Thursday, May 15, 2008 0 comments ++[ CLICK TO COMMENT ]++

Looks Like William Ackman Is Reducing His Monoline Short Positions

One of the key things required for the monoline insurers to improve is for the short-sellers to close their positions. This won't avoid losses (that's all up to fundamentals) but it will stabilize the equity price. Furthermore, it will increase confidence by customers. Yes, stock prices impact some customers since this is a confidence industry (who wants to pay insurance premiums to a company that is plastered all over the newspaper and may not pay out?).

Prem Watsa of Fairfax, who seems like he was heavily short the monolines, closed out his shorts (CDS holdings) late last year. The big, public, short-seller is Wiliam Ackman of Pershing Square and it looks like he scaled back some of his Ambac short positions. Todd Sullivan of valueplays picked up on Pershing's 13-F filing and it seems that he has scaled out of his put options on Ambac, and lowered some of his put option holdings in MBIA. I suspect Ackman is still heavily short via CDS and he probably won't unwind that any time soon.

In the meantime, Third Avenue (note that this is the company and not necessarily the fund that Martin Whitman runs) seems to be increasing its monoline insurer holdings. Assuming this info isn't out of date (it won't capture what was sold/bought since the filing), they have increased their position in MBIA, Ambac, and Triad (amazing that they have confidence in Triad, a company that Jim Grant presciently predicted was one of the mortgage insurers living on thin ice.) Interestingly they reduced their position in MGIC. I'm not sure why they dumped MGIC, while loading up on TGIC. It's interesting to see all the tactical moves in and out of the various distressed names.

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