What Planet is Warren Buffet On?

The Oracle of Omana Warren Buffet
The Oracle of Omana Warren Buffet

Recently Warren Buffet has been appearing on the national scene, moreso than before.  He is now the darling of both the press and Washington.

He figured prominently during the bailout talks when he invested $5 billion in Goldman Sachs.  There was a proverbial gasp heard

The Warren Buffet Way
The Warren Buffet Way Click Here

round the investing nation at the time because everyone knew the financials were in trouble, in general, banking in specific.  But, let’s look at his deal.  At the time the stock seemed like a steal.  In fact, many thought he was taking advantage of the venerable bank.  For Berkshire Hathaway, it bought a US$5 billion equity stake in the dominant player  of the industry, and for its money receives a guaranteed dividend of 10 per cent a year on its perpetual preferred shares.  On top of that Goldman’s gave Berkshire 5 year warrants which give Berkshire the right to buy 43.5 million common shares of Goldman Sachs at a strike price of US$115 at any time before 2013.  However, banking stocks tanked, the crisis deepened, Goldman shares hit a low of US$47.41 on November 21st. After writing an op-ed piece for the New York Times on why he buys America, Mr. Buffet came in for criticism.

However, we are talking about Warren Buffet.  I’m often reminded of the movie “Wall Street” when i think of him.  Anything he purchases will sooner or later gather stragglers, who mistrust their own investment skills.  Goldman shares have doubled since November, closing at $111.93 last Monday.

“The Investment bank has had to change its business model, and reduce the amount of leverage it carries on its balance sheet, but some business areas are positively on fire with flow or client driven trading benefiting from wide spreads being charged and really bringing in the moolah.” [what a shocker, that actually works]

Benjamin Graham Click Here
Benjamin Graham Click Here

For every silver lining however there is a cloud.  The GE deal Berkshire got, with those same warrants, don’t look so delicious.  The warrants were for an aggregate cost of $3 billion @ $22.25 per share.  Ge closed at $10.43.  Yeah, not so much.

Warren Buffet Click Here
Warren Buffet Click Here

Which brings me to the next point.  Disciples of the value strategy, like Berkshire Hathaway’s Warren Buffett, focus on the long-term intrinsic value of a company, hoping to buy shares in good companies at reasonable prices.  For financial stocks—some of which haven’t or won’t survive the crisis—it’s nearly impossible to identify the long-term value, whether through profits, cash flow, or other measures.

But what are companies worth these days?  What is the value of a company that accepts TARP money?  Hard isn’t the proper word for what investors are up against when trying to figure this out, impossible is more like it.  And these atrocious bailouts and stimulus packages flowing out of Washington and the Federal Reserve [secretly, psssst hey AIG, come here in the alley i got some more money for ya] are only hurting the situation.  In the mean time Buffet is seen publicly on T.V. talking about he praises Obama for his efforts and he’s optimistic for the long term.  Was that on a Hallmark card Warren?  “Get Well Soon America” from your buddy Warren.

Bull Moves by Peter Schiff Click Here
Bull Moves by Peter Schiff Click Here

He’s lost it.  In fact if you go back and look at Berkshire Hathaway’s performance versus the dow over the past 20 years, it has underperformed. GASP!!! Not the sage of Omaha!!!  Oh brother.  Yes he’s lost it.  Hell, he got lucky in the first place.  He never “had” it.  A study was done once, some university economists [this is no joke, this is serious research here] wallpapered their class with the Wall Street Journal [yay free plug WSJ] blind folded several students, gave them darts and had them throw them.  They picked the stocks they landed on and invested.  [don’t try this at home kids, these guys have PhDs]  Every single student’s stocks out performed the DOW.  GASP!!! [and i would have gotten away with it if it weren’t for you meddling kids]  Apparently they did this study for years.  They concluded that the big performer investors are simply lucky and actually have no “magical skills” to predict good stocks.  [ha what do those snotty nosed professors of economics know]

So Warren [we’re on a first name basis] says he’s optimistic for the economy and Obama’s the bee’s knees.  Wellllllllll Peter Schiff, Ron Paul, Lou

Crash Proof by Peter Schiff Click Here
Crash Proof by Peter Schiff Click Here

Rockwell, Judge Napolitano, Glen Beck [I had to mention him so people who Google his name read this blog teehee], all say the exact opposite.  And, I agree with them [but who listens to me *sigh* I need a hug].  Can vultures pick up the pieces Warren Buffet leaves behind?  Sure, mull over the carcasses of the straggler investors who follow him blindly.  But, be wary and trust your own learning.  Read Adam Smith.  Be an “Austrian” school of economics disciple.  These Keynesian economist are the darlings of Washington right now, since they chant spend, spend, spend.

Jim Rogers
Jim Rogers

For the rest of us, invest in gold.  Buy dividend paying stocks OVERSEAS.  Stay away from cash and the dollar.  When this hyper-inflation hits, [oooooh boy don’t you dare argue with me there] and it will hit, all of your cash is going to go up in smoke.

How many billionaires…. were removed off the Forbes Billionaire list.

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shakaama

Ex law school student. I was kicked out for revealing I had a heart actually beating inside. I used to be in a modern dance company. I'm working on my 7 miracles to be proclaimed a saint by the pope. #1 is really hard, but once i get over that hump the other 6 will be a cinch.

One thought on “What Planet is Warren Buffet On?”

  1. Sir/madam

    the picture in question is not a copywritten picture nor is it yours. This is directly from the company that I am affiliated with. If you wish to discuss the legal ramifications of your claim, take that discussion up with them.

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