Editor’s Note: When the Oracle of Omaha speaks, we all listen. This time, has been proposed to reinsure the bonds in the hands of the major insurance companies. To what accounted for this move? Can send me your comments a: what behind the Buffet proposal? Buenos Aires, Argentina on February 13, 2008 the markets yesterday closed the day with euphoria. End of the crisis? No, not much less. It is a story that can prevent the crisis to increase its magnitude was known. Warren Buffet announced that his firm’s investment, Berkshire Hathaway, had offered to assume the obligations of the leading insurers of bonds affected by the crisis, MBIA, Ambac Financial Group and FGIC.
The proposal is simple and consists of creating a fund to reinsure U$ S 800,000 million in municipal bonds that are in the hands of Ambac, MBIA and FGIC and avoid so they become the latest victims of the mortgage crisis. That Yes, the CDS in the proposal are not included. Thus, giving U$ S 5,000 million update of bond issues municipal, to try to prevent insurers from losing its AAA credit rating. It is true that Buffet is a philanthropist, but at any moment I thought that this proposal represented an act of charity on your part. The same is confirmed Buffet to declare to the CNBC: when I move closer to St. Peter I will not present it as an act that will guarantee me entry (in the sky). And if wasn’t for charity, then: what is the strategy of Buffet? Favorite Warren Buffet strategy is to go shopping while the majority of investors flee markets terrified, in these moments, which, when everyone sells, can become shares of a company or buy financial assets at prices far below the real value. Buffet has important business linked to the insurance market. Late in 2007, it bought the firm of reinsurance NRG (of the Dutch ING Group) for a price of 300 million and last January 23, acquired a 3% of the capital of the largest worldwide, Swiss Re reinsurance firm.