contrarian@coalmine

Friday's Turnaround: Raid on the Shorts

One of the reason's I've stopped reading Bill's blog is his predictable whining when the market acts differently than he expects, especially on a daily basis, causing him to point fingers at the usual suspects. He embraces the Relative Strength Index (RSI) as if it's a true mathematical calculation of extreme market sentiment, rather than just another after-the-fact way of historically charting oversold and overbought conditions--"Gee Whiz, look at this chart, if I'd only bought when everybody hated this stock, and sold it when everyone loved it...I'd...I'd...I'd be RI..I..I..CH!!". When you lean too hard on a crutch, it can sometimes break.

That being said, Charlie Gasparino, a muscle-bound, macho man of a financial journalist, who claims access to the inner sanctums of Wall Street (ie The Boardroom), has been allowed for weeks to scream "Fire in the theatre!, the monolines are heading to a quick and painful bankruptcy; my 'sources' tell me so". He reiterated one of these rants of imminent demise on CNBC as late as Friday morning! Then, with a 1/2 hour left in a short trading week, he broadcasts that a "bail out" for Ambac is a certainty, and banks X,Y& Z are lined up to help.

Action/Reaction....sho... squeeze into the close.

On Monday some Power Pundit will reiterate the Financial Meltdown argument, the markets will plunge, and Bill Cara will say "you see, I told so...".

Yawn!

A Common Sense Look at MBIA

Who knows when the smart money is wrong, or just early? Ackman, in retrospect, has made a brilliant trade; but years ago, when he initiated his short position and MBIA was flatlining at $60, his position looked uninteresting at best. Now the pundits are rightfully applauding his patience and his profits.

Will current MBIA common stock holders be rewarded after a few years of waiting, with their eyes focused toward the dim light at the end of the credit crisis. Time will tell. One thing is certain, the traditional monoline business is not dead...Buffet has confirmed this with his own entrance into the marketplace.

The smart money was obviously early (ie. Warburg Pincus,Marty Whitman, Davis Select Funds, etc.) on this bet that MBIA will first survive, and then eventually thrive again. Early doesn't make these folk ultimately wrong. As for Ackman, one can stay too late at the party...but greed is a bitch to leave unattended on the dance floor when you've been having so much fun with her.

A Common Sense Look at MBIA

If you're going to take the simpleton's route to financial analysis then somebody taking the other side of the argument would say,

"Why did Warburg Pincus double-down on their original investment in MBIA if they thought that they would be throwing good money after a bad investment?" or/

"Why was Marty Whitman's Third Avenue Value fund averaging down on their investment in MBIA through the end 2007?" Whitman's number crunching abililty is legend, and he has a 1/2 century more experience than Ackman. or/

"Why would Chris Davis of the Davis Select, with an bonafide expertise in investing in financial companies, make a big purchase of MBIA common stock at the end of 2007?"