Posts Tagged ‘Warren Buffett’

Buffett Defends the Indefensible: Goldman Sachs and Rating Agencies; Goldman’s Sweetheart Deal With Buffett Revisited

Buffett Defends the Indefensible: Goldman Sachs and Rating Agencies; Goldman’s Sweetheart Deal With Buffett Revisited

Maria Shriver's 2008 Women's Conference

Courtesy of Mish

In the midst of the stock market crash, Warren Buffett got a great deal on Goldman Sachs preferreds. Those preferreds are making him $15 a second.

I do not fault Buffett one second for taking that deal. It seemed like a great deal at the time, and it was. The problem is, it’s important to distinguish between a deal good for his shareholders, and the integrity of Goldman Sachs.

Sadly, Warren Buffett is now caught in no man’s land, unable or unwilling to see the difference.

With that backdrop, please consider Buffett strongly defends Goldman; Berkshire net up.

Speaking at Berkshire’s annual meeting, Buffett also said Berkshire swung to a $3.63 billion first-quarter profit, compared with a year-earlier $1.53 billion loss, helped by an improving economy and gains from investments and derivatives.

Buffett said he did not hold against Goldman the U.S. Securities and Exchange Commission civil fraud lawsuit alleging the bank hid from investors that securities underlying a risky debt transaction were chosen by Paulson & Co, a hedge fund firm that was betting they would lose value.

News that investigators opened a criminal probe into Goldman has led to increased speculation about Blankfein’s job security, but Buffett expressed strong support.

Asked who should run Goldman if Blankfein were replaced, Buffett said: "If Lloyd had a twin brother, I would vote for him. I have never given that a thought."

The $5 billion investment consists of preferred shares that throw off $500 million in annual dividends, plus warrants to buy an equal amount of common stock. Goldman can buy back, or "call," the preferreds at a premium.

GOLDMAN, DERIVATIVES

"We love the investment," Buffett said. "Our preferreds are paying $15 a second, so as we sit here, ‘Tick, tick, tick, tick,’ that’s $15 every second," he said.

Buffett added that the SEC lawsuit was not a serious enough event to raise reputational issues that would call into question the Berkshire investment.

That last sentence is complete nonsense at best. At worst it is a blatant lie.

Goldman’s reputation most assuredly has been called into question by the SEC. Moreover, Janet Tavakoli calls it into question every day of the week. So do many others. Arguably so did the the market, judging from its reaction.…
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10 Things You Need To Know That Are Going On This Weekend

SPECIAL EDITION: 10 Things You Need To Know That Are Going On This Weekend

Courtesy of Joe Weisenthal, at Clusterstock 

It’s a Saturday, but it certainly doesn’t feel like it, because there’s a heck of a lot going on. 

Here’s what you need to be paying attention to this May Day.

  • Greece/IMF/EU talks continue. According to Greek government officials, some kind of announcement may be made today. The market is hoping to hear something that’s orders of magnitude stronger than any bailout announcement we’ve gotten so far, or otherwise the feeling will be that it can and will fall through again.
  • Of course, there are fresh violent, anti-austerity protests going on today in Athens. The fact that it’s May Day, a day for celebrating anti-capitalism only adds to the tension.
  • New reports suggest the criminal probe into Goldman Sachs is not just a perfunctory follow-on to the SEC charges, but rather a truly separate thing that’s wider than Abacus, and that started before the SEC’s investigation. HUGE.
  • With just five days before the election, UK’s The Guardian has endorsed the Liberal Democrats, the country’s biggest third party. Its leader, Nick Clegg, has surged thanks to a string of strong debate performances, Gordon Brown’s disastrous campaigning, and a lingering sense of unease with the conservatives.


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    Here Come The Hypocrites! (Berkshire)

    Here Come The Hypocrites! (Berkshire)

    Courtesy of Karl Denninger at The Market Ticker 

    That didn’t take long…

    WASHINGTON—Democrats took a step toward their goal of overhauling financial regulation, reaching a tentative deal to set restrictions on trading in exotic financial instruments known as derivatives.

    Among the considerations still in the balance: A big provision being sought by Warren Buffett in recent weeks. A key Senate committee had changed its proposed overhaul of derivatives regulation after lobbying by Mr. Buffett’s Berkshire Hathaway Inc., potentially helping the famed investor avoid a financial hit, congressional aides say.

    I thought these were weapons of financial mass destruction Warren?

    What’s the problem?  You don’t want to be forced to recognize the economic and accounting reality of your transactions?  I don’t see why that should be a problem.

    Posting margin on underwater positions is a reality for everyone who trades on margin – and you do a lot of it.  There’s no reason why anyone – you included – should not have to put forward margin – in cash – just like everyone else.

    Yeah, I know, Berkshire is "Strong".  So what?  That’s not material to the point at hand, which is that when you are short a "PUT", which is effectively what you are, and the position is underwater, you should be required to post margin!

    Hot globe exploding

    Reliance on "future economic strength" to avoid this requirement is a big part of why the system nearly blew up.  You were a part of it writing those contracts, and you now want to be exempted from safety and soundness requirements on something you identified – in public – as a dangerous practice.
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    Surprise! and Something Weird is Going On

    Something Weird Is Going On With The Financials And Berkshire Hathaway

    Courtesy of Joe Weisenthal at Clusterstock 

    The big story of the day in the world of financial stocks is that they’re all getting hammered, and the idea is that it might have something to do with the fact that strong derivatives reform seems to be coming down the pike.

    Now there was a report earlier in the day that perhaps Berkshire Hathaway might somehow get a fat exemption, but now according to WSJ that’s not the case. The Democrats have killed that provision.

    So you’d think that Berkshire might be getting pelted, but it’s not.

    chartIt’s actually up about 0.4%.

    That’s not a huge move, except in comparison to other financials, in which case it’s significant?

    So what’s going on?

    The markets are probably figuring that the hit to Berkshire will be one-timey in nature — basically that it will cause the company to post collateral, but that derivatives aren’t central to how it makes money.

    With the financial firms getting whacked, strong regulations may go at the heart of what they do, and actually hurt future profitability, thus the falling shares and blowout in CDS.

     

    Previously today:

    Surprise! Buffett Set To Get A Big Fat Gift In Financial Regulation Bill

    Courtesy of Joe Weisenthal 

    Warren BuffettBerkshire Hathaway (BRK) CEO Warren Buffett has generally maintained a sterling reputation (as far as financiers go), but longtime observers know that he’s as good as any at taking advantage of public policy to suit his needs.

    (Ever wondered why he loves the estate tax so…
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    Goldman Sachs Charged With Fraud: Who Could Have Guessed? Part III

    Goldman Sachs Charged With Fraud: Who Could Have Guessed? Part III 
    The firm’s history suggests its vulnerability in periods of negative social mood.

    By Elliott Wave International

    For the full GS/Fraud article, parts I-III, click here.>>

    In the November 2009 issue of Elliott Wave International’s monthly Elliott Wave Financial Forecast, co-editors Steven Hochberg and Peter Kendall published a careful study of Goldman Sachs history — and made a sobering forecast for its future.  Here is our special report, Part III. 

    Special Section: A Flickering Financial Star, Part III

    With the market’s downtrend recently in abeyance, these transgressions failed to capture the imagination of the public or the scrutiny of law enforcement. But the extreme recriminatory power of the next leg down in social mood suggests that Goldman’s dealings will become a lighting rod for public discontent.

    In January 2008, Elliott Wave Financial Forecast noted that Goldman’s success relative to the rest of Wall Street pointed “to the eventual appearance of a much larger public relations problem in the future. In the negative-mood times that accompany bear markets, conflict of interest charges will come pouring out.” The recent revelations about Paulson’s and Friedman’s actions are exactly that to which we were referring. Additional claims against Goldman — including front-running its clients and profiting from inside information — are already too numerous to mention. As the bear market intensifies, the firm will attract scrutiny as easily as it brushed it off in the mid-2000s.

    Based strictly on the form of its advance, a July 2007 issue of The Short Term Update called for a peak in Goldman shares at $234. Goldman managed one more new high to $250 in October 2007; it then fell 81 percent to a low of $47 in November 2008. The stock market’s wave 2 rise brought Goldman back to $193 on October 14. Its affinity for marching in lock-step with the DJIA strongly suggests that Goldman will decline to below its November 2008 low.

    Another key socionomic trait is for the most successful recipients of bull-market goodwill to be singled out for special treatment in the ensuing decline. Even fellow financiers are taking aim. In a not-so-veiled reference to Goldman, one Wall Street titan said that big profits made by investment banks are “hidden gifts” from the state, and resentment of such firms is “justified.” Let the bloodletting begin. 

    Let the Buyers (of Stock) Beware
    Goldman’s heavy involvement in the hedge fund…
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    Probe Turns to Buffett Deal

    Pondering…. would this be the God’s work GS has been doing?

    Probe Turns to Buffett Deal

    Government Suspects Goldman Director Told Galleon of Berkshire’s 2008 Investment

    By SUSAN PULLIAM, WSJ

    Goldman Sachs Group Inc. director tipped off a hedge-fund billionaire about a $5 billion investment in Goldman by Warren Buffett‘s Berkshire Hathaway Inc. before a public announcement of the deal at the height of the 2008 financial crisis, a person close to the situation says.

    The revelation marks a significant turn in the government’s case against Raj Rajaratnam, the hedge-fund titan at the center of the largest insider-trading case in a generation. Mr. Buffett’s investment in Goldman in September 2008 was a watershed moment in the financial crisis. One of the world’s savviest investors, Mr. Buffett helped allay fears about the instability of the financial system by backing America’s leading investment bank.

    The new disclosure stems from a government examination into whether the Goldman director, Rajat Gupta, gave inside information to Mr. Rajaratnam. In a court filing March 22, the government alleged that Mr. Rajaratnam or "co-conspirators" traded on non-public information about Goldman. In a filing last week, the government provided more details about the information it alleges Mr. Rajaratnam received, including advance notice about the Buffett transaction with Goldman.

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    SEC Formally Charges Goldman Sachs In Derivatives Fraud with Paulson and Company – another ‘Rogue Trader at Work?’

    SEC Formally Charges Goldman Sachs In Derivatives Fraud with Paulson and Company – another ‘Rogue Trader at Work?’ 

    Courtesy of JESSE’S CAFÉ AMÉRICAIN

    “Only fraud and falsehood dread examination. Truth invites it.”
    - Dr. Samuel Johnson

    The SEC is formally charging Goldman Sachs with fraud in the derivatives markets, specifically with regard to Collateralized Debt Obligations related to subprime mortgages.

    Investors in Goldman’s Abacus CDO lost one billion dollars.

    In addition to the company, an individual VP in Goldman’s international group is being charged, Fabrice Tourre.

    Paulson and Company, a major hedge fund, paid Goldman to structure a CDO based on mortgages that Paulson selected, so that they could bet against it.

    "The product was new and complex, but the deception and conflicts are old and simple. Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party,” said Robert Khuzami, director of the division of enforcement.

    This could be construed as a deft way of throwing red meat to the angry mob, nailing a specific individual at Goldman while limiting the criminal charges against the company although there will be significant civil cases, and dealing with the billionaire hedge fund owner Paulson who made a fortune betting against the subprime market.

    This could be more damaging if this includes other Goldman bets against its customers on products it represented and created, and it shows an overall intent to create fraudulent products for the purpose of shorting them. For now the SEC will not say if this fraud is a singular event or more systemic. 

    Goldman will almost certainly attempt to spin this as the actions of a ‘rogue trader‘ who was an aggressive exception.

    Last week the White House asked Jamie Dimon and Lloyd Blankfein to ‘cool it’ on their intense lobbying efforts against derivatives and financial reform.

    Perhaps this will help them in their decision.

    This is just the tip of the iceberg. The Wall Street Banks are knee deep in fraud.

    No one can obtain the kind of consistently odds


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    What Will Buffett’s Response Be Now That Goldman’s “Ethics” Are Exposed For All To See?

    What Will Buffett’s Response Be Now That Goldman’s "Ethics" Are Exposed For All To See?

    Courtesy of Tyler Durden

    Bloomberg Television’s Betty Liu does a great job deconstructing the hypocrisy behind Warren Buffett’s Goldman investment – she quotes Alice Schroder author of Snowball, who says, "I’ve always wondered why Buffett would trade his skepticism for an investment in Goldman Sachs. It looks it was a mistake, it was a mistake for Buffett to invest this money in Goldman and to compromise his philosophy on Wall Street." What philosophy? That of the benevolent old uncle who is happy to rip the entire silver market apart and demand physical when he knows full well (as does the CFTC) that it is an impossible request? Or that of the guy who pretends to have principles when he is fully aware the government will always bail him and his investments out at the expense of the middle class? We eagerly await to see Berkshire’s press release on its Goldman investment after this development.


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    THE MANY MYTHS OF WARREN BUFFETT

    THE MANY MYTHS OF WARREN BUFFETT

    Courtesy of The Pragmatic Capitalist 

    Warren Buffett Testifies Before Senate Finance Committee

    Warren Buffett is the most glorified and respected investor of all time.  And rightfully so.  After all, he became the world’s wealthiest man by essentially picking stocks.  But Warren Buffett is also remarkably misunderstood by the general public.  I personally believe the myth of Warren Buffett is one of the greatest tricks ever played on the small investor.

    To the average investor Buffett is a folksy frugal regular old chum who just has a knack for picking stocks.  You know, he just picks those “value stocks” and let’s them run, right?  Well, nothing could be farther from the truth and here we sit with an entire generation of investors fooled by the idea that value investing/buy and hold is the single greatest way to accumulate wealth.  With the poor results of the last ten years investors have finally started to challenge this thinking.

    To a large extent, the myth of Buffett has fed an investment boom as a generation of American’s aspire to make their riches in the equity markets.  And who better to sell this idea than Wall Street itself?  After all, a quick investment in Bill Miller’s Value Trust or the great Peter Lynch’s Fidelity Magellan (now essentially defunct) will get you a near replica of the Warren Buffett approach to investing, right?   Not so fast.

    Let me begin by saying that I have nothing but the utmost respect for Mr. Buffett.  When I was a young investor I printed every single one of his annual letters (including his Buffett Partnership letters which can be found here) and read them page by page.  It was and remains the single greatest education I have ever received.  I highly recommend it for anyone who hasn’t done so.  But in digging deeper I realized that Warren Buffett isn’t just this value stock picker that he is widely portrayed as.  What he has built is far more complex than that.

    In reality, he formed one of the original hedge funds (The Buffett Partnership Ltd) and used his gains to one day purchase Berkshire Hathaway.  His evolution into the value investor we now think of today has been long in the making.   Make no mistake, Buffett is a hedge fund manager.  Yes, he comes from the ilk of the oft vilified and awful hedge fund…
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    Warren Buffett & Bill Ackman Interviews

    Warren Buffett & Bill Ackman Interviews

    Courtesy of Market Folly

    Warren Buffett of Berkshire Hathaway and Bill Ackman of hedge fund Pershing Square recently sat down with CNBC in two separate interviews. While the two men shared a talking point in the recent Kraft deal (they are both large shareholders), we thought it was interesting to hear their recent takes on the economy and markets.

    In his interview, hedge fund manager Bill Ackman says that you are buying Kraft (KFT) at less than 14 times earnings and get a 4% dividend yield. He liked the fact that Kraft used a limited amount of shares (and used more cash) in the deal and in the end paid a fair price to get the deal done. As we covered earlier, Kraft is now Pershing Square’s largest holding.

    Ackman argues that Kraft’s purchase of confectioner Cadbury now makes Kraft a more ‘defensive’ play. Obviously it will take a bit of time to integrate the two businesses, but the Pershing Square hedge fund manager points out that Kraft has done it numerous times before with other transactions.

    Embedded below is Ackman’s video interview where he outlines his thoughts on the Kraft and Cadbury deal. RSS & Email readers will want to come to the site to view this post as there are a lot of videos included:


     

    And here is part two of Ackman’s video interview where he talks about some of his other portfolio activity and his take on the economy:

    Moving next to Warren Buffett, we see that he shares a different opinion on the matter of the Kraft and Cadbury deal. Below he gives his thoughts on Wells Fargo (WFC), the economy, Ben Bernanke, and much more.

     

    We’ve followed these two gentlemen extensively before and have covered numerous resources such as Warren Buffett’s recommended reading list, Pershing Square’s research on General Growth Properties (GGWPQ). For more insight from these two big time investors, head to our resources on Warren Buffett as well as our resources on Bill Ackman.

    Market Folly

     


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    Phil's Favorites

    Why are Atlantic and Gulf coast property owners building back bigger after hurricanes?

     

    Why are Atlantic and Gulf coast property owners building back bigger after hurricanes?

    Surf threatens beach houses on Dauphin Island, Alabama, September 4, 2011 during Tropical Storm Lee. AP Photo/Dave Martin

    Courtesy of Eli Lazarus, University of Southampton and Evan B. Goldstein, University of North Carolina – Greensboro

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    Courtesy of ZeroHedge. View original post here.

    For the first time since the fall of the Soviet Union, Russian jets flying through South Korean airspace provoked the South Korean military into a "midair confrontation" that involved firing hundreds of warning shots. All told, South Korean jets fired 360 machine-gun rounds and at least 20 flares, Bloomberg reports.

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    The Daily Biotech Pulse: Acadia Schizophrenia Drug Fails, Viveve Plummets, Eisai Gets Breakthrough Therapy Designation

    Courtesy of Benzinga.

    Here's a roundup of top developments in the biotech space over the last 24 hours.

    Scaling The Peaks

    (Biotech stocks hitting 52-week highs on July 22)

    • Acasti Pharma Inc (NASDAQ: ACST)
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    Kimble Charting Solutions

    Is Crude Oil Sending a Bearish Message to the Stock Market?

    Courtesy of Chris Kimble.

    Crude Oil (NYSEARCA: USO) and the S&P 500 Index (INDEXSP: .INX) have peaked and bottomed together several times in the past 9 months. See points (1) and (2) on the chart above.

    In summary, the correlation between Oil and the stock market has been quite interesting and demands investors attention.

    Crude Oil has been creating lower highs of late and is breaking price support at (3).

    If the correlation remains the same, Crude Oil may very well be sending a bearish message to stocks.

    Tricky spot for active investors – careful here.

    ...

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    Chart School

    RTT Plus Chart Book (Sneak Peak)

    Courtesy of Read the Ticker.

    The magic of support and resistance channel lines and how they direct price. Here are some chart disclosed to members via the RTT Plus service. All charts are a few weeks old. 


    XAU bound by parallel channel lines.


    Click for popup. Clear your browser cache if image is not showing.



    Newmont Mining support from Gann Angles.



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    Cryptos Suddenly Panic-Bid, Bitcoin Back Above $10k

    Courtesy of ZeroHedge. View original post here.

    Following further selling pressure overnight, someone (or more than one) has decided to buy-the-dip in cryptos this morning, sending Bitcoin (and most of the altcoins) soaring...

    A sea of green...

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    DNA testing companies offer telomere testing - but what does it tell you about aging and disease risk?

    Reminder: We're is available to chat with Members, comments are found below each post.

     

    DNA testing companies offer telomere testing – but what does it tell you about aging and disease risk?

    A telomere age test kit from Telomere Diagnostics Inc. and saliva. collection kit from 23andMe. Anna Hoychuk/Shutterstock.com

    Courtesy of Patricia Opresko, University of Pittsburgh and Elise Fouquerel, ...



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    ValueWalk

    Professor Shubha Ghosh On The Current State Of Gene Editing

     

    Professor Shubha Ghosh On The Current State Of Gene Editing

    Courtesy of Jacob Wolinsky, ValueWalk

    ValueWalk’s Q&A session with Professor Shubha Ghosh, a professor of law and the director of the Syracuse Intellectual Property Law Institute. In this interview, Professor Ghosh discusses his background, the Human Genome Project, the current state of gene editing, 3D printing for organ operations, and gene editing regulation.

    ...

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    Members' Corner

    Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

    Are you ready to retire?  

    For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

    Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

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    It's Not Capitalism, it's Crony Capitalism

    A good start from :

    It's Not Capitalism, it's Crony Capitalism

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    OpTrader

    Swing trading portfolio - week of September 11th, 2017

    Reminder: OpTrader is available to chat with Members, comments are found below each post.

     

    This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

    We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

    Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

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    Promotions

    Free eBook - "My Top Strategies for 2017"

     

     

    Here's a free ebook for you to check out! 

    Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

    In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

    This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

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    Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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