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Buffet Defends GS

Sat May 1, 2010

Warren Buffet defended Goldman Sachs to his BRK investors at the annual meeting in Omaha. 

Readers will recall that Buffet invested $5 B in GS preferred in 2008 with a whopping 10% dividend, as Warren puts it, $500 M a year, $15 a second.  Reading the article note this is a convertible preferred in that he has options to buy lots of GS stock, his strike price is $115. So with GS common falling, it is in Warren's best interest to ride to the rescue to bolster the price of stock he has options to buy. Note that Warren did not recuse his opinion due to conflict of interest…..

GS common has been falling over the fallout from accusations that GS sells one thing and then bets against it versus its own clients.  Gee another $30 and Warren's profit is kaput in the common!

Warren like Goldman, is his own best client…

Picture 1 

Charlie Munger is Buffet's long time confidant, Munger added

Though Mr. Buffett said the S.E.C. lawsuit had not yet negatively influenced his opinion of Goldman, he said he would revise his thinking if new evidence came to light.

Mr. Buffett added that Goldman is a longtime adviser that “helped build Berkshire Hathaway” by selling them businesses for more than 50 years.

Mr. Buffett’s longtime lieutenant, Charles Munger, tempered his boss’s kind words. Mr. Munger, Berkshire’s vice chairman, said that there is a difference between behaving legally and behaving ethically — and that a business should not simply follow the former. » 

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6 responses to “Buffet Defends GS”

  1. Juan Avatar
    Juan

    If you were an investor in Goldman Sachs, what do you think?
    Yet, and by investing in Goldman, and publicly talking good about this investment bank, including emphasizing on its so called “integrity”, does this implies that Buffett supports this kind of business?
    “Perhaps”…I don’t know?
    Yet, I’m pretty sure that in 5, 10, or 25 years’ from now, he will have made a profit on his investment in Goldman.

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  2. Dennis Elam Avatar
    Dennis Elam

    I strongly suspect that buffet realizes what looked like a great investment two years ago could evaporate. That is what happened to Arthur Andersen when it lost the trust of its clients. That is what happened to Drexel once the Feds really took aim at it. Now the Feds are taking aim at Goldman. If the partners decide the environment is just too hot they can certainly move elsewhere, which is what the partners of Arthur Andersen did. That would leave Buffet with zilch, and financial egg on his face.

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  3. Joy Avatar
    Joy

    With Warren Buffet defending Goldman Sachs make you wonder how much credibility he has.

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  4. Dennis Elam Avatar
    Dennis Elam

    Warren has options on GS stock
    you can judge for yourself his level of credibility

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  5. Lauren Officer Avatar
    Lauren Officer

    I defenitly think that his defense to GS was not the ethical answer when we all know he is a smart man and he knows that they are at fault and in trouble. On the other hand, he would be a fool to publicly redicule GS when he has so much invested and his opinion could possible cause more turbulence, and in turn hurt his pocketbook.

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  6. Dennis Elam Avatar
    Dennis Elam

    In this case his investors know better, I suspect again that GS goes the way of Arthur Andersen, one bet that will not pay off for Warren.

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