Wednesday, September 24, 2008

Warren Buffett backs Paulson plan.... and Paulson

I heard Warren Buffett interviewed on CNBC this morning. Buffett is buying 5 billion dollars worth of Goldman Sachs, his first buy of an  investment house since 1978, according to CNBC.  (It's not the common stock...)
    "The Market could not have taken another week like the one developing last week," he said, adding that the Paulson plan is absolutely necessary to avoid "going over the precipice..." 
    "If they do it right,  I think they'll make a lot of money," he said. He insisted that they shouldn't be buying this paper at what the institution paid, nor at the carrying value  -- but at bargain basement prices.  He said nobody can "leverage up" right now. If they could and would, there's 15 to 20 % profit to be made.  "I like a market related price," he said. He suggested the government might want to sell off some of it into the market to see what the real price is before buying more....  He said they have the staying power to hold these things until things improve. Holding 700 billion is beyond private entities.
    "You couldn't have any better guy," doing this than Paulson, Warren Buffett said. 
     If you weren't watching the market last week, it went down 300 points one day 340 the next and 405, next  topped by the sequential collapse of  Lehman Brothers, AIG etc etc.  AIG was a crucial fall since it underwrites the debt of every major corporation around the world. 
    "AIG would be doing fine right now if they never heard of derivatives," Buffett said.