Monoline Insurers: More Trouble Ahead

My outlook on the monoline insurers in general, and MBIA (MBI) specifically, remains negative. All indications are that we have not seen the end of credit woes. If bond or CDO defaults go up -- and bets are that they will -- MBIA will feel the pain.

As the rating agencies now begin to ponder the capital sufficiency of MBIA and its ilk, the picture gets grimmer. Even though Fitch mentioned that the probability of MBIA coming up short is low, it has flagged that as a concern. Needless to say, if MBIA needed more capital, it would not be simple in the current environment.

Therefore, as my Nov 55 puts on MBIA (which are up nicely) approach expiration, I am slowly beginning to roll some of these over into May. This was the first such purchase.