Bank of America could settle with MBIA any day, or it could drag the case on for another couple of years. In the meantime, look for an upgrade for MBIA's parent company from Moody's Investor Service in the near term. The bond rating agency downgraded MBIA Nov. 19, citing the cross-default threat, but said it would consider reversing the downgrade if MBIA could amend its bonds to delink the parent and MBIA Insurance. That's what MBIA accomplished on Monday. A Moody's upgrade would merely be an acknowledgement of that fact. Still, assuming the upgrade comes, it will likely spark another rally in MBIA shares--a reflection of how poorly the market understands the issues surrounding MBIA.
That lack of understanding suggests an opportunity for investors, and one that may be particularly attractive since it has relatively little to do with what happens with the economy.
-- Written by Dan Freed in New York.