MBIA and ABK

If you have not been following this both bond insures MBIA and ABK are up about 100% in the last two days. A post I did back in December said everything revolved around these guys. I think I am being proven right in that statement as losses accelerated last week after these guys look they were done and huge market gains today after regulators met with their counterparties potentially infusing $5 billion to $15 billion in capital in what amounts to a governement orchestrated bailout.

Couple of thoughts.

1) When in history has a government bailout amounted to anything substantial for equity owners? The 1998 liquidity crises centered around LTCM. That hedge fund blew up and the governement had to come in to lead a bailout (Wall St banks ultimately bailed them out). The point is the owners of LTCM got next to nothing. Same with the S&L crises. The governement came in and huge bailouts. Equity owners got next to nothing. 1930s JP Morgan led huge bailouts, equity owners got next to nothing. Why is this time any different? The market is acting like it is and you shouldn't ignore that information feed. I am just not totally following why.

2) If this is resolved with a bailout we may have reached a bottom in financials. Not screaming from the mountain tops but it is possible. You still have problems with housing, increasing credit card defaults, commericial real estate turning sour, and auto loan problems but what could take the whole finacial system down (the derivative issue) would have a major repair job done.

One more bonus thought just for you.
3) It seems like we went through this about 5 months ago. Remember the SIV bailout with the super SIV fund that went the way of the dodo bird? Well this has all kinds of problems with it. All we know is that they met and options were discussed. I don't know how bad it really is but it could be bad enough that unlike in 1998 this will truly be a governement bailout with still large losses for various financials.