Wednesday, November 16, 2011

Warren Buffet's "Investing Smarts"

Ol' Warren used to preach about 'long-term' investing.  Like Pampered Chef and its magic-breaking 'oven stones,' (which aren't supposed to break, but three of 'em busted in 6 months here....)

But that's so......1990's....

...after the bailout bill’s passage, Warren Buffett sat down and wrote then-Treasury Secretary Henry Paulson a four-page private letter laying out a plan to clean up the toxic assets plaguing numerous financial institutions. Buffett proposed something he called a “public-private partnership fund.” For every $10 billion the private sector invested, Buffett said the government should put up $40 billion. 

After Paulson’s exit, incoming Treasury Secretary Tim Geithner tweaked the plan and rolled it out in March 2009. But according to quarterly reports from Buffett’s holdings company, Berkshire Hathaway, between the time the billionaire crafted his plan and Geithner adopted it, Buffett quietly purchased 12.4 million shares of Wells Fargo stock and 1.5 million shares of U.S. Bancorp. Once the government unveiled its “Public-Private Investment Program,” bank stocks jumped, resulting in large profits for Buffett.

How much Buffett profited is hard to calculate, since there’s no way to know what his purchase price was. But prior to the government adopting Buffett’s plan, Wells Fargo had been trading at roughly $20 a share. In the weeks after Geithner’s announcement, the stock jumped to $30 a share. Likewise, U.S. Bancorp went from $8 in February 2009 to more than $20 a share by May.

Best-guess on the capgains:  $50 million or so.

Geithner is a useful idiot, of course. 



Anonymous said...

Good for Buffet. He is using the capitalist system to his advantage, just like every big business in America! Some get help from (D)'s, others from (R)'s.

So, rather than harp about it constantly, what is the solution?

Jim said...

Wow! Buffett, the single largest shareholder for Wells Fargo, increased his WFC holding by less than 4%. Big move!