In his latest blog, Matt sings the praises of ETNs and argues that the risk of losing money is “vanishingly small”.

Matt’s argument is that “most ETNs offer daily redemptions at net asset value, meaning that (even ignoring the quoted market) an investor of size (50,000 shares in the case of iPath ETNs) can sell out of the product within 48 hours and get the full net asset value of the note from the issuer.”

In other words, even if you become concerned about the credit risk of the issuer and there is insufficient liquidity in the secondary market for you to trade, you can get out of a position by selling it back to the ETN issuer.

I agree with Matt that the tax treatment of ETNs gives them a huge advantage for US investors (ETNs are taxed at long-term capital gains tax rates and only on a deferred basis

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XL Capital Group’s (XL) financial strength rating (FSR) of “A" (Excellent) and issuer credit ratings (ICR) of “a" were reaffirmed today by the rating agency A.M. Best. The outlook for all ratings is “stable". The rating reaffirmation is followed by XL’s efforts to restructure its investment portfolio by settling with Syncora Holdings. The company had a disappointing run last year, dragged down by structured-finance losses recorded by Syncora Capital, a bond insurer, of which it was the majority owner. Last October, XL severed its ties with Syncora, a big step in setting a track to recovery. On a year-to-date basis, XL has reduced its exposure to more volatile asset classes by $3.5 billion. XL also implemented expense reduction initiatives in the second half of 2008. It has been streamlining processes across all geographic locations, with a primary emphasis on corporate functions. The company has also ...

MBIA's rating slashed to deep junk status, litigation worries continuesOn Thursday, June 25, bond insurer MBIA's (MBI) senior debt rating was lowered by Moody's Investors Service to Ba3 -- three levels below investment grade -- from Ba1. The downgrade cited expectations of further portfolio deterioration due to its exposure to risky mortgage-backed securities coupled with the uncertainties associated with the ongoing litigation over the company's restructuring that happened last February.Moody's also changed the rating outlook of MBIA Insurance Corp. to negative. Additionally, Moody's affirmed the investment-grade Baa1 rating of National Public Finance Guarantee Corp., MBIA's dedicated municipal-bond insurance company.Investors and world's 18 largest banks, including JPMorgan Chase & Co. (JPM) and Bank of America Corp. (BAC) have sued MBIA, claiming a fraudulent restructuring in February this ...

Tuesday March 3, 2009 Navivest

Yesterday, the Dow Jones Industrial Average lost 299.64, to close at 6,763.29, an 11 year low. This came on the back of three straight down days, so now the running total is four straight down days on the Dow. At some point, that has to give.

We understand the economy is in shambles, to paraphrase Warren Buffet, and that this is a bear market, but we continue to maintain that we won’t see a straight line downwards. In other words, there will be bear market rallies, and we are expecting one today.

On the earnings front, there aren’t any companies reporting today that could bear on the markets. We do get earnings releases from Autozone (AZO), bond insurer MBIA (MBI), Chinese solar company, Trina Solar (TSL) as well as Xilinx (XLNX), but none of these should impact the markets either way.

The economic calendar is light,

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MBIA Inc. (MBI) announced today that it has established a new U.S. public finance financial guarantee insurance company, giving the bond insurer a new entity dedicated exclusively to the U.S. public finance market. The move is part of the company's goal to separate its municipal business from its structured finance business.

Investors obviously liked the move as MBI is the best-performing S&P 500 company today, with shares surging 35%.

Specifically, MBI transferred stock of MBIA Insurance Corp. of Illinois to a newly established intermediate holding company dubbed National Public Finance Guarantee Corporation. It will operate as a subsidiary of MBIA Corp.

"We believe this new business model will not only preserve the interests of both our public finance and structured finance policyholders and enhance the value for our shareholders, but will benefit the U.S. public finance markets as well," stated MBI CEO Jay Brown.

While the surge in

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