Warren Buffett Laughs at Your Puny Downturn

September 23, 2008

Warren Buffett is investing at least $5 billion in Goldman Sachs, which Henry Blodgett thinks is kind of a big deal:

Warren Buffett’s $5 billion investment in Goldman Sachs (GS) could change everything.

Yes, Warren got a sweetheart deal–a preferred stock yielding 10% and a warrant to buy $5 billion of common stock at $115 (8% below the close). But the fact that he had the confidence to pull the trigger on a $5 billion investment in a company whose very existence seemed threatened last week could turn the whole market around (temporarily).

As Blodgett goes on to note, this doesn’t do much for Paulson and Bernanke’s credibility. This isn’t to say that a massive bailout isn’t still necessary – I have no opinion on this (although I think it would be good form on Paulson’s part to revise his request to $695 billion). But the already dubious claim that congress needed to do exactly what they asked immediately before every source of capital simultaneously dries up is rendered pretty absurd by one of the most prominent at-risk firms getting $5 billion from a guy with a track  record of spending his money wisely.

Paulson’s chances of getting exactly what he wanted – or getting anything quite as quickly as he wanted – were already pretty negligible. This should shift the timing and the nature of any bailout away from what Bush and company were hoping for.

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One Response to “Warren Buffett Laughs at Your Puny Downturn”

  1. Allen Taylor Says:

    Nice writing. You are on my RSS reader now so I can read more from you down the road.

    Allen Taylor


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