More Food for thought- as Warren Buffet returns to wall street

By
Real Estate Mortgage Broker

TUCKING IN

Sep 25th 2008

 Warren Buffett's return to Wall Street raises hopes

IN 1998 Goldman Sachs was looking for help in bailing out Long-Term Capital Management, a sickly hedge fund to which it was exposed. It sought a contribution from Warren Buffett. But the Oracle of Omaha was on holiday (with Bill Gates, of course) and as the deadline approached his boat drifted out of mobile-phone range. This time there were no communication problems. Mr Buffett has answered Goldman's latest call with a $5 billion infusion from his cash pile.

Goldman could not have wished for a more credible vote of confidence, albeit at a steep price: Mr Buffett's holding company will receive $500m a year in dividend payments on its preferred stock. Mr Buffett knows from experience that it pays to negotiate hard with investment bankers. His only previous foray on Wall Street, a $700m bet on Salomon Brothers, went badly awry, though it eventually turned a profit.

He is, he says, betting "on brains"--and, implicitly, that Goldman's profits will not be hit too hard by becoming a regulated bank. Some also see the move as a vote of confidence in financial firms, which Mr Buffett has thus far avoided in this crisis, preferring the relative calm of energy, railroads and chewing gum.

That may be hoping for too much. Mr Buffett made clear that he considers Goldman's management a cut above. And he drew a contrast between its cautious valuation of illiquid assets and more "fanciful"

marks at some other firms. Moreover, for all his hardheadedness he has a soft spot for Goldman, having befriended its one-time boss, Sidney Weinberg, as a young man and stayed close to the firm ever since

In any case, Mr Buffett's skill lies more in picking undervalued stocks with strong brands than in timing market bottoms--indeed, he bought into Salomon only weeks before the 1987 crash. Even when it comes to individual holdings, he is not flawless. He held Moody's, a rating agency, for too long.

Still, it is heartening that such a shrewd investor is beginning to spy opportunities in the rubble of a crisis he has dubbed "an economic Pearl Harbour." He confirmed this week what must already have been

obvious: that he has been approached by almost every big financial institution in recent months. After Goldman, he can expect the phone to ring off the hook

close

This entry hasn't been re-blogged:

Re-Blogged By Re-Blogged At
Spam prevention

Accessibility option: listen to a question and answer it!

To submit the form,
drag the eye to the circle on the side.

Type below the answer to what you hear. Numbers or words, lowercase:

Comments 2 New Comment

Anonymous
Post a Comment
Spam prevention

Accessibility option: listen to a question and answer it!

To submit the form,
drag the key to the circle on the side.

Type below the answer to what you hear. Numbers or words, lowercase:

Rainer
47,935
Nicole Weidauer
Keller Williams Greater Seattle

Thanks, Kurt, for sharing. I know I trust Mr. Buffet's advice. If he says things are going to be okay, then I will take it from him. Lord, please let him be right!

Best of luck, Nicole Weidauer

The Egerer & Weidauer Team, Keller Williams Realty North Seattle

September 29, 2008 11:33 AM
Rainmaker
270,395
Ross Quintana
Spokane Washington Real Estate - 509-362-1966
TQ Real Estate Coaching

Spokane Wa Real Estate Expert Well, I think it comes more down to money than anything else, when things go wrong, investors can make money on the clean up.

September 29, 2008 11:34 AM
Anonymous
Post a Comment
Spam prevention

Accessibility option: listen to a question and answer it!

To submit the form,
drag the key to the circle on the side.

Type below the answer to what you hear. Numbers or words, lowercase:

Rainer
35,225

Sunny Group Movement Mortgage

Ask me a question
*
*
*
Spam prevention

Accessibility option: listen to a question and answer it!

To submit the form,
drag the computer to the circle on the side.

Type below the answer to what you hear. Numbers or words, lowercase:

Additional Information

Share on Facebook