While the Dow Jones Industrial Average's 302.89 point gain to 11,734.32 on Friday may have put a little weekend spending cash in investors' pockets, activist investor Bill Ackman of hedge fund Pershing Square Capital Management LP may have a little less reason to celebrate as two of his short-selling targets, bond insurers MBIA Inc. and Ambac Financial Group Inc., each recorded double-digit gains over the past week on surprisingly strong earnings. The largest bond insurer, MBIA, climbed 3.5% Friday and over 18% for the week to close at $8.57 per share on news of a gain for the first time in four quarters. Its net income for the second quarter hit $1.7 billion compared with $211.8 million for the year-ago period driven by $3.3 billion in unrealized gains on insured credit derivatives. Toxic structured finance products driving gains? Aren't these the same investments that drove the ratings agencies to downgrade a number of bond insurers and have led to massive write-downs? A number of media outlets, observers and members of the blogosphere said the gain was due to new tricky accounting rules. An article on Forbes.com Friday said the Street's reaction to MBIA's earnings may be "ill-conceived if it is based on the higher-than-expected profit" due to recent accounting rules changes, MBIA has factored its own credit risk into its valuation of its insured credit derivatives. The increase in perceived credit risk, implied by its wider cre ...
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While the Dow Jones Industrial Average's 302.89 point gain to 11,734.32 on Friday may have put a little weekend spending cash in investors' pockets, activist investor Bill Ackman of hedge fund Pershing Square Capital Management LP may have a little less reason to celebrate as two of his short-selling targets, bond insurers MBIA Inc. and Ambac Financial Group Inc., each recorded double-digit gains over the past week on surprisingly strong earnings. The largest bond insurer, MBIA, climbed 3.5% Friday and over 18% for the week to close at $8.57 per share on news of a gain for the first time in four quarters. Its net income for the second quarter hit $1.7 billion compared with $211.8 million for the year-ago period driven by $3.3 billion in unrealized gains on insured credit derivatives. Toxic structured finance products driving gains? Aren't these the same investments that drove the ratings agencies to downgrade a number of bond insurers and have led to massive write-downs? A number of media outlets, observers and members of the blogosphere said the gain was due to new tricky accounting rules. An article on Forbes.com Friday said the Street's reaction to MBIA's earnings may be "ill-conceived if it is based on the higher-than-expected profit" due to recent accounting rules changes, MBIA has factored its own credit risk into its valuation of its insured credit derivatives. The increase in perceived credit risk, implied by its wider cre ...