According to the President, Congress, independent financial experts, and TV pundits, this week’s economic picture for the country is the worst seen since the Great Depression. It can be argued that Warren Buffet is the richest man in the United States, turning over his capital to the Bill and Melinda Gates Foundation for philanthropic purposes notwithstanding.
Mr. Buffet made his fortune as CEO of Berkshire Hathaway (NYSE BRK A and BRK B), an insurance and holding company. During this week’s “Charlie Rose” TV interview, he says he is a “big fan” of former Goldman Sachs (GS) CEO turned U.S. Treasury Secretary, Hank Paulson. In explaining his recent decision to poor billions of his own funds into the now Goldman, Mr. Buffet pronounced the U.S. economy as sound. Evidence of how strongly Warren Buffet holds that belief is exemplified by his decision to acquire General Electric (GE) stock this week.
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Mr. Paulson on July 22 spoke on “Reinforcing Market Stability and Confidence.” A speech he made at the NYC Public Library. Paulson alerted the general public to the problems in the economy de-stabilizing the stock market. All these months later, we see Paulson pleading with Congress for solutions to what has reached crisis proportions.
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Yet Buffet is buying while everyone else is selling stock certificates. Investors might do well to consider his investment strategies in context of his personal lifestyle, living in the same modest home for decades. He dresses in an understated fashion. His home and attire bespeaks a humble man. He invests his money similarly. In the Rose interview, Buffet explained that he only invests in things he understands. He is humble enough to admit he doesn’t understand many things. He does not seem to be too interested in relying on others to inform him. He is the quintessential self-made man.
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Warren Buffet generally doesn’t likes to mix into business investment decisions when he does not he have confidence in management. In the case of Goldman Sachs, he explained his understanding opinion of Hank Paulson’s leadership. Paulson, when at Goldman Sachs, Buffet says was the investor extraordinaire. Buffet also notes, he chooses companies with demonstrated longevity.
He believes that the $700 billion bailout should be considered an investment. Further, the money should be given to Paulson to invest (not loan) for the best return on taxpayer money over time. He does not think most oversight committees will have much more than a vested interest in making Congress and the Executive look better. Political crony appointments were the subtext of what was being said. This investment by committee is likely to do more harm than good, Buffet says. Ordinarily, one could scoff at this push for big money to go into Paulson’s hands. However, from Buffet’s conduct during this crisis and his smart head for good investing, he does say the economy is basically sound and puts his money where his mouth is.
To follow Buffet’s lead one would have to think for himself, understand the business itself, know about corporate management and longevity, and choose a company that’s been through hard times. With that in mind, Warren Buffet says buy.
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[tags] Great Depression, Warren Buffet, Berkshire Hathaway, Charlie Rose, Goldman Sachs, U.S. Treasury Secretary, Paulson, GE, General Electric Co., GS, Goldman Sachs Group, covered call investment strategy, investment strategy, iron condor, poweroptions, stock insurance, stock option trading, stock options [/tags]