Wednesday, 13 February 2008

Quote of the Day - Warren Buffet on Bond Insurers

Amidst all the crap, CNBC sometimes has some very good interviews. Yesterday they interviewed Warren Buffet for about 25 minutes. Listening to Warren Buffet talk for 25 minutes could potentially save you 25 years of investment mistakes.

Yesterday's interview focussed amongst other things, on Buffet's proposed plan to take the Municipal Bond Insurance business away from the three big Monoline insurers AMBAC, FGIC and MBIA. Not, as the media wrongly reported a 'bailout.' Buffet is not interested in the CDO's and other crap that the Monolines got themselves into and is the reason they find themselves fighting to stay afloat.

Buffet pointed out that despite the insurer's retaining their AAA credit ratings they are not trading that way and neither are the bonds they insure. More specifically Buffet said;

"When a company issues a 14% bond when US Treasuries are below 4% and is rated AAA, you've now seen the cow jump over the moon."

Classic stuff.