Tug Bovine

it all comes back to ROE for me. I'd argue that ROEs for new business is probably somewhere around 20%+. it will come down over time as market share comes back from FHA biz (which is of slightly lower credit quality) and insurance books should grow a bit as well (although i think books should remain more or less flat y/y in '14) these ROEs are possible due to barriers of entry - we have seen a few like ESNT and NMIH - but you need management that fannie/freddie trust as well as relationships with the mortgage originators. you can't compete on price either - last time someone cut price to gain volume, all other players cut as well - which made everyone worse off. Tug Bovine Mortgage Insurance sounds like a winner - no legacy book - but the MTGs of the world will say "the world blew up and we're still here - and we've paid out every single claim".

FHA rates are going up because the government is intentionally trying to reduce market share and get private capital back in the mortgage market. The FHA's capital position has become worse over the last few years and raising premiums should also help build capital to repair it. ------ FHA TAKES ADDITIONAL STEPS TO BOLSTER CAPITAL RESERVES Continuing effort to help strengthen FHA’s Mutual Mortgage Insurance Fund WASHINGTON – As part of a broad effort to strengthen the Federal Housing Administration’s (FHA) Mutual Mortgage Insurance Fund (MMI Fund), FHA Commissioner Carol Galante announced a series of changes to be issued this week that will allow the agency to better manage risk and further strengthen the health of the MMI Fund. “These are essential and appropriate measures to manage and protect FHA’s single-family insurance programs” said Galante. “In addition to protecting the MMI Fund, these changes will encourage the return of private capital to the housing market, and make sure FHA remains a vital source of affordable and sustainable mortgage financing for future generations of American homebuyers.” http://portal.hud.gov/hudportal/HUD?src=/press/press_releases_media_advisories/2013/HUDNo.13-010

i prefer the private mortgage insurers. you can make a pretty strong bull case that they aren't in runoff - the FHA is actively trying to reduce market share, which should allow private mortgage insurers to grow business in an flat origination environment. I like the legacy MIs because i am also bullish on the credit side - i think they're adequately reserved (at a minimum) and that as the old books burn off, loss ratios will come down. dont have much of an opinion on mortgage servicing - haven't looked at them in a few years when the bull case was buying MSRs from the big banks who were forced to divest them for capital reasons. seems like there's been some regulatory issues as of late. is there something to do here?

Why do you prefer GLNG? They have the most exposure to the spot market as their newbuilds deliver this year without contracts. I have there being around 30 ships/year being delivered in '14 and '15 and only total incremental demand for ~15 ships each year (with these weighted towards the back end of '15. To me, it seems like dayrates and utilizations have to keep coming down. i personally prefer the names with better contract coverage (eg, glog) What do you think normalized dayrates should be? At 75-80k and 70% LTV, you can earn a low-mid teens roe, which seems fair to me