Warren Buffett

Financial carnage spreads to GE

Jim Kim — Mon, 13 Oct 2008 13:36:59 -0400

We don't speak much of GE here, but the financial crisis has really hurt GE Financial. Fortune notes that the world still tends to think of GE as a diversified industrial company, but the fact is that "for years, about half of GE's prodigious profits have come from General Electric Capital, a 100 percent-owned affiliate." It has "ventured into practically every kind of financial service," from making car loans to investing in commercial real estate in Florida to credit cards. For the longest time, it seemed smart, up until it was forced to turn to Warren Buffett for an emergency injection of $3 billion. This is an eye-catching article that clarifies just how seductive the financial services industry can be, and how it can drag so many good companies down.

For more:
- here's the article

Related Article:
Warren Buffett rides to Goldman Sachs' rescue

Star analyst touts three stocks

Jim Kim — Thu, 09 Oct 2008 14:27:57 -0400

Some would argue that you'd be a fool to buy bank stocks these days, but then again Meredith Whitney is no fool and she recommends the preferred shares of JPMorgan Chase, Bank of America and Wells Fargo, reports Fortune. She's got a point. JPMorgan Chase and Wells Fargo especially have fared as well, as could be expected in the credit crunch. No one thinks they're about to tank. And yields are looking very good, having soared to the 8 or 9 percent level. Of course Warren Buffett got 10 percent on his Goldman Sachs preferred shares, but you're not him. But then again, yields could actually rise a bit more as the uncertainty continues.

For more:
- here's the article

Related Article:
Does Meredith Whitney have a new target?

Soros offers an alternative rescue plan

Jim Kim — Wed, 01 Oct 2008 15:03:30 -0400

George Soros, once known as the Man Who Broke the Bank of England, was in Washington to make clear that he doesn't think much of the bailout plan that Congress just rejected. Rather than an RTC-like plan, he suggested an alternative that would recapitalize banks in similar fashion using preferred shares (paying about 5 percent) and warrants. This is similar to the way Warren Buffett invested in Goldman Sachs, only if private money were not available would public funds be used. Banks would be able to leverage--not a great word here--that equity immediately. Soros coupled that aid proposal with direct aid for struggling individual mortgage holders. Among the benefits: the government would not have to analyze thousands of securities in an effort to find the right price--a tough task. We've noted that pricing issues loom as the biggest obstacle to success.

For more:
- here's the article from TheStreet.com

Bailout rejection a wrench for Buffett and Pandit

Jim Kim — Tue, 30 Sep 2008 17:40:10 -0400

Warren Buffett made it known that his $5 billion wager on Goldman Sachs assumed that the government would take some sort of bailout action. Likewise, Citigroup's deal for Wachovia would have looked a lot better if the bailout had been approved. Of course, the FDIC will assume some of the Wachovia portfolio risk. Still, Citigroup now adds about $122 billion more in option ARMs. All in all, the chances are good these stories will have happy endings. At some point, you have to think that the politicians will be able to agree on a plan. So relief is coming, one way or another. But there is still some uncertainty. A redrawn plan will likely be superior to the previous one--from a retail point of view. How favorable it will be to Buffett and Citigroup remains to be seen.

For more:
- here's a Financial Times item

Goldman wants to buy up to $50 billion in bank assets

Jim Kim — Mon, 29 Sep 2008 13:07:20 -0400

Goldman Sachs loves playing the role of white knight. It now say it is willing to commit up to $50 billion to buy bank assets. Goldman plans to talk to regulators to identify appropriate opportunities, according to the Financial Times. Goldman chief financial officer David Viniar maintains the bank can be proactive because it has already been shedding problem assets. For example, Goldman owns a mere $8 billion in commercial mortgage-backed securities. It could likely sell those for a gain. It has cut its exposure to CLOs as well, from $52 to $8 billion. On top of that, it is receiving a $10 billion injection of capital, half of which comes from Warren Buffett. So the gilded bank is apparently well positioned to bulk up with commercial bank assets. And why not? The government is basically willing to strike some good deals for quality buyers.

For more:
- here's the article

Warren Buffett rides to Goldman Sachs' rescue

Jim Kim — Tue, 23 Sep 2008 20:46:58 -0400

Calling Goldman Sachs an "exceptional institution," Warren Buffett announced he had bought $5 billion in Goldman preferred shares (which pay a whopping 10 percent) and warrants to buy potentially another $5 billion in common shares (at $115 each over the next five years). Goldman said it will also raise $2.5 billion in a common offering. This sends a message that Goldman and Morgan (fresh from its deal with Mitsubishi UFJ) are more than viable as commercial banks. Of course, not everyone is going to get the deal Buffett got, but at this point, a surge in the price of Goldman and Morgan would be good news. Everyone expected big capital raises from both banks after they went commercial.

For more:
- here's an article

Buffett bets market will beat hedge funds

Jim Kim — Mon, 09 Jun 2008 21:14:02 -0400

Warren Buffett has placed a wager that the Standard & Poor's 500 will beat hedge funds over the next 10 years, reports Fortune. In what amounts to a proposition bet, Buffet placed his wager against Protégé Partners, a firm that runs funds of hedge funds. Over 10 years, if the S&P 500 beats the average return of five funds of funds, net of all fees and other costs, Buffett will win. The real winner here will be one of two charities. Both Buffett and Protégé Partners put up $320,000. The funds are being held in a zero-coupon bond expected to be worth $1 million in 10 years. The money goes to the charity of the winner's choice. The bet is being administered by the Long Now Foundation, which will oversee similar prop bets for charity. So who's going to win?

For more:
- here's the article

Buffett on hell and the subprime crisis

Tue, 06 May 2008 06:59:56 -0400

Shareholders of Berkshire Hathaway gathered in typically worshipful fashion at their annual meeting. The press loves the event, along with the company's annual report, as a chance to to glean some nuggets of folksy investor wisdom from the sage of Omaha. The meeting is sometimes called the Woodstock of Capitalism. Some of the more interesting comments came in the Q&A with the media. "Capitalism without failure is like Christianity without hell," Buffett said. He and Charles Munger suggested that top banks do not deserve a lot of sympathy, as they are responsible for the mess they created. Buffett noted the system encouraged executives to "paint pretty pictures."

For more:
- here's a wrap up from the Los Angeles Times

ALSO NOTED: Bear Stearns shareholders to vote on JP Morgan offer May 29; UBS to lay off 8,000?; and much more...

Tue, 29 Apr 2008 06:59:50 -0400

Company News:
> BNY Mellon buys rest of BNY Trust Australia. Article
> UBS to lay off 8,000? Article
> Bear Stearns shareholders to vote on JP Morgan Chase offer May 29. Article
> Bank of America analyst: More industry pain ahead. Article
> Deutsche Bank to seek cash for acquisitions? Article
> Bank of America to help Countrywide borrowers. Article
> Visa profits jump 28 percent. Article
> Supreme Court rejects Lehman Brothers appeal in tax case. Article

Industry News:
> Buffett finances Mars deal. Article
> Vacant homes indicator sets new record. Article
> Declining demand for shares of funds of hedge funds. Article
> The downside of preferred shares. Article

Regulatory News:
> More mortgage owners get help. Article
> Fed probes Bank of America-Countrywide deal. Video

And Finally... How to coach an underperformer. Article

Buffett raps Wall Street in latest letter

Tue, 04 Mar 2008 06:59:54 -0500

Warren Buffet's latest letter to shareholders is heavy with criticism of Wall Street. The Sage of Omaha once derided derivatives as financial weapons of mass destruction. The Financial Times notes he now seems to feel vindicated. He borrowed a quote from Wells Fargo CEO John Stumpf about Wall Street inventing "new ways to lose money when the old ways seemed to work just fine." He also had some choice words for the private equity industry. In some ways, these guys have made life tougher for would-be acquirers such as Berkshire Hathaway. Buffett wrote that with Berkshire, "a deal is a deal." Ouch!

For more:
- here's the Financial Times article
- here's the opening of the letter from Warren Buffett to his shareholders

Read more on: Warren Buffet | Wells Fargo | private equity