Buffett a Long Shot for Bear Stake

Don't hold your breath for the announcement of Warren Buffett's big investment in Bear Stearns (BSC - Cramer's Take - Stockpickr).

Shares of the struggling brokerage firm roared 8% higher Wednesday afternoon as reports swirled about an outside investor taking an interest in Bear. Rumors initially focused on a deep-pocketed financial institution from Europe or Asia buying a chunk of Bear's stock, before The New York Times reported that a group led by Buffett is in talks for a 20% stake in the Wall Street firm.

A spokesman at Bear Stearns declined to comment on the rumors, and an assistant for Buffett said that he was unavailable for comment.

But market watchers say a Bear investment would be uncharacteristic for the Sage of Omaha. Buffett, these people point out, has almost always tried to buy simple, easy-to-understand businesses when they're out of favor among investors.

Bear Stearns' stock is somewhat out of favor, to be sure, having lost more than 20% of its value since January. But the stock has risen sharply since it plunged below $100 a share briefly during an August panic tied to the firm's steep losses in the subprime mortgage market.

Moreover, there's nothing very simple about Bear's business right now. The firm has spent recent years dealing in esoteric, hard-to-parse securities such as collateralized debt obligations, or CDOs. The business pumped out record profits earlier this decade when the debt market was healthy, but that all changed this past summer