Friday, December 28, 2007

Warren Makes A Move

Damn. This is gonna be good. Ya think Warren's gonna be charging a nice fat little premium here? AP (12.28.07):
"Warren Buffett's Berkshire Hathaway will receive a license in New York to open a new bond insurance business, a state regulator said Friday.

The license for Berkshire Hathaway Assurance Corp. will officially be approved no later than Monday.

Berkshire Hathaway Opening Bond Insurer

One analyst has observed that "Buffett will have the advantage of setting up operations with a strong balance sheet and a clean book of business, making his operation attractive for bond issuers".

Considering the financial woes of the existing insurers, Warren's company will be a godsend for our Jolly Bankers, at twice the price.

Our analyst also speculated that Warren's new company "could take some business away from other insurers". As if that wasn't the point or anything.

How's the competition faring this morning? Ewwww! Not well. Both "MBIA and Ambac shares dropped sharply. MBIA fell 12 percent to $19.60 in morning trading, while Ambac fell 9.7 percent to $26.31."

UPDATE: Spoke too soon. Warren's new company is only going to "guarantee the interest and principal of U.S. municipal bonds", and "won't insure structured-finance products such as collateralized debt obligations or any asset-backed securities".

More from The Independent (12.29.07):

"[Buffett] has criticised the bond insurers for writing business too cheaply so that prices do not reflect risk. Now America's second richest person is seeking to capitalise on the uncertainty hanging over them to charge premium prices based on Berkshire Hathaway's rock-solid AAA rating."

Buffett muscles in on bond insurers

"'We felt that in many cases the prices that people were charging were inappropriate,' Mr Buffett told The Wall Street Journal. 'As long as people were willing to accept that, there was no point in trying to offer something else.'"

Times have changed, it would seem.

And by the way, "Berkshire Hathaway is sitting on a cash pile of more than [$45 billion] that Mr Buffett wants to invest."

And by the way, Ambac closed today at $25.12, down $4.02. MBIA closed today at $18.74, down $3.53.



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