Buffett to invest $3B in GE(dealbook.blogs.nytimes.com)
dealbook.blogs.nytimes.com
Buffett to invest $3B in GE
http://dealbook.blogs.nytimes.com/2008/10/01/buffett-to-invest-3-billion-in-ge/index.html?hp
34 comments
Another lesson in "Why it's a great idea to keep capital around to invest during the bad times" or "How to buy GE at a 42% discount" from Mr. Buffett.
He also gets a 10% dividend on his (preferred) stock. I'm pretty sure that you only get that dividend if the company turns a profit, but thats pretty fucking good. Not only that, but after 3 years they can buy it back for a 10% premium. So, if they do well profit wise and buy back their stock, he will have $3B*(1.40)= $4.2 Billion. Not bad.
> How to buy GE at a 42% discount
GE is a consumer finance company. All this popular perception about windmills, toasters, and jet engines is ignorant of the financial reality. I will go on the record and say Buffet is WRONG. GE will perform badly in coming years.
A great indicator that the market is nowhere near bottom is how the peanut gallery continues to pipe up around here that now is the time to buy. The time to buy will be when no webtard would even consider recommending a buy.
GE is a consumer finance company. All this popular perception about windmills, toasters, and jet engines is ignorant of the financial reality. I will go on the record and say Buffet is WRONG. GE will perform badly in coming years.
A great indicator that the market is nowhere near bottom is how the peanut gallery continues to pipe up around here that now is the time to buy. The time to buy will be when no webtard would even consider recommending a buy.
Wow that is some ignorance there. How can you possibly have an opinion contrary to Buffet's? The man is clearly the greatest investor of all time, and he's betting $3 billion so you can be sure he did his homework. (He always does).
So what is it you know that he doesn't? Do you think his legions of brilliant employees, who've been doing this sort of thing more successfully than anyone over the past few decades, missed the fact that GE has a large finance division? The same Warren Buffet who has been warning for the last few years that all of the loose credit and complex derivatives based on the loose credit were going to come crashing down?
I'm not meaning to suggest Warren Buffet is infallible, but there are maybe a handful of people in this entire world who know enough to ever firmly have a contrary opinion to one of his on such matters, and they surely don't read this site.
So what is it you know that he doesn't? Do you think his legions of brilliant employees, who've been doing this sort of thing more successfully than anyone over the past few decades, missed the fact that GE has a large finance division? The same Warren Buffet who has been warning for the last few years that all of the loose credit and complex derivatives based on the loose credit were going to come crashing down?
I'm not meaning to suggest Warren Buffet is infallible, but there are maybe a handful of people in this entire world who know enough to ever firmly have a contrary opinion to one of his on such matters, and they surely don't read this site.
"I will go on the record and say Buffet is WRONG."
You know who says Warren is Buffet is wrong? Poor people :). kingkong, I'm not saying that you are poor, it just sounded like you said Chuck Norris doesn't know how to roundhouse.
You know who says Warren is Buffet is wrong? Poor people :). kingkong, I'm not saying that you are poor, it just sounded like you said Chuck Norris doesn't know how to roundhouse.
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Chances are that you and buffet could both be right. Buffet is right in getting a guaranteed 10% return on $3B dollars with a potential for upside with his preferred stock, even if you are right in that GE common stock performs badly in coming years. So long as GE is still in business/profitable, Buffett is right.
I agree with your last point, I'd actually be curious how many of the vocal "buyers" are actually throwing their money down and buying?
I agree with your last point, I'd actually be curious how many of the vocal "buyers" are actually throwing their money down and buying?
Buffett has said that he's looking for huge investments, and he's not as worried about getting great returns. That's the problem with having so much money to invest - he needs multi-billion dollar investments to make a dent, and there just aren't that many around.
He's said that if he only had a million dollars, he could double it every year, with investments in small, relatively unknown companies.
He's said that if he only had a million dollars, he could double it every year, with investments in small, relatively unknown companies.
catch 22
Chances are always that Warren Buffet is right. He's made a career out of being more right than anyone else and for more money than anyone else.
For all but maybe a few people on the planet, to have an opinion that he is wrong is pure conceit. For a layman to say he is wrong is akin to an accountant disagreeing with Stephen Hawking on the topic of black body radiation.
For all but maybe a few people on the planet, to have an opinion that he is wrong is pure conceit. For a layman to say he is wrong is akin to an accountant disagreeing with Stephen Hawking on the topic of black body radiation.
> made a career out of being more right than anyone else
He's made a career out of being good friends with Hank Greenberg and securing capital at lower rates than anyone else at tight times. He also usually takes stakes large enough to force things his way. He is not some sort of successful stock picker; he has a few tricks not available to anyone else.
He's also never operated in a deflationary environment. We shall see how that works out.
He's made a career out of being good friends with Hank Greenberg and securing capital at lower rates than anyone else at tight times. He also usually takes stakes large enough to force things his way. He is not some sort of successful stock picker; he has a few tricks not available to anyone else.
He's also never operated in a deflationary environment. We shall see how that works out.
Funny, Wikipedia mentions his connection to Greenberg only once. What it seems to focus on more is some of his legendary stock picks, like Coca Cola.
Even if GE does poorly, Buffet will still get his dividend. Also bear in mind, dividends paid by most corporations are taxable as long-term capital gains as opposed to income tax.
All in all, a solid bet by Buffet. Perhaps it's time to investigate Berkshire Hathaway stock.
All in all, a solid bet by Buffet. Perhaps it's time to investigate Berkshire Hathaway stock.
" Perhaps it's time to investigate Berkshire Hathaway stock."
We had a stock picking game when I was in elementary school. I won by picking BerkHa because its price was higher and it moved a lot more. I only had 2 shares but I outperformed everyone who had hundreds or thousands of shares of other stock. I thought it was fun and told my mom we should buy some BerkHa but she said the stock market was gambling.
1989 price: 3700
2008 price: 137,700
% increase: 3700%
Tears: Many
We had a stock picking game when I was in elementary school. I won by picking BerkHa because its price was higher and it moved a lot more. I only had 2 shares but I outperformed everyone who had hundreds or thousands of shares of other stock. I thought it was fun and told my mom we should buy some BerkHa but she said the stock market was gambling.
1989 price: 3700
2008 price: 137,700
% increase: 3700%
Tears: Many
Is anyone else here who thinks that the first rejection of the bailout plan and the subsequent agreement was done on purpose to generate the stock market fall, where insiders could snatch up valuable stock ?
This is how it is done, invest when there is blood everywhere and the bandwagon investors or running for the hills. They will be back, specifically to pay you.
"NHN": Not Hacker News.
Can these stories please move to somewhere more suitable?
http://www.newmogul.com/
Can these stories please move to somewhere more suitable?
http://www.newmogul.com/
the cult of buffett has become amusing. he would be the first one to point out his own investing gaffs and blunders to his own cultists. he would be the first to tell you not to idolize him because he periodically makes bad bets. he's just an opportunist with a moderately good track record. i can't remember a single year in which he was the best performing manager. he's simply being doing pretty good for so long that he has accumulated a vast fortune.
i can't remember a single year in which he was the best performing manager.
You actually nailed it with that statement - his performance is measured on decades, not year to year.
You actually nailed it with that statement - his performance is measured on decades, not year to year.
The funny thing about buffet is this aw-shucks wise old stock picker grandpa image he has cultivated. He's a ruthless insider with somewhat unsavory friends in the insurance business, with questionable accounting histories. The dirty secret about berkshire is that it's predominantly an insurance company.
its no dirty secret, google finance makes it pretty clear "Sector: Financial > Industry: Insurance (Prop. & Casualty)". It's possible there's questionable accounting in the history, but 30+ years into it, I'm surprised nothing major's come up seeing how large and public a target he and berkshire are and how many other accounting cheats have been netted.
It kinda has come up a few times if you care to google. The thing is, I don't think much ILLEGAL has gone on. Just ... questionable. Nothing strictly wrong with that, but it sort of flies in the face of all the nauseating buffet fawning.
Tax avoidance is almost the bread and butter of international property and casualty. They help multi-nationals repatriate earnings in low tax countries. Nothing ILLEGAL about that... just something the sycophants probably don't realize.
Tax avoidance is almost the bread and butter of international property and casualty. They help multi-nationals repatriate earnings in low tax countries. Nothing ILLEGAL about that... just something the sycophants probably don't realize.
I'm curious, whare your sources for this statement? Any books or articles in particular?
The dirty secret about berkshire is that it's predominantly an insurance company.
Hardly a secret - it's the first line of business listed in the first sentence in every year's annual report (see http://www.berkshirehathaway.com/2007ar/2007ar.pdf for example):
"Berkshire Hathaway Inc. is a holding company owning subsidiaries that engage in a number of diverse business activities including property and casualty insurance and reinsurance, utilities and energy, finance, manufacturing, services and retailing. "
Hardly a secret - it's the first line of business listed in the first sentence in every year's annual report (see http://www.berkshirehathaway.com/2007ar/2007ar.pdf for example):
"Berkshire Hathaway Inc. is a holding company owning subsidiaries that engage in a number of diverse business activities including property and casualty insurance and reinsurance, utilities and energy, finance, manufacturing, services and retailing. "
his performance is measured on decades
who cares? who owns a single equity for decades? some fictional granny investor in pasadena? look at your own trading history...i bet you never held a single equity more than four years. note that i am distinguishing index funds and etfs here. berkA is a single equity
who cares? who owns a single equity for decades? some fictional granny investor in pasadena? look at your own trading history...i bet you never held a single equity more than four years. note that i am distinguishing index funds and etfs here. berkA is a single equity
Citation that people don't hold equities for more than four years?
I have held equities for more than four years. Most of my portfolio, actually. Daytrading and churning positions are for people with more time to devote to the market than I care to. But maybe I am fictional, as my grandmother gave me one of her BRKb shares in 2002 (which I still own).
I have held equities for more than four years. Most of my portfolio, actually. Daytrading and churning positions are for people with more time to devote to the market than I care to. But maybe I am fictional, as my grandmother gave me one of her BRKb shares in 2002 (which I still own).
The period that you measure someone's market performance is independent of how long they actually hold a single equity. Do you measure a day trader's performance over a single day?
Either way - it's a moot point - (Just like the investment funds you excluded) BRK doesn't need to turn over an equity to increase their value, whatever the time period. They could never sell anything and still give increased returns to their investors.
Either way - it's a moot point - (Just like the investment funds you excluded) BRK doesn't need to turn over an equity to increase their value, whatever the time period. They could never sell anything and still give increased returns to their investors.
moderately good track record:
http://finance.google.com/finance?chdnp=1&chdd=1&chd...
*This is already after the point where he's been consistently very good & already has had several generations of cult following.
*This is already after the point where he's been consistently very good & already has had several generations of cult following.
i can't remember a single year in which he was the best performing manager
That would be precisely the wrong metric to look at to see how a good long-term investor is: the absolute best performer in a given year is very likely to be the guy who threw darts at just the right stocks on the wall.
That would be precisely the wrong metric to look at to see how a good long-term investor is: the absolute best performer in a given year is very likely to be the guy who threw darts at just the right stocks on the wall.
bullshit bullshit. average "long term" investor is in and out of single stocks in two years or less. you're at the far end of the bell curve for people who hold for four years. the myth of the "long term" investor is just that. the reality is most people hold equities for less than a year.
and "long term" is not a definitively superior investment strategy. look at the dow chart for the 20th century, you can see at least two ten-year stretches of zero gains. guess what, we're in another one now. buy-and-hold only makes sense in secular bull markets, like 1982-2000.
and "long term" is not a definitively superior investment strategy. look at the dow chart for the 20th century, you can see at least two ten-year stretches of zero gains. guess what, we're in another one now. buy-and-hold only makes sense in secular bull markets, like 1982-2000.
I meant "long term" in the sense of investors who consistently make a profit in the long term, not those who happen to hold particular equities for a long period of time.
I'm sorry, but this is just lunacy. Warren Buffett will go down as the greatest investor of all-time. Unlike many of the hedge fund managers out there who like to talk a big game based on 1, 2, or 3 year returns, Buffett has been beating the market for over 50 years. While you are right that he is the first to admit when he makes a mistake, his record is obvious, mistakes and all: http://www.usnews.com/usnews/biztech/personalfinance/persona...
For the rest of us, please take his advice and invest in an index fund. And don't try to time the market. As long as you are investing for at least 10 years, trying to pick the bottom is a loser's game.
For the rest of us, please take his advice and invest in an index fund. And don't try to time the market. As long as you are investing for at least 10 years, trying to pick the bottom is a loser's game.