Warren Buffet Does It Again

The Oracle of Omaha, Warren Buffet, once again puts his money at risk while actually taking less risk than it seems in a scenario that he has a history of doing for quite sometime now. If the US financial crisis is stemmed at all, he is pretty much assured of an outsized investment windfall, one the average person can not even think about with so little risk. So why is that?

And will it be mentioned in the testimony tomorrow by Senators who do not want anyone to profit from the government bailout, that Warren already has? He gets paid interest of ten percent, and if Goldman want to pay him off, they have to pay a 10% penalty for that prepayment. Warren also got the right to buy up to 7% of the company common stock at $115 per share on day the price closed trading at $125 per share. Goldman also has to raise another 2.5 Billion from someone else, whose new investment is in front of Warrens investment, as is all of the common stock. Meaning the common shares go to zero in bankruptcy and Warren’s preferred perpetual exposure has preferred rights in the courts when the shareholders get nothing in a worst case scenario. He can buy those shares anytime he wants. Call your broker and see what you can get from Goldman Sachs.

So, again, why is that?

First of all, he has a skill most of us do not have, leading to a well earned reputation for making mostly very astutely negotiated investments, taking advantage of times like these gleefully while successfully minimizing the inevitable poor returns and losses all investors suffer at some point. The stock and importantly the balance sheet of the Berkshire Hathaway company that he manages and owns a big chunk of, is strong and liquid and has an unabashed unlimited profit objective.

He invested 5 Billion into Goldman Sachs which even as one of the best players on the old Wall Street, which technically disappeared last week, still needed to seek the shelter of the government by quickly “converting” to a bank holding company. Even they are not bigger than the market and it’s excesses they helped create. BTW, my holding company application is still waiting to be opened at the front desk of the Fed.

Secondly, although he is already perhaps the richest American, he nonetheless insisted on better terms than you or I could ever get. And mind you, it was all for the benefit of his shareholders, not the American taxpayer.

He is a harsh critic of Bush and also McCain, saying he (Buffet) would need a “lobotomy” in order to change his support to McCain.

Despite his wealth and access, he was not able to get his favorite candidate, Hillary Clinton nominated by the Democrats he openly supports regularly. He now supports Barack Obama and no doubt will be an unofficial advisor to an Obama administration.

Congratulations Warren.

And thanks for your continued support of American capitalism rather than taking your money out of the market as you could have… you greedy guy you.

NOTE: After his death, about 83% of his estate will go to The Bill & Melinda Gates Foundation presumably bypassing some of the normal estate taxes he supports, in complex transactions most of us do not understand and which are beyond our reach. Nevertheless, he is a man I admire very much and who has already supported many non political causes and reportedly taken every tax deduction allowable.