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U.S. financials are up, so is skepticism Add to ...

The blogger Accrued Interest isn't buying into the euphoria over U.S. financial stocks after Wednesday remarkable surge by some of the more beaten up names. Recall that Radian Group Inc. posted a surprise quarterly profit, raising the possibility that other troubled U.S. insurers might post similar positive surprises. AIG's shares have risen 92 per cent in two days.

Here's Accrued Interest's take:

"Radian reported a profit this quarter mostly on the back of insurance claims rescinded due to misrepresentations. AIG is up big on the news, as are other insurers. It might explain MBIA's big move to the upside [on Tuesday]

"Here's something a bit odd, though. Why are all the other banks up on this news? It isn't like foreclosures are down. In fact, what Radian is saying is that they've managed to avoid paying banks the insurance they were otherwise due. How is this good?

"Isn't Radian just transfering losses from their own books onto other banks? Won't the other MI's follow suit? Even the more conservative banks, e.g., J.P. Morgan or Wells Fargo have exposure to potentially "misrepresented" loans through their recent acquisitions. I suppose banks would rather Radian (and the other MIs) survive in some form. But even then, I'd have to say this is at best, a mixed event for banks. Not a clear positive."

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