Warren's timing...

...is pretty near perfect as usual, or so it appears. The FT reports:

Shares in bond insurers MBIA and Ambac fell sharply on Friday amid concerns that a rival US bond insurer planned by billionaire Warren Buffett will eat into their ability to win new business and further damage efforts to boost their flagging capital bases.

If Berkshire Hathaway Assurance sticks to wrapping muni debt it will doubtless make a lot of money. Whether it makes a decent ROE is less clear as (one would hope anyway) the ratings agency criteria for the amount of capital needed to be a AAA bond wrapper will have changed. On the other hand if Buffett just keeps 1.1 times the amount of capital MBIA, AMBAC etc. would have for his book, he will probably do fairly well.

Meanwhile Fitch has given MBIA and Ambac four weeks to raise the billion or so of extra capital they need to retain their AAAs. It will be an interesting month for the monolines.

Update.A nice post from Accrued Interest points out that BHAC is basically a punt on muni investors not waking from their lethargy and actually doing some credit research.

The only risk AGO [but more broadly monolines without structured finance exposure] stock holders face is the possibility that municipal bond insurance declines as a concept. That bond buyers are no longer willing to pay for extra protection on AA-rated school districts and A-rated sewer systems. The fact is that the history of defaults on these types of credits is slim indeed, which is exactly why the municipal insurance business is so profitable. Classically, muni buyers liked insurance because it prevented them from having to do any credit research. So the question is, will investor laziness trump the fear created by current insurer troubles?

Put in those terms, I'm a buyer of OTM calls on laziness...