The Buffett Bailout

The market had opened higher today thanks to the news that Warren Buffett was investing $5 billion into Bank of America ($BAC). In exchange, Buffett will get 6% preferreds. He always gets amazing deals. Shares of BAC rose as much as 25% today. In a matter of minutes, Buffett had made a cool (unrealized) gain of $700 million. So after publicly insisting that they don’t need to raise capital, BAC goes ahead and raises capital.

The good news is that Buffett’s move helped the financials. AFLAC ($AFL) briefly cracked $37 and JPMorgan Chase ($JPM) got to $38.57. Even Nicholas Financial ($NICK) rose to $11.45.

Sadly, the market has already given back much of those gains, and the S&P 500 is back in the red. Wall Street is focused on Ben Bernanke’s speech in Jackson Hole tomorrow. I really think this is a non-event; I don’t expect any major news. Plus, some of the recent data has been better which takes some of the heat off the Fed.

The most interesting activity has come in the gold pits. Gold dropped $104 yesterday and the fall continues today. Two days ago, gold got to $1,917.90 per ounce. Now it’s at $1,739.

Posted by on August 25th, 2011 at 11:25 am


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