One of the big stories of the day was the announcement by Warren Buffet that his company, Berkshire Hathaway would make a $5 billion investment in Bank of America. Over the last several weeks we have watched shares of BofA go down to levels not seen since the financial crisis, due to its ongoing exposure to liability from bad mortgages from Countrywide Financial, which Bank of America bought in 2008. There have also been rumors that BofA has large amounts of exposure to European banks. Other financial institutions have followed BofA down, though to a lesser extent, with Citigroup in particular (which I hold in my portfolio) taking on the appearance of a "BofA lite". (See below chart from Yahoo Finance: BofA is the blue line; Citi is green).
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| 3 month chart from finance.yahoo.com |
The announcement of the deal, which Buffet --now said to be the third richest man in the world with a net worth over $50 billion-- thought up while in the bathtub, caused BofA stocks to jump considerably, along with the other financials.
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| 5 day chart from finance.yahoo.com |
As of this writing, the Dow Jones Industrial average has followed the European markets downward, and is now off by about 130 points or just over 1% -- which used to be a lot, but could change in the blink of an eye in these recent weeks of high volatility. But the financials are a bright spot, at least today, with BofA up by over 10%, and Citi up by just under 5%.
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