MBIA: Less Wobbly Than Thou

News that bond insurers are once again perceived as worthy guarantors rather than agents of financial apocalypse sent MBIA (MBI) soaring 25% by midday Thursday. With the apocalypse at least postponed under the auspices of New York insurance regulators, short-sellers who'd borrowed more than 30% of MBIA's outstanding shares felt a squeeze. With their help, the stock has tripled in price over the past month, though it's still down 78% from last October's high.

Dictating the action was the Armonk, N.Y.-based company's deal to reinsure $184 billion in U.S. public finance bonds insured by Financial Guaranty Insurance Co., a transaction that will bring MBIA $741 million in revenue.

This bit of business as usual is a badly needed vote of confidence in MBIA, which has seen its credit and capital base undermined by the housing downturn. Shares plunged as much as 92% over the past year as credit losses sapped equity, though that was still better than the 98% peak-to-trough decline for rival Ambac. And MBIA's credit has held up better than FGIC's, which got downgraded to junk.

"It's a good step in righting the wrongs of the past," says Morningstar analyst Kim Ryan of the deal with FGIC. "Ambac and MBIA are actually coming out of this not too badly. The big two certainly had sufficient capital to cover all but the most dire situations."

Ryan cautions that this isn't necessarily a full recovery, and warns that the credit and housing markets "are still a scary situation, which could still hit everyone hard."

The Bottom Line: Buy
The housing crisis may get scarier still, but shorting MBIA shares is turning into a real money pit of late.

Tiffany: Foreign Sales Glitter

Diamonds proved an investor's best friend Thursday as luxury retailer Tiffany & Co.beat Wall Street estimates. The stock got marked up 10%.

Same-store U.S. sales dropped 4% in the fiscal second quarter, but the company flashed a 35% comparables gain in Europe, while Asia bought 17% more bling. Sales at the flagship New York store rose 5%, thanks to tourists.

Earnings nearly doubled, aided by a year-ago charge for the divestiture of a Caribbean chain.

Though jewelry sellers are hardly immune from economic ups and downs, Tiffany seems to be weathering the domestic spending slowdown better than most.

Pali Research analyst Stacy Widlitz suggested Thursday that the flush foreigners flocking to Tiffany's midtown Manhattan landmark can only help so much. "We think a conservative stance is prudent in the current environment," she wrote of the fiscal third quarter. "If execution continues on the current track EPS may likely exceed guidance. However, for now we remain conservative as Q3 U.S. comparisons are challenging and make continued mid single negative U.S. comps likely. We look for U.S. comps to turn positive in Q4 as comparisons ease."

The Bottom Line: Buy
A diamond is the world's hardest substance, and outperforming expectations in luxury retail during a recession isn't much easier. They're doing something right.

Williams-Sonoma: Investors Flee Kitchen

Williams-Sonoma shares tarnished 9% after the upscale cookery retailer reported disappointing second-quarter profits and turned down its third-quarter outlook.

The San Francisco-based seller of $300 frying pans and $60 pepper mills has been on the defensive since May 2006, and its stock is down 36% year to date.

"We were disappointed by the degree to which the macro-economic environment deteriorated in the second quarter -- the impact of which was progressively declining comparable store sales throughout the quarter," CEO and Chairman Howard Lester said. "To put this in perspective, comparable store sales declined from negative 8.6% in May to negative 14.0% in July."

That's not a good sign for the rest of the year, warned SunTrust Robinson Humphrey analyst David Magee in a preview note. "Particularly for the more discretionary segments of retail, we think consumer sentiment remains shaky, which, as the holiday season looms on the horizon, could lead to increased caution by WSM on 2H guidance," he predicted Wednesday. He'd expressed hope that the bad news was already priced in, but no such luck.

The Bottom Line: Hold
If you still own this bit of chipped crockery, resist the urge to dump it right away. With people going out less, they might require some kitchen gadgets soon enough.