed Bath & Beyond (BBBY) raised to Buy from Neutral at UBS.
• Brookfield Asset Management (BAM) raised to Outperform from Neutral at Credit Suisse.
• Double Hull Tankers (DHT) raised to Buy from Hold at Citigroup.
• GFI Group (GFIG) raised to Buy at Goldman Sachs.
• Philps Electronics (PHG) downgraded to Underweight from Overweight at Lehman.
• Priceline.com (PCLN) raised to Buy from Hold at Citigroup.
• Research in Motion (RIMM) raised to Outperform at Oppenheimer.
• Staples (SPLS) raised to Buy from Neutral at UBS.
• Wrigley (WWY) raised to Overweight from Neutral at JPMorgan.

Jon C. Ogg
January 18, 2008

ACA Capital (OTC:ACAH) was downgraded today to junk status under the "BBB" rating at S&P.  Congratulations. Like that was a difficult one to see coming.  This one is up big today on hopes (rumors) that the brokerage firms may band together to save it, although they would likely be doing this to save their own exposure from it failing more than seeing this one as a good investment.

D.R.Horton (NYSE: DHI) was downgraded by Moody’s to junk status: Ba1 is the new rating after having been at Baa3, the lowest investment grade out there.  There shouldn’t be a single homebuilder in the U.S. with an investment grade rating and there shouldn’t have been since 2006.  If you tried selling a house in 2006 in a non-hot part of the country you’d know why this is so.  The truth is that homebuilders are now just land banks and using the balance sheets for guidance is pure wizardry.  We have asked "Which Homebuilder Goes to Zero First?" for good reason.

S&P took its outlook on AMBAC (NYSE: ABK) and MBIA (NYSE:MBI) to negative from stable.  Where has S&P been?  These companies have had known exposure to this mess for weeks now. At least AMBAC said it could get its rating stabilized.  Security Capital Assurance’s (NYSE:SCA) XL Capital Assurance unit is also on negative credit watch, so investors might as well get ready for that "AAA" rating to go away too.  Blackstone Group (NYSE:BX) has a unit called Financial Guaranty Insurance Co. that the community has called "FGIC" (or pronounced ‘Fij-ic’) forever.  S&P has it under review as well.

Moody’s (NYSE: MCO) just maintained some of its own "Aaa" ratings on Monday, so there is a turf war. If you can recall a housing executive saying the housing market "was going to suck" a while back, it might ring a bell.  We don’t have to say that the ratings agencies suck, because they already know that they do.  Maybe the conspiracy theorists are right.  Maybe if these ratings agencies were truly objective (and actually analyzed these in the manner that we all were counting on them to) that would have never allowed much to really happen in the financial markets.

Most of these stocks have traded lower on the day, but they all have recovered far off lows and some are actually up on the day.  If you take a look at what we’ve said here you’ll know we have noted how their business models in covering debt issues are full of conflicts of interest top to bottom.  No wonder.

Jon C. Ogg
December 19, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he produces the SPECIAL SITUATION newsletter and he does not own securities in the companies he covers.

CSK Auto (CAO) Company gets brokerage downgrade. Falls to $4.30 from 52-week high of $19.14.

Office Depot (ODP) Still falling after warning on sales. Drops to $14.11 from 52-week high of $41.06.

Neurocrine Biosciences (NBIX) FDA rejects company’s sleep drug. Shares off to $5.01 from 52-week high of $14.88.

NII Hldgs (NIHD) Company is participating in a December 18 third-generation license auction in Brazil. No other news. Falls to $43.37 from 52-week high of $90.43.

Conexant (CNXT) No news, but down to $.95 from 52-week high of $2.21.

AMD (AMD) Bad reaction to analyst day presentations. Falls to $8.42 from 52-week high of $23.

Douglas A. McIntyre

Reuters writes that HP (HPQ) rode big sales in laptops to a record quarter.

The Wall Street Journal writes that United Rentals sued Cerberus over a broken takeover.

The Wall Street Journal writes that Pfuzer (PFE) won a key court case that may block some suits over whether its drug Celebrex caused heart problems.

The Wall Street Journal writes the GOP members of Congress are attacking an FCC plan to block cable expansion.

The Wall Street Journal writes that the Nasdaq is trying to take some companies away from the NYSE.

The New York Times writes that US company sales overseas may keep the US economy from falling into recession.

The New York Times writes that employess at CBS News (CBS) have voted to strike.

The FT writes that China has voiced alarm at the price of the US dollar.

Barron’s writes that shares of Echostar (DISH) fell when a reported indicated that the company would not be bought by AT&T (T).

Douglas A. McIntyre

Security Capital Assurance (SCA) Another bond insurance operation. Drops to $7.59 from 52-week high of $34.58.

MBIA Inc (MBI) The third in the trio of bond insurance firms. Drops to $33 from 52-week high of $76.02.

Merrill Lynch & Co (MER) Big losses and potential SEC investigation. Bad combination. Down to $54 from 52-week high of $98.68.

Washington Mutual (WM) Mortgage broker. Falls to $23.59 from 52-week high of $46.38.

Citigroup (C) Down to $35.52 from 52-week high of $57.

Silicon Image (SIMG) Q3 profit drops by half. Shares fall to $4.30 from 52-week high of $13.77.

Douglas A. McIntyre