"The worst of the crisis in Wall Street is over,'' said Buffet on the 3rd of May.
(1) Yesterday he announced to buy a 5 billion stake in Goldman Sachs.
How to evaluate these steps? Would you now follow the leader? The first question is, does Goldman fit in the BH-fund-approach of long term growth stocks? Under normal circumstances probably not.
Either we are all to negative about the financial sector or the long term expectations have to be adjusted downwards for years.
The profitable banking years are over for the next few years.
The second question is then: why.
Why now, why not in May for example? It is therefore more likely that Mr.
Buffet has been asked to invest in Goldman.
To save Wall street.
Rather than his first statement that the worst was over on wall street, this action is much more credible.
A statement is easy to make.
But it can be verified.
It was clear that the financial crisis was not over at all, and the statement damaged somehow the image of the investor.
Too many of these mistakes can't be made, because they will diminish his credibility.
A step is this one just announced to invest in Goldman is much more credible.
What remains unclear is the motive to do so.
Again, in my opinion he wouldn't do this under normal circumstances.
It can only be understood as a philanthropic gesture to stabilize Wall Street.
The immediate impact was already high: all media broadcasted the news and this boosted the sentiment.
The congress is still discussing the measure proposed by the Fed and the Treasury.
I think it will be approved.
Not so much for the discussion, but for what happened behind the scenes.
That we will know only months or even years later.
How Wall Street was rescued.
And than we are able to evaluate the 5 billion dollars investment in Goldman.
Was it a risk, for a risk averse investor, or just a cold calculation? What is clear is that a third action of Buffet will no longer be sufficient to help the market, it will have too little credibility.
Maybe this is enough.
Who will follow him; perhaps the financial crisis is now really over...
H.
J.
B.
(1) The Financial Crisis - Is It Really Over (EzineArticle) PS (A few days later, the 28th of September): I only just learned that the secretary of the Treasury Mr.
Paulson has much of his wealth in stock of Goldman, this from the period when he worked for the company: he was the captain of the project bringing Goldman to the Exchange.
(1) Yesterday he announced to buy a 5 billion stake in Goldman Sachs.
How to evaluate these steps? Would you now follow the leader? The first question is, does Goldman fit in the BH-fund-approach of long term growth stocks? Under normal circumstances probably not.
Either we are all to negative about the financial sector or the long term expectations have to be adjusted downwards for years.
The profitable banking years are over for the next few years.
The second question is then: why.
Why now, why not in May for example? It is therefore more likely that Mr.
Buffet has been asked to invest in Goldman.
To save Wall street.
Rather than his first statement that the worst was over on wall street, this action is much more credible.
A statement is easy to make.
But it can be verified.
It was clear that the financial crisis was not over at all, and the statement damaged somehow the image of the investor.
Too many of these mistakes can't be made, because they will diminish his credibility.
A step is this one just announced to invest in Goldman is much more credible.
What remains unclear is the motive to do so.
Again, in my opinion he wouldn't do this under normal circumstances.
It can only be understood as a philanthropic gesture to stabilize Wall Street.
The immediate impact was already high: all media broadcasted the news and this boosted the sentiment.
The congress is still discussing the measure proposed by the Fed and the Treasury.
I think it will be approved.
Not so much for the discussion, but for what happened behind the scenes.
That we will know only months or even years later.
How Wall Street was rescued.
And than we are able to evaluate the 5 billion dollars investment in Goldman.
Was it a risk, for a risk averse investor, or just a cold calculation? What is clear is that a third action of Buffet will no longer be sufficient to help the market, it will have too little credibility.
Maybe this is enough.
Who will follow him; perhaps the financial crisis is now really over...
H.
J.
B.
(1) The Financial Crisis - Is It Really Over (EzineArticle) PS (A few days later, the 28th of September): I only just learned that the secretary of the Treasury Mr.
Paulson has much of his wealth in stock of Goldman, this from the period when he worked for the company: he was the captain of the project bringing Goldman to the Exchange.
Source...