It takes money to make money
Can you get a deal like Warren?
Berkshire will buy $5 billion of Goldman perpetual preferred stock that carries a 10 percent dividend. It also will receive warrants to buy $5 billion of common stock at $115 per share, exercisable within five years.
Jan 2011 options are the longest dated available. The $110 Put, VSDMB, is likely to drop tomorrow, but it last traded at $26. That is close to the 10% dividend. No it is not perpetual and it carries more risk, but hey neither you nor I are Warren.
Now how about the upside? I could buy the stock or a synthetic long (buy call sell put) on the Jan 2011 $130 strike would have netted out at no cost. After the open tomorrow you’ll probably need to go for the $140 strike.
In summary, no you can’t get a deal like Warren and if you buy some stocks and or options you will not move the price of GS. However, if you are prepared to take more risk, both downside and time risk, then you can get roughly equivalent possible returns.
GS becomes a bank holding company.
On September 21, 2008, The Goldman Sachs Group, Inc. (the “Registrant”) announced that the Federal Reserve Board had approved its application to become a bank holding company.
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Most of us don’t have his [Buffett's] capital to work with.
AND
Most of us are not handicapped by his capital.
Everything has pros and cons, including the size of your wallet.
Using Buffett as a filter in stock research seems sensible enough.
Does Buffett have legendary timing on stock sales that would require a phone call?
Perhaps more importantly most of us don’t have Buffett’s experience, brain, emotions and temperament.
Still it would be nice to know the GS management, understand their balance sheet and get an offer of a 10% dividend and the option to buy the stock any time in the next five years for the lowest price in the last three years.
GS – from a quick eyeball
- selling at half its “normal” P/B
- selling at a ten year low P/E
- most multiples at their best value in a decade
http://ogres-crypt.com/php/chart-mscf.php?s=GS
Personally I hope Buffett is buying early.
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