Tuesday, 12 February 2008
The Saviour of Omaha
Warren Buffet today made a huge announcement, that Berkshire Hathaway is going to effectively underwrite the monoline insurers. Complex though the situation is (and Robert Peston does actually do a good job of putting this in English on his blog) this is big news.
Much of the downturn in markets in February has been down to a great fear that these insurers would be downgraded and with it all the associated CDO's and bonds that the banks are sitting on. The net result would have been billions more write-offs for the banks and pushing the worst cases, like Citigroup and UBS, close to the edge.
Instead, into town comes America's greatest living businessmen, spots an opportunity and saves the day. No doubt he will make a pretty penny by taking on so much risk, however the very fact that such a conservative financier would do this has pushed the markets up hugely.
Perhaps a floor has now been added to the market collapse?
Posted by CityUnslicker