Buffett to the rescue? NOT!

So Buffett offers to reinsure the muni portfolios of the bond insurers -- basically he would cover all the losses above a certain amount in exchange for a premium. Typical Buffett -- offers to make a can't lose investment that takes advantage of others problems.

The muni insurance is NOT where the problem is -- they aren't suffering any losses in that business so offering to reinsure it just takes the profits away from the bond insurers. The only reason why one of them would actually take the deal is because they were truly desperate. When a business gets in trouble they often have a choice to make -- sell the crown jewels or dump the problem areas that no one wants. If you sell the problem areas, you have to do it quickly before everyone knows they are a problem. Otherwise you have to be willing to dump them for almost nothing. What would you offer the bond insurers for their CDO guarantee business?

Sure seems to me that most sell the crown jewels instead -- they dump the best business and hope the cash they get can allow them to fix the bad business before the whole thing goes under. Not a good strategy for the shareholders but then again they got screwed the moment the bad business became a problem.

I would still look for opportunities outside of financials mostly -- Moody's has moved up again and most of the others have too many questions. I think Merrill has been potentially interesting simply because they have new management, have 20% of bloomberg and 49% of blackrock. Add up the asset values and they could account for as much as half of Merrill's market cap (well at least when I did this analysis a couple of weeks ago -- haven't kept up with Merrill's price).

I should be trying to find some non-financial stocks that have been crushed but I haven't had the chance yet.