The big story of the day in the world of financial stocks is that they’re all getting hammered, and the idea is that it might have something to do with the fact that strong derivatives reform seems to be coming down the pike.
Now there was a report earlier in the day that perhaps Berkshire Hathaway might somehow get a fat exemption, but now according to WSJ that’s not the case. The Democrats have killed that provision.
So you’d think that Berkshire might be getting pelted, but it’s not.
It’s actually up about 0.4%.
That’s not a huge move, except in comparison to other financials, in which case it’s significant?
So what’s going on?
The markets are probably figuring that the hit to Berkshire will be one-timey in nature — basically that it will cause the company to post collateral, but that derivatives aren’t central to how it makes money.
With the financial firms getting whacked, strong regulations may go at the heart of what they do, and actually hurt future profitability, thus the falling shares and blowout in CDS.
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