Tuesday, September 23, 2008

Warren Buffet Finally Decides to Start Buying Distressed Financials

We've been waiting to see two things in the financial space - (a) Warren Buffet beginning to buy distressed franchises showing he finally sees value and (b) large insider buying by CEOs aka those in the know.

Well we finally got Warren to buy a distressed financial... what piece of old gum stuck to the bottom of our shoes did he buy? AIG (AIG) in the $4s? Washington Mutual (WM) in the $3s? Perhaps Wachovia (WB)??

Oh... *that* distressed financial. So now he not only gets a 'special' share with 10% Warren Buffet dividend (must be nice) - he also now owns the government via Goldman Sachs (GS). He's good. He's really good (but darn he gets some seriously great terms on his deals). The stock is up strongly in afterhours and within seconds this becomes a "winning position" for Buffet. Morgan Stanley (MS) up even more.

So effectively Goldman has created a near monopoly, wiping out nearly all competitors while keeping a few weakened ones around so as not to feel any anti-trust pressure (Intel model), has their men running Merrill, Wachovia, and the new most powerful position in the world - Secretary of US Treasury, have the credit lines of the Federal Reserve behind them, has the SEC protecting them, has the US government looking to buy their toxic assets, and now has Buffet backing them. They even fooled us with the "hey our stock is falling too, we're no different than anyone else" scenario last week.

They love it when a plan comes together. Mad respect to the Masters of the Universe.
  • Goldman Sachs Group Inc (NYSE:GS - News) on Tuesday said it will receive a $5 billion investment from Warren Buffett's Berkshire Hathaway Inc (NYSE:BRK-A - News; NYSE:BRK-B - News).
  • Berkshire will buy $5 billion of perpetual preferred stock that carries a 10 percent dividend. It also will receive warrants to buy $5 billion of common stock at $115 per share, exercisable within five years.
  • Goldman also said it plans to sell at least $2.5 billion of common stock.
  • Shares of Goldman rose $12.17, or 9.7 percent, to $137.22 in after-hours trading following the announcement.
Need to get long Goldman Sachs again

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