News came out today that Warren Buffett has invested $5 billion into Goldman Sachs. Warren was on the CNBC’s Squawk Box, speaking about his decision to invest in the company. But is he really confident in the financials or not?
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Mr. Buffett has been talking about how he doesn’t invest in anything that he doesn’t understand. He avoids things that might have a hidden trap because he didn’t know it all. I heard him talk awhile back say that he’s not sure what to do about investing in the financial sector and continued by saying that he would not get into anything that wouldn’t be a sweetheart of a deal.
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Most of it is in the preferred stock as well as some in the common shares. His strike price for the common is $115 per share, which is $7 less than what it closed at last night. He can exercise those shares anytime over the next five years. Just in case you’re wondering how many shares all together he received for his $5 billion, It was 43 million shares. There were a lot of other perks in the deal for Mr. Buffett and that’s why he got in Goldman Sachs.
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The media is having a field day stating that Warren Buffett is confident in the condition of the financial sector and that can’t be further from the truth. When you have $5 billion to invest, believe me people will sweeten the pot for you has much as possible to make sue that deal goes through. Mr. Buffett deserves the deal he’s recieved, but to watch the open market flock to the financials is just a little too much. The media will always hype it up to have something to talk about, but to think this parade is going to continue is just too weird. If he was confident about the sector then why didn’t he invest in the whole sector? I’ll tell you that that isn’t the case, he’s confident about Goldman Sachs and only Goldman Sachs to make him money. To think otherwise is foolish.
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