News of Buffet’s helping gesture welcomed with glee
February 14, 2008
On Tuesday this week the people welcomed the news that Warren Buffet has lend a helping hand to those bond insurers who are suffering. News that also created reasonable amount of joy was that the major lenders of the country have declared that a plan has been formulated by them which are designed to help the homeowners stay clear of a foreclosure.
The news prompted the Dow Jones industrial Average (INDU) to gain around 133 points which is almost 1.1 percent increase. The Standard 7 Poor’s 500 (SPX) index also gained 0.7 percent. However the NASDAQ composite did not change much after reporting some increase early in the day. The future trades in the market are most likely to be affected by the information of retail sale of January before trade starts each day.
The stocks in most indices went up through most of the session and the Dow was ahead with one point up at 225 points. However because of the decrease in the stock price of the tech sector and the commodities the market was not able to sustain the gains it had achieved. As the treasury prices took a fall the corresponding yields went up. The value of dollar was in a mixed state against the main currencies of the world. Another field which took a fall was the oil and the gold sectors.
Wall Street however welcomed the news that the Berkshire Hathaway chairman and CEO Warren Buffet has lent a helping hand to the bond insurers and those people who are facing foreclosures as they might get some help from the money lenders. The news greatly helped in relieving the tension about the current economic outlook. The good thing about such a move is that even if it does not really help the people it does give the people a hope that the issue can be contained and it helps in getting the environment back to a state of calm.
Buffet has put forward an offer to insure almost $800 billion in tax-exempt bonds. He had made the offer to the three main bond insurers in the country, MBIA (MBI), Ambac Financial (ABK) and the FGIC. But the responses from these companies have not been all that favorable. When Buffet admitted that one of the companies have rejected the offer completely, two others have not responded as of yet. One of the companies that rejected the offer is Ambac.
The move from the financial giant was speculated to be a move which proved that major fallout in the economic sector can be avoided if the proper precautions were taken. This is a further reassurance for those people who were planning to invest in any field. But the critics however felt that the move from Buffet was just going to benefit his own Berkshire Hathway and not the bond insurers. What the outcome of this offer is going to be has to be waited and seen.