If earnings are so great then why such a huge drop on such good SOUNDING news? Well, for exactly the reasons I have been stating for the past 7 years: when you "buy" earnings using debt then you can look good for a long time whether you are Toyota or Genworth or GE. But at some point the piper must be paid and the EW charts are telling us that the SOB is standing in front of us right now with his hand out. He's saying "pay up bitches".
But we already knew that!! How? Because of this statement from the above press release:"prompted a company review of whether its reserves are adequate". They have to disclose this lest someone go to jail after the BK. The simple truth is that they sold lots of "long term care" insurance to old people and now those costs are rising just as quickly as the people they insure get older. Folks, 90% of your medical bills come in the last 10% of your lifetime. GNW knew this and they did it anyway because it was quite profitable while the Ponzi lasted. We also know they have an Australian mortgage division and those homes are 3x overpriced even though nobody thinks they are in a bubble. That means GNW loans a lot of money to home debtors who fully intend to walk away in case of 2008 redux. There is no penalty for doing so short of losing your 2% down payment.
Look at their options. They have Jan 2015 $2 puts going for a few pennies. I don't know if Jan 2015 is enough time for it to BK but I do know that 3rd waves collapse a lot faster than most people think possible. I also know that credit can lock up in a very rapid time frame and nobody will see it coming because they are too busy looking at distracting things that do not matter. Talk about your asymmetrical bet. I think I will spend $200 maybe $300 bucks and and take an educated risk in order to chance making a fat killing in terms of percentage gain over the next 5 months.
2 comments:
Genworth's imminent collapse has more to do with bad lapse assumptions than poor estimation of claims experience. Unfortunately, estimation of lapse ratios is a discipline required for all manner of insurance contracts. It would be naive to think that the application of bad lapse assumptions was limited to just LTC. It would also be naive to assume they were unintentional. JMHO.
The other factor I would explore, if I had time, would be the actuarial assumptions for claims being filed in terms of both timeliness and amounts. As these are both related to consumer reliance (and heir awareness), I suspect that Genworth and other LTC underwriters missed badly on this, too.
To be honest, I don't claim to be an expert on GNW. But I am pretty good a Elliott wave analysis and I do know that the entire global economy is a massive debt Ponzi. So I already know how it is all going to turn out and now just trying to divine when using EW.
Post a Comment