Buffett's Goldman Deal Is No Charity

Still, Mr. Buffett is not taking big risks based on the structure of the investment.

Berkshire Hathaway will receive perpetual preferred shares in Goldman, which will pay a 10 annual percent dividend, or $500 million a year. Those dividends take precedence over other payments to common shareholders. Goldman has the right to buy back the shares at any time for a premium of 10 percent.

In addition, Berkshire Hathaway will receive warrants to buy $5 billion in common stock at a strike price of $115 a share, which can be used at any time in a five-year period. Those warrants are already in the money: Goldman shares closed Tuesday at $125.05, up $4.27, and rose to $134.75 in after-hours trading after Mr. Buffett's investment was announced.

Comments

[elo]

11:01 AM on 09/30/2008

Dr. Tantillo, who has ( http://blo­g.marketin­gdoctor.tv ) did a post a few days ago on Buffett (in a winner/los­er post that contrasted him with WaMu).

Dr. Tantillo blogs from a branding perspectiv­e, and posits that any company must stay true to its brand's 'core features' to succeed--a­nd that Buffett has done just that, in his personal as well as his profession­al life (i.e., still lives in a modest home in NE).

"A successful brand 'discovers­' and refines its core features until they hum and are reflected perfectly in its actions and marketing.­"

Full post: http://blo­g.marketin­gdoctor.tv­/2008/09/2­6/brand-ad­visory-buf­fett-and-w­amu.aspx

[icechaos]

02:29 PM on 09/25/2008

Maybe we should put gang bangers in charge.

Too many of you on here a just filled with hate.

[Tulka2]

01:18 AM on 09/25/2008

This is the first good news in several days. God, i hope there's still money to be made on Wall Street. Main Street better hope so too. Better to follow W. Buffet's money than Ron Paul's curmgeon. Ron Paul is a 19th century, country doctor.

[PT6]

08:30 PM on 09/24/2008

He is an opportunis­t!

He sees money for his stocks!

He loves it!

Does that make it a good idea? No
Does that make it Right? No

[RightWingMarine]

08:58 PM on 09/24/2008

Why is it not right for the leader of an investment company to make money? Not only is he trying to make money but he's letting the world in on what he's doing for free. How many investment companies will give you free advice and you don't even have to be a customer?

[PT6]

08:28 PM on 09/24/2008

He is an opportunis­t!

He sees money for his stocks!

He loves it!

[falco]

05:39 PM on 09/24/2008

Buffet is in now because if this finacial mess and fraud unravels, all these supposed "good hearts" will be revealed for what they are - theives. They will do their damnest to try to keep it from unraveling­. Look for Bill Gates to chip in next. They are all going down, and you will be shocked to see how many and who are involved! Yeahhh!

[anastasiabeaverhousen]

05:05 PM on 09/24/2008

Golly gee whilikers. What might Buffet know that we don't? Well, let's see:

1) Paulson was the CEO of Goldman prior to becoming Treasury Secty.
2) Whatever bailout is approved, Paulson will probably help out his old company first.
3) Whatever money Buffet just put into GOldman will grow over night.

Duh.

[doogiedude]

04:36 PM on 09/24/2008

During Chairman Bernanke's testimony before Congress today, the subject of Mr. Buffet's investment in Goldman Sachs was mentioned. Mr. Bernanke essentiall­y said Mr. Buffet made hie investment under the assumption the bailout plan would be approved.

I have a diffucult time believing Mr. Buffet would make such a large investment based on such an assumption­.

I would imagine a person of Mr. Buffet's investment experience planned for the contingenc­y of no bailout plan.

This sounded me to like an attempt by Mr. Bernanke to keep up the crisis pressure for the disaster capitalist­.

Just sayin

[Erdgeist]

03:48 PM on 09/24/2008

All of Cheney's buddies are going to make a lot of money. This plan was known about months in advance (but not to Congress) and no doubt involves some insider trading. Here is the smoking gun:

"Fratto insisted that the plan was not slapped together and had been drawn up as a contingenc­y over previous months and weeks by administra­tion officials. He acknowledg­ed lawmakers were getting only days to peruse it, but he said this should be enough."

This has Cheney written all over it. Yes, the bailout plan that was put to Congress as some kind of emergency was known way in advance, months in fact. Here is the URL: http://www­.rollcall.­com/news/2­8599-1.htm­l?type=pri­nter_frien­dly

[ReelBusy]

03:36 PM on 09/24/2008

Warren knows what he is doing and can afford it unlike the rest of us.

It's all about the McCain "Economy" now isn't it?

MCCAIN & PALIN in BEAUTY & the BEAST
Featuring the McCain Economy Chorus
http://www­.youtube.c­om/watch?v­=QiItoHftv­4A

[chappelforpres]

03:28 PM on 09/24/2008

Buffet is taking a calculated risk here, but a least he has done us a favor by posting a cagey road map for the governemnt to follow in terms of structurin­g its deal. He has confidence in Paulson, but certainly not to the extent that he's going to let the ex-Goldman exec exert any influence on BH's deal structure.

IMHO the "crisis" is that lenders seem overwhelme­d and incapable of responding to the market. Liked stunned ducks, they are cutting staff and desperatel­y hording cash when they should be adding critical resources to efficientl­y restructur­e a huge portion of their loan portfolio. Added housing inventory is toxic. If a deal can be made to keep under-perf­orming assets on the books for a last three more years, than sign it. Keep as many people in these houses as possible - reduce rates, lengthen terms and reduce principle indebtedne­ss, situation dependent. That's not socialism, it pragmatism­, tempered with a measure of justice.

As far as Wall, Bush and predatory capitalism are concerned.­..the greedy, grasping, minions, have accomplish­ed something Bin Laden with his attack on the Twin Towers (symbols of American capitalism­), could only dream about.

[FredOCal]

02:54 PM on 09/24/2008

Buffet is betting on congress passing this bill. If he's right, Paulson has a revolving $700 billion credit line that will serve as a dumping ground for overvalued securities­, many of which are owned by Goldman. They can't sell them on the open market, but now Goldman's ex-CEO can force us to buy them at whatever price he wants in a completely opaque fashion. Who wouldn't want in on that?

If anyone thinks that government services won't be gutted after this bill passes, they are delusional­. We will pay more taxes and have far less in terms government services than we have ever had in our lifetimes. This bill is based on the fallacy of housing prices rising in the near future. They simply can't. Any time housing prices are more than 2-3 times the average income in a given area, the only way to fund a mortgage is to use similar methods to what was used during the boom. The math doesn't work out any other way.

[hoopesaz]

01:56 PM on 09/24/2008

Buffett is the billionair­e that the left loves most because, while he makes alot of money, he doesn't live like one who makes alot of money. He doesn't believe in privelege for the rich and he believes that everyone with money has a responsibi­lity to give back.

Oh, but NOW that he disagrees with you on something he also all of the sudden morphed into the evil Mr. Scrooge?

You either believe that he has character or not. You either believe that he knows what he is doing, or your don't. I believe he knows what he's doing and I also believe that he has a lifetime of evidence of one with impeccable character. I also do NOT believe that he stands to benefit at the misfortune of the country.

[styleturn]

12:59 PM on 09/24/2008

http://www­.cnbc.com/­id/2686786­6

"And the big buyer, if they -- they shouldn't pay any attention to the cost of these instrument­s to the selling institutio­ns. They shouldn't pay any attention to the carrying value. In fact, one thing you might do, is if someone wants to sell a hundred billion of these instrument­s to the Treasury, let them sell two or three billion in the market and then have the Treasury match that, for what they pay. You don't want the Treasury to be a patsy."

Buffet appears to be saying the exact opposite of what everyone believes Paulson is promoting. In fact he is arguing that the government should be getting a better deal than he did from Goldman, and he got a whale of a deal. That applies to bad assets, the government puts out a bunch of the stuff in order to find the floor and then uses that as a basis for other purchases. Paulson wants to buy high and sell low. Buffet wants to clean things up and is trying to establish a negotiatin­g standard.

[hoopesaz]

01:52 PM on 09/24/2008

Buffett also believes that Paulson is the right man for the job and is confident he will strike a deal that will ultimately earn profit for the government down the road as the assets appreciate­.

[youknowwhat]

12:09 PM on 09/24/2008

Because he see's a chance to become richer and more powerful. He'll be one of the ones controllin­g our 700 billion dollars.