Let Me Tell You What Bill Ackman's Biggest Problem Is

I’ve never met Bill Ackman. I have nothing against him personally. I simply have a problem with a certain philosophy of his. Let me explain.

Back in 2002, Ackman went short the bond insurer MBIA (Symbol: $MBI). I won’t bore you with the CDS and CDO details, but his main reasoning was that the bond insurer was running a high-risk business model. And you know what? He was dead right! According to the SEC filings, he went short around $45 and covered around $4. A great trade on the surface, but let’s dig into the details.