Warren Buffett: Value Investor or Loan Shark of Last Resort?

An excerpt from a Buffett article:

Berkshire Hathaway purchased a $5 billion stake in Goldman Sachs (NYSE: GS), and followed with a $3 billion chunk of General Electric (NYSE: GE). Buffett’s no dummy. His investment came in the form of high-yielding preferred stock, with warrants to cash in any potential common stock gains. However, the investors that followed him into these blue chips didn’t have the same kind of low-risk luxury. They bid up the common stocks, which trade lower — and in GE’s case, considerably lower — today.

On Oct. 16, The New York Times ran an op-ed piece by Buffett — entitled “Buy American. I Am” — urging readers to snap up shares of stateside companies. The market rallied, with the S&P 500 closing at 946.43 that day. It has gone on to shed 28% of its value. “Let me be clear on one point: I can’t predict the short-term movements of the stock market,” he wrote, giving himself a little wiggle room. However, beating the “long-term investing” drum doesn’t excuse him from arriving unfashionably early with his buy advice. The S&P 500 now has to climb 38% just to make up for the 28% slide (and, no, that’s not a typo — do the math).

[Buffett] is the antithesis of the greed that corrupted bankers and the abusive power that defines the media. Buffett, by all accounts, is a pretty amazing guy. However, when the market needed a cleanup hitter to step up to the plate and clear the bases last fall, he whiffed. Instead of buying stakes in dependable bellwethers, Berkshire Hathaway appears to be positioning itself as a loan shark of last resort to desperate companies like Tiffany (NYSE: TIF) and Harley-Davidson (NYSE: HOG). Those are two of his more recent investments, yet they too hit fresh lows last week. Again, Buffett’s investments are secured by chunky yields that won’t blow up in his face unless the companies go under. The problem is that investors who initially bid up these companies once they see the Nebraskan wave his wand are seeing their faith in our country’s greatest stock picker erode with every downtick.

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One thought on “Warren Buffett: Value Investor or Loan Shark of Last Resort?

  1. The mindless sheep who might follow the investment strategies of Mr Buffett whom I have the utmost respect for or Mr Cramer whom I have no respect for need to look only one place for responsibility of their personal investing outcomes. It’s called a mirror.

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