- Joshua M Brown
- August 25th, 2011
Here's what all the racket is about this morning...
Warren Buffett’s Berkshire Hathaway ($BRKB) will buy $5 billion worth of Bank of America’s ($BAC) preferred shares, or 50,000 shares at $100,000 each. The shares pay a 6% dividend. BAC shares jumped 21% in pre-open trading. (Barrons)
A few thoughts...
1. This is a bailout.
2. This may be the most politically motivated investment Warren's ever made. He was meeting with Barack Obama just the other day to help the Pres get his economic speech in shape for September. If you think the subject of Bank of America requiring "assistance" never came up, well, I mean, come on!
3. Buffett will score once again as perception is reality and the perception is that Bank of America has a future with Buffett as its newest backer. They now the time to unwind things and make orderly progress on deleveraging. No fire sales and no panicky actions necessary.
4. If I were either John Paulson or Bruce Berkowitz, I'd use this morning's pop to unload as much BAC as possible. Both men have been trapped and embarrassed by the stock, now's a nice chance to do something better with all that capital.
5. Why did we have to hear that Buffett "came up with the idea while in the bathtub Wednesday morning"? I could've done without that...
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The Reformed Broker is a blog about financial markets and the economy. Joshua Brown is a New York City-based investment advisor for high net worth individuals, charitable foundations, retirement plans and corporations... More.