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Actively trading the markets is extremely stressful and oftentimes, traders–even those with years of experience–make irrational decisions as a result of this stress. Wall Street Rock Stars are on the top of their game though, banking mad profits every day. On WallStreetRockStar.com you will find REAL information and real trading ideas from REAL Wall Street Rock Stars. - Mark Whistler

The Buffet Bailout

Feb 12

Written by: neildefalco
2/12/2008 6:27 PM

Stocks shot up today when Warren Buffet announced an offer to reinsure $800 billion in municipal debt. This offer was extended to three top bond insurers: FGIC Corp, MBIA Inc and Ambac Financial Group. It was a bold move – and I’ll tell you why…

Along with the $800 billion comes a 50 percent premium charge on top of what the bond insurers are already receiving from the debt issuers.

This is quite interesting really. First, the offer is so ridiculous that the bond insurers would have to be in dire straights (which they seem to be) in order to accept – and if they do, Berkshire Hathaway makes out like bandits. Second, the offer could have been meant to do exactly what it did – boost investor’s confidence and spike stock prices.

Buffet started selling muni bond insurance himself and is actually trying to get approval by all 50 states to insure bonds issued by municipalities – he sealed his first deal last month.

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