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Buffett Hopes For A Bargain In BofA

http://66.225.205.104/JR20110825.mp3

If there's one investor who can inspire confidence in a stock, it's Warren Buffett. The legendary owner of Berkshire Hathaway gave a much-needed vote of confidence to Bank of America today, and the market responded. Mere months ago, Warren Buffett dumped all of his Bank of America stock and chalked the investment up to a loss. But now, he's spending $5 billion to snap up even cheaper shares of the Charlotte bank. Banking consultant Bert Ely says $7.14 was too good a bargain to pass up. "Warren Buffett's a very shrewd investor," says Ely. "He may have taken a loss before but he's smart enough to look at a situation and say, 'Whatever happened before, this is a good opportunity, I'm gonna invest in it.'" Buffett stands to profit handsomely in the deal and Bank of America gets some extra cash to handle massive mortgage losses that are dragging it down. Nancy Bush of SNL Financial says Bank of America also gets some help rebuffing market chatter that the bank is at risk of a takeover - or worse. "The rumors have been ridiculous," says Bush. "I think it was a good confidence building vote in the company because obviously Warren Buffett doesn't see it that way and as we know he's been pretty right over the years." During the height of the financial crisis, Buffett's Berkshire Hathaway made a similar investment in Goldman Sachs and secured a 10 percent dividend. He's secured a dividend of about six percent on the Bank of America buy. Bank of America CEO Brian Moynihan says the bank has enough money to operate, but he welcomes Buffett's endorsement. Motley Fool Senior Analyst James Early says Buffett may be doing more than just shoring up a struggling bank. "I think that he sees this as sort of a capitalist do-gooder thing too," says Early. "He's trying to make money, but he's also trying to voice his belief in the U.S. economy, because a bet on Bank of America is very much a bet on the U.S. economy." As the nation's largest bank - with huge exposure to the housing market - Bank of America continues to make investors skittish. Shares traded sharply up this morning on news of Buffett's vote of confidence, before settling to close at $7.65.