Berkshire Profit on Goldman Sachs Passes $2 Billion

A

ASusilovic

uly 23 (Bloomberg) -- Warren Buffett’s option to buy shares of Goldman Sachs Group Inc., part of an agreement reached at the depths of the credit crisis, has earned a profit on paper of about $2 billion, a return of more than 40 percent.

Goldman Sachs today passed $162 in New York trading for the first time since rival Lehman Brothers Holdings Inc. collapsed in September. Buffett’s Omaha, Nebraska-based Berkshire Hathaway Inc. has warrants to buy $5 billion of Goldman common stock for $115 a share any time in the next four years.

“It must feel good to be Warren Buffett,” said Gerald Martin, a finance professor at American University’s Kogod School of Business in Washington, who has studied the billionaire’s investing history. “That number just flies in the face of people who like to say he’s lost a step.”

The difference between the strike price and the share value translates into a $2.09 billion paper profit for Berkshire. The U.S. government got a 23 percent annualized return for its investment in the firm after an agreement yesterday by the bank to repay $1.1 billion to settle warrants.

Goldman Sachs turned to Buffett in September, agreeing to sell $5 billion in preferred shares paying 10 percent interest, after Lehman’s bankruptcy and the emergency takeover of Merrill Lynch & Co. by Bank of America Corp. Amid the crisis, Goldman earned an explicit endorsement from Buffett, the so-called “Oracle of Omaha” who is celebrated for his investing savvy.

The warrants, Buffett said, were tacked on to give him an incentive to sell some of Berkshire’s existing stock holdings to fund the deal at a time when he had an increasing number of investment opportunities as the economy froze and markets plummeted.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aTeyHubL.YKE

I just shorted Goldman today, but hey, congrats Warren B. Good trade ! :D :D :D
 
Quote from Kassz007:

Remember the threads people were starting when that investment was under water? Laughing at Buffett? Who's laughing now...
More...

I remember them well ! Also the headlines Warren ending in Armageddon with Berkshire.
 
Quote from Kassz007:

Remember the threads people were starting when that investment was under water? Laughing at Buffett? Who's laughing now...
More...

Stick around, Buffett won't sell. GS could go to 160 brazillian or file bk next week, don't matter.
 
It's funny because Buffett appears as a sweet, soft spoken grandfather... but he's actually one of the most shrwed and well connected individuals in the game.

Regardless of what the general public thinks about him, Buffett is, and always was one of DA BOYZ. Don't kid yourself by believing otherwise.
 
Quote from Kassz007:

Remember the threads people were starting when that investment was under water? Laughing at Buffett? Who's laughing now...
More...

Exactly......and the weird part was that he wasn't exactly underwater. The warrants were given for free...Buffett was after the 10% interest rate
 
Quote from JAP:

It's funny because Buffett appears as a sweet, soft spoken grandfather... but he's actually one of the most shrwed and well connected individuals in the game.

Regardless of what the general public thinks about him, Buffett is, and always was one of DA BOYZ. Don't kid yourself by believing otherwise.
More...

Obviously. You don't become the world's richest man without having a connection or two. But the man is a genious nonetheless. Who else had the balls to make that kind of investment in an American bank at that point in time? He is infinitely confident in his abilities and it shows.
 
Who's going to deny Buffet's trade would have been wiped out had he not gotten the government to shove 180 billion down AIGs broken throat?

It's all horseshit.
 
Quote from JAP:

It's funny because Buffett appears as a sweet, soft spoken grandfather... but he's actually one of the most shrwed and well connected individuals in the game.

Regardless of what the general public thinks about him, Buffett is, and always was one of DA BOYZ. Don't kid yourself by believing otherwise.
More...

That was what all the criticism was all about, not the fact that he was under water or not.

Many pundits argued bailing out failed companies at the taxpayers' expense was not the foundation upon which the United States was once founded on and free market economics was and still should be the preferable route for US policy makers to secure long term chance for prosperity for US citizens.

Buffet chose to part from that fundamental view.

Safe them (and save me)

Hence why he has gotten his part of the blame from some corners during the aftermath of the market crash of 08 in my view.

Ofcourse others argue being well conected is part of the game so bravo to him.

I guess it is a matter of ideology and taste.
 
Quote from Kassz007:

Obviously. You don't become the world's richest man without having a connection or two. But the man is a genious nonetheless. Who else had the balls to make that kind of investment in an American bank at that point in time? He is infinitely confident in his abilities and it shows.
More...

Noone else had a chance to grab the investment he got offered. It's not like it got offered to the public or other institutional investors. It was a very sweet deal.

Now consider that Goldman got bailed out by the taxpayers against the people's wishes. Meanwhile Buffet was crying with full force for bailouts of Wall Street.

Nothing genius about it, just a bunch of cronies scratching each other's backs.
 
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