CEO Brown bought 100,000 shares of this mortage insurer in Nov 2010 at 10. The media has had lots of play about mortage irregularities and the potential of claims MBI and others might have against the offending banks that created these deficient mortgages. MBI has also made progress in splitting itself into two businesses, the good one that insures municipal bonds, and the bad one, you know your home, etc. Single family housing has reached levels that don’t support further price destruction as the cost of building is now substantially higher than the existing housing stock. On the other hand, the municipal market, the “good” one is not viewed favorably at all now. At any rate things are rarely as bleak as you think they are especially when there is strong insider buying. Then again the balance sheet which is what this is all really about is as opaque as ever. It’s a short term play and I dont’ have a lot of confidence on this one but I dont’ see a wipeout below 10.
Well the earnings were as opaque and as confusing as I expected. I don’t know why this stock sold off on earnings except that no sooner than they get people feeling better about their exposure to RMBS problems, that the world turns negative on their “good” business, the muni bond insurance side. I paired back my exposure by 30% Kept all of my Mar 10 strike puts I sold because I will buy more of MBI below 10. I sold all of my March 11 calls at a loss of about 70%. Big gains and losses are in common in option trading so I’m nonplussed by that. Selling them all was debatable though. I bought them for the earnings bounce. It didn’t happen and if I were to own them now it would be because I changed my strategy or in denial that I was wrong. Both are bad recipes for long term success.