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The Buffett Goldman Sachs deal and why Buffett is simply amazing!



September 23, 2008 – Comments (5) | RELATED TICKERS: GS , BRK-A , BRK-B


There were a couple of blurbs yesterday on how Morgan Stanley and Goldman Sachs were switching over to be commercial banks, because it just didn't make sense to be investment banks anymore. Well the oracle of Omaha didn't let that one slip buy him!  He knew one thing that the hopheads on TV didn't think about. Commercial Banks can be bought easier! Goldman Sachs with its 50 billion market cap and clean balance sheet suddenly looks good to the few big banks that are looking to acquire assets. Goldman is shopping for cash and what does Buffett negotiate? 5 Billion in P E R P E T U A L L Y   P R E F E R R E D STOCK!!! What does that mean? It means that Buffett gets his before any other stockholder in the worst case scenario. He negotiated a sweet 10% dividend. AND Sweetest of all is he gets to invest 5 Billion more at anytime he wants in the next 5 years @ 115 per share!!!!!


 At the time I'm writing this, Goldman shares are trading at  137.22. If Buffett exercised his warrants at this very minute, he'd make almost a billion dollars or 20% in less than a 24 hour period on just the common stock. When the market opens tomorrow, I fully believe the stock will be trading at 150 at the least. Goldman will get that boost from just the 7.5 billion in additional capital. Once the talking heads on TV start talking about the endorsement by Buffett, it will be like an endorsement from Lebron James for Crocs and Lebron stating that they improve his jumping ability. The 1 thing everybody is looking for in the financial sector is stability and Buffett tracks stability all over the carpet when he comes home.

If a big bank does come a calling, (which I doubt now given the price boost I expect) Buffett walks away with a 50% or more return on his investment in a very short time frame.

If the stock does absolutely nothing for the next 5 years, Buffett could exercise his warrants and still make 20%.

If he waits a few years for the financials to totally recover, he'll probably triple his investment.

The guy is simply amazing! 

5 Comments – Post Your Own

#1) On September 23, 2008 at 8:53 PM, RainierMan (65.91) wrote:

Buffet invests in GS. Ken Heebner is buying financials. They must be seeing something that others are missing. Admittedly Buffet's investment is unique, but still; there must be value there that others are missing, or more would be doing the same thing.

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#2) On September 23, 2008 at 9:03 PM, Lordrobot (91.68) wrote:

With Goldman you want to be careful with the word Market Cap. The common stock represents a mere 12 % of the Goldman partnership. It is the only way the public can play. The remaider ownership is 88% composed of partners, retired partners, and a small but wealthy private sector.

Yes, your post is pretty good because you are right about Buffett's timing. He is a smart guy. Rumor has it that Buffett approached Goldman. There is also a rumor that Gates may following Buffett's signals. Of the 4% shorts that have decided to remain holding their positions, are not likely to sleep very well tonight. If the mutual funds stop bottom selling which they might when they hear the name Buffett, then there will be no hope for their escape. The shorts that have terrorized the markets wiht bold attacks on Morgan and Goldman will find they have a very personal cash liquidity problem very fast and very large.

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#3) On September 23, 2008 at 10:46 PM, LordZ wrote:

The hater in me all the sudden is wanting GS to miserably fail....

Its truly amazing what being the richest man in the world can buy you....

Its like walking into the best whore houses and being able to pull the guys off the best talent and let everyone know that you get first dibbs and you get to eat before anyone else and maybe if theres any left over the rest can get and fight over the scraps.

Amazing my A$$, he just feeds off other peoples weaknesses.

How much will be enough ???

Personally he can have that whore...

not worth fighting over or for...


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#4) On September 23, 2008 at 10:52 PM, LordZ wrote:

And why does Berkshire deserve to be on the don't short list ???



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#5) On September 25, 2008 at 10:24 AM, oldfool37 (< 20) wrote:

Feeds on other people's weaknesses?  If my memory serves, he was born without money.  He is just smarter than the average bear.  If that ticks you off, well......just makes me want to grab some more Berkshire stock.

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