It is Buffett rumor time again. Ever since he did a CNBC interview and said that "opportunities would arise" from the current state of affairs, pundits have been having Berkshire Hathaway (NYSE:BRK.A) buying every mortgage lender out there. Ignore them.
Why? Can anyone name the last time Buffett bought shares in a company on the open markets when people thought he would? Me neither. Shares of Countrywide (CFC) jumped 10% yesterday when the Wall St. Journal simply opined that he may be a buyer of parts of the company. No facts, just an opinion. How large would the premium be for Buffett if word got out he was actually buying the company or made an offer for it? That fact alone eliminates an open market purchase of the lender.
What is likely? Buffett will probably buy dirt cheap mortgage backed securities he deems risk advantaged. What I would expect to be announced would be Buffett taking a multi billion dollar bet on mortgages, perhaps in a private transaction they issue Buffett debt or preferred convertibles to provide a specific lender with necessary liquidity. During the Enron induced energy company meltdown at the turn of the century, Buffet made bets with convertible securities that turned out to be very profitable investments.
I just cannot imagine Buffett making an open market purchase. I would be very surprised, on the other hand, if he was not somehow involved in the cleaning up of this mess.