Warren Buffett announced Monday that Berkshire Hathaway (NYSE: BRK.A, BRK.B) might execute a share buyback for the first time ever - a bullish signal that it's time to buy stocks at record bargain prices.
Buffett said Berkshire is authorized to repurchase stock for the first time as long as its price is less than 1.1 times book value, and it retains cash holdings of no less than $20 billion.
Berkshire's Class A shares rose 8% Monday on the news, and Class B shares climbed 8.6%.
Buffett didn't just start a rally in his own company's stock, either. The whole market moved on news of Buffett's bullish sentiment.
The Dow Jones Industrial Average on Monday rallied 272 points, or 2.5%, and followed with another 148-point, or 1.34%, gain yesterday (Tuesday). That's after last week's drastic 738-point, or 6.4%, tumble in the Dow. The Standard & Poor's 500 Index is up 3.4% this week after last week's 6.5% fall.
"When Buffett does anything, it's not so much the economic impact but the psychological impact of what he does, and this was hugely important from a psychological perspective," Larry Glazer, managing partner at Mayflower Advisors LLC, told The Wall Street Journal.
Now investors are looking for their own Buffett-style bargains, believing that the famed investor's moves mean it's time to buy.