Harry Newton's In Search of The Perfect Investment
(BRK.A) is buying $5 billion of perpetual preferred stock in Goldman Sachs.
The preferred stock has a dividend of 10% and is callable at any time at a 10%
premium. Berkshire Hathaway will also get warrants to purchase $5 billion of Goldman
common stock with a strike price of $115 each. Buffett can exercise these at any
time over five years. Goldman Sachs closed last night at $125 and was trading
after hours at $134. That means Mr. Buffett has already made $826 million on his
warrants -- or 17%. Not bad for one night's work.
8:00 AM EST, Wednesday, September 24, 2008: No
one beats Warren Buffett for excellence in investing. No one. While you and
I have floundered in recent weeks, Mr. Buffett has closed two absolutely brilliant
MidAmerican Energy Holdings is buying all the shares it doesn't own in Constellation
Energy (CEG) at $26.50 a share. That's a huge bargain -- based on MidAmerican's
assets and its recent trading. Its one-year high was $108. Constellation got
into some recent financial difficulties with trading energy, but Buffett has
given it enough money to solve that mistake.
In both transactions
Buffett displays his fine touch for buying ultra-solid assets ultra-cheaply.
Yes, I'm jealous.
Paulson wants is a blank $700 billion check. Yesterday
Paulson warned Congress that if Congress failed to pass the $700 billion plan,
it risked causing a recession and increasing joblessness. Fact is we're getting
the recession and the increasing joblessness whether Paulson's plan passes or
the Paulson plan passes, it will go down in history as giving faith-based investing
a whole new meaning. If it is passed, it will be the least-thought out, least
discussed piece of legislation ever in the history of the United States. Tactics
being used by the Administration to stampede Congress into it remind me of how
we got railroaded into Iraq. Take an "emergency," blow it up, propose
an action without discussion and bingo...
am personally not against some form of "bailout." The devil is in
the details. And the details in this one stink. The proposal is to give Paulson
a blank $700 billion check and let him spend it wherever he feels. He can bail
out his friends and screw his enemies, or vice versa. He can bail out WaMu and
ignore Citigroup, or vice versa. You think I'm kidding? Here in its glorious
entirety is Paulson's Plan. Skim through. I've bolded the more delicious parts.
Text of Draft Proposal for Bailout Plan
PROPOSAL FOR TREASURY AUTHORITY TO PURCHASE MORTGAGE-RELATED ASSETS
Section 1. Short
This Act may
be cited as ____________________.
Sec. 2. Purchases
of Mortgage-Related Assets.
to Purchase.--The Secretary is authorized to purchase, and to make and
fund commitments to purchase, on such terms and conditions as determined by
the Secretary, mortgage-related assets from any financial institution having
its headquarters in the United States.
Actions.--The Secretary is authorized to take such actions as the Secretary
deems necessary to carry out the authorities in this Act, including, without
such employees as may be required to carry out the authorities in this Act
and defining their duties;
into contracts, including contracts for services authorized by section 3109
of title 5, United States Code, without regard to any other provision of law
regarding public contracts;
financial institutions as financial agents of the Government, and they shall
perform all such reasonable duties related to this Act as financial agents
of the Government as may be required of them;
vehicles that are authorized, subject to supervision by the Secretary, to
purchase mortgage-related assets and issue obligations; and
such regulations and other guidance as may be necessary or appropriate to
define terms or carry out the authorities of this Act.
Sec. 3. Considerations.
the authorities granted in this Act, the Secretary shall take into consideration
stability or preventing disruption to the financial markets or banking system;
Sec. 4. Reports
months of the first exercise of the authority granted in section 2(a), and
semiannually thereafter, the Secretary shall report to the Committees on the
Budget, Financial Services, and Ways and Means of the House of Representatives
and the Committees on the Budget, Finance, and Banking, Housing, and Urban
Affairs of the Senate with respect to the authorities exercised under this
Act and the considerations required by section 3.
Sec. 5. Rights;
Management; Sale of Mortgage-Related Assets.
of Rights.--The Secretary may, at any time, exercise any rights received
in connection with mortgage-related assets purchased under this Act.
of Mortgage-Related Assets.--The Secretary shall have authority to manage
mortgage-related assets purchased under this Act, including revenues and portfolio
(c) Sale of
Mortgage-Related Assets.--The Secretary may, at any time, upon terms and
conditions and at prices determined by the Secretary, sell, or enter into
securities loans, repurchase transactions or other financial transactions
in regard to, any mortgage-related asset purchased under this Act.
of Sunset to Mortgage-Related Assets.--The authority of the Secretary to hold
any mortgage-related asset purchased under this Act before the termination
date in section 9, or to purchase or fund the purchase of a mortgage-related
asset under a commitment entered into before the termination date in section
9, is not subject to the provisions of section 9.
Sec. 6. Maximum
Amount of Authorized Purchases.
authority to purchase mortgage-related assets under this Act shall be limited
to $700,000,000,000 outstanding at any one time
Sec. 7. Funding.
For the purpose
of the authorities granted in this Act, and for the costs of administering
those authorities, the Secretary may use the proceeds of the sale of any securities
issued under chapter 31 of title 31, United States Code, and the purposes
for which securities may be issued under chapter 31 of title 31, United States
Code, are extended to include actions authorized by this Act, including the
payment of administrative expenses. Any funds expended for actions authorized
by this Act, including the payment of administrative expenses, shall be deemed
appropriated at the time of such expenditure.
Sec. 8. Review.
by the Secretary pursuant to the authority of this Act are non-reviewable
and committed to agency discretion, and may not be reviewed by any court of
law or any administrative agency.
Sec. 9. Termination
under this Act, with the exception of authorities granted in sections 2(b)(5),
5 and 7, shall terminate two years from the date of enactment of this Act.
Sec. 10. Increase
in Statutory Limit on the Public Debt.
of section 3101 of title 31, United States Code, is amended by striking out
the dollar limitation contained in such subsection and inserting in lieu thereof
Sec. 11. Credit
The costs of
purchases of mortgage-related assets made under section 2(a) of this Act shall
be determined as provided under the Federal Credit Reform Act of 1990, as
Sec. 12. Definitions.
of this section, the following definitions shall apply:
Assets.--The term mortgage-related assets means residential or
commercial mortgages and any securities, obligations, or other instruments
that are based on or related to such mortgages, that in each case was originated
or issued on or before September 17, 2008.
term Secretary means the Secretary of the Treasury.
(3) United States.--The
term United States means the States, territories, and possessions
of the United States and the District of Columbia.
guys at Reserve Management belong in jail for this stunt. Here's
the story. It's mind-blowing. What I can't figure out is what Reserve management
gained by this total idiocy. Here's the New York Times story
Fund Gave a Heads Up
By the time the Reserve Fund reported last Tuesday afternoon that its Primary
Fund money market funds had broken the buck that is, were
no longer worth a dollar a share investors had already withdrawn billions
of dollars from the fund.
analysts assumed they had reacted to the panic sweeping the market. But a
lawsuit filed in Minneapolis late last week by Ameriprise Financial offers
another explanation: The suit claims the Reserve Fund tipped some big customers
about its crisis in advance so that they could get their cash out before its
losses became public.
the complaint, two senior Reserve Fund executives acknowledged during a conference
call last Thursday with Ameriprise that big investors had received an early
Fund executives seemed surprised that Ameriprise had not also been tipped
at the same time, the complaint alleges.
qualified as a big investor. The financial services company had entrusted
$128 million of its own money and more than $3.2 billion of its customers
to the Reserve Fund, through two of its brokerage subsidiaries.
Fund Management Company, which managed $66 billion in assets as recently as
last year, did not respond to messages to its office in New York City. Its
lawyer in Minneapolis, Barbara P. Berens of Kelly & Berens, said her client
had instructed her not to comment on the case.
is one of several facing the Reserve Fund company, whose founder invented
the money market fund in the early 1970s and whose chairman, Bruce R. Bent,
has been publicly critical over the last year about the improper risks he
said other money market funds were taking in the stretch for higher and more
words were handed back at him in another lawsuit filed on Friday, this time
in federal court in Manhattan. That complaint, proposed as a class action,
was filed by the San Francisco law firm of Girard Gibbs on behalf of George
C. Dyer, an investor with several hundred thousand dollars frozen in the Reserve
Funds fund series.
It quotes Mr.
Bents repeated assurances to shareholders that he thinks of the one-dollar
share price as an inviolate aspect of money fund management.
entrusted to a money fund is your reserve resource that you expect to be there
no matter what, he wrote in January. In July, the fund company boasted
of its superior capacity to maintain a $1.00 per share net asset value
at all times.
also contends that the way the Reserve Fund handled its 11th-hour redemptions
last week violated the redemption procedures laid out in the prospectuses
it filed with the Securities and Exchange Commission. And it asserts that
the Reserve Fund more than doubled its stake in commercial paper issued by
Lehman Brothers Holdings last spring, after the investment bank was
widely considered to be the next victim of the ongoing banking crisis.
are complicating an already tangled redemption process for the Reserve Fund,
which has posted only a few advisory statements for investors on its website,
which has staff members at the Reserve Funds offices in Manhattan to
monitor its activity, has issued an order allowing the fund family to delay
redemptions past the seven-day period set by federal law.
And the federal
district judge handling the Ameriprise case in Minneapolis, Paul A. Magnuson,
imposed a temporary restraining order on Friday evening that prevents the
Reserve Fund from permitting any further withdrawals from several of its largest
financial markets should be left as free as possible from judicial intervention,
temporary injunctive relief is warranted here, he said. Such serious
allegations, if proven, give plaintiffs a very strong position for winning
later on the merits.
He added that
Ameriprise and its customers would be irreparably harmed if defendants
were allowed to honor redemption requests of investors who were made privy
to the bad news before the public was.
At a hearing
scheduled for Tuesday morning in Minneapolis, the lead attorney for Ameriprise,
Harvey J. Wolkoff of Ropes & Gray in Boston, will ask the judge to speed
up the pace of discovery in the case so we can figure out who the tippees
were. Mr. Wolkoff said.
For the full text
of Ameriprise's press release and for the
full text of Ameriprise's legal complaint.
around trading desks today . . .
FOR URGENT BUSINESS RELATIONSHIP
I NEED TO ASK
YOU TO SUPPORT AN URGENT SECRET BUSINESS RELATIONSHIP WITH A TRANSFER OF FUNDS
OF GREAT MAGNITUDE.
I AM MINISTRY
OF THE TREASURY OF THE REPUBLIC OF AMERICA. MY COUNTRY HAS HAD CRISIS THAT
HAS CAUSED THE NEED FOR LARGE TRANSFER OF FUNDS OF 700 BILLION DOLLARS US.
IF YOU WOULD ASSIST ME IN THIS TRANSFER, IT WOULD BE MOST PROFITABLE TO YOU.
I AM WORKING
WITH MR. PHIL GRAM, LOBBYIST FOR UBS, WHO WILL BE MY REPLACEMENT AS MINISTRY
OF THE TREASURY IN JANUARY. AS A SENATOR, YOU MAY KNOW HIM AS THE LEADER OF
THE AMERICAN BANKING DEREGULATION MOVEMENT IN THE 1990S. THIS TRANSACTOIN
IS 100% SAFE.
THIS IS A MATTER
OF GREAT URGENCY. WE NEED A BLANK CHECK. WE NEED THE FUNDS AS QUICKLY AS POSSIBLE.
WE CANNOT DIRECTLY TRANSFER THESE FUNDS IN THE NAMES OF OUR CLOSE FRIENDS
BECAUSE WE ARE CONSTANTLY UNDER SURVEILLANCE. MY FAMILY LAWYER ADVISED ME
THAT I SHOULD LOOK FOR A RELIABLE AND TRUSTWORTHY PERSON WHO WILL ACT AS A
NEXT OF KIN SO THE FUNDS CAN BE TRANSFERRED.
WITH YOUR BANK ACCOUNT, IRA AND COLLEGE FUND ACCOUNT NUMBERS AND THOSE OF
YOUR CHILDREN AND GRANDCHILDREN TO WALLSTREETBAILOUT@TREASURY.GOV
SO THAT WE MAY TRANSFER YOUR COMMISSION FOR THIS TRANSACTION. AFTER I RECEIVE
THAT INFORMATION, I WILL RESPOND WITH DETAILED INFORMATION ABOUT SAFEGUARDS
THAT WILL BE USED TO PROTECT THE FUNDS AND DETAILS ON THE TRANSFER OF YOUR
MINISTER OF TREASURY PAULSON
tasteless Indian humor.
For centuries, Hindu women have worn a dot on their foreheads. Most
of us have naively thought this was connected with religion or, marriage.
The Indian Embassy
in Washington, D.C. has recently revealed the true story.
When a Hindu woman
gets married, she brings a dowry into the union. On her wedding night, the husband
scratches off the dot to see whether he has won a convenience store, a gas station,
a donut shop or a motel.
If nothing is there, he must take a job at a call center in India giving technical
advice to hapless Dell customers with busted computers.
This column is about my personal search for the perfect
investment. I don't give investment advice. For that you have to be registered
with regulatory authorities, which I am not. I am a reporter and an investor.
I make my daily column -- Monday through Friday -- freely available for three
reasons: Writing is good for sorting things out in my brain. Second, the column
is research for a book I'm writing called "In Search of the Perfect
Investment." Third, I encourage my readers to send me their ideas,
concerns and experiences. That way we can all learn together. My email address
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