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FBN’s Liz MacDonald on how Berkshire Hathaway sold insurance on muni bonds, and canceled muni bond credit protection contracts five years early.
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Well there's a big move actually -- warm Buffett's Berkshire Hathaway out today.
Out of the Muni -- sector and it's got Wall Street debating whether this or red flag with more on what it -- mean of course Elizabeth MacDonald this year.
The bottom line that -- got to explain how he is out of the Muni bond market because he doesn't hold the actual months.
-- -- and explain but explain both sides of this debate.
First of red flag debate at what he did was essentially Berkshire have three rather sold insurance is not buy insurance it's sold insurance on Muni bonds.
It reportedly in states such as -- it's like Illinois California.
And Texas and so essentially and also Florida so those some -- CBS's mean -- swaps those that's in what's called the insurance on it.
They pay in the -- the bond defaults.
He got out of half of the trade early five years early eight and a quarter billion dollars unwound.
At Berkshire Hathaway.
This is according to Berkshire Hathaway's SEC filings.
He's aperture health is also reporting that the other side of the trade the other 50% that it is still sitting at Berkshire Hathaway's books.
-- union -- be unilaterally settled.
Because they obviously there's future loss payments that could be due -- -- on them.
And the underlying bonds here sticks -- to his latest funny 54 that's according to the SEC file a filings.
So that's a red -- why unwind it is this an indication that they're more defaults coming you know Muni defaults have been very low.
We haven't seen an outbreak and bank of meaning bankruptcies across the country at all.
So the flip side is the Muni market did improve it had to -- -- -- has been improving in value.
Is then that is essentially basically see taking money off the table.
To deploy that capital elsewhere saying -- -- all sides -- the moving yeah yeah that's right thanks he could just keep profit taking -- to profit taking to make.
Better investments elsewhere.
But what's right what's -- the debate here is he he still sitting on half of the trade.
And -- traders often piggy back when they see moves like this.
Think it will let other half get beaten up idea of the trade get beaten up in the markets negatively we don't know yet driven don't have losses on the trade.
That's not been reported yet.
That may not necessarily be the doom and -- that people are reading and yeah I'm even give it again the other side is to stop and they got that big fight they're saying -- got a -- losses on the principle of -- financial probably -- price of the bonds due you know you bond holders that's a big deal the Z -- covenants and -- off -- and keep it should be back with more I'm sure.
Of course all right a bold move by Nike is raising its prices and designing its most expensive sneak -- --
