Email
Password
Remember meForgot password?
    Log in with Twitter

article imageBarry G Hartman on why Warren Buffett is the financial fireman

In this article, learn what financial service expert Barry G Hartman says about Buffett's investments.
While Buffett had to sell some of his stock Johnson & Johnson, Proctor & Gamble, and ConocoPhillips to generate enough money for his deal with the investment bank, he certainly helped in a way very few in the country could.
The deal, according to MarketWatch, came at a point when the federal government was doing everything in its power to bring some stability to both the financial system and the economy. To the dismay of millions of Americans, this also meant that they were pumping millions of dollars right back into the banks.
The original deal made between Goldman Sachs and Buffett was that the billionaire would invest $5 billion into the investment bank for preferred stock. He also received warrants to buy $5 billion worth of stock at $115 per share. He would have five years to exercise the stocks, according to MarketWatch, which came with 10% dividends.
Then the deal was changed in March of 2013. Instead of allowing to Buffett and Berkshire Hathaway buy over 43 million shares at $115 before October 1st, according to Nasdaq, they decided on a different deal. Goldman Sachs said that they would give Buffett “the number of shares equal to the value to the difference between the average closing price of the 10 trading days leading up to Oct. 1, 2013 and the exercise price multiplied by the 43,478,260 shares the warrants granted.” The changes made the deal smaller than the original, but didn't require Buffett to spend any money on the warrants.
Furthermore, it was disclosed on Oct. 8 that the new deal gave Berkshire $13.06 million in shares, which in turn made him the sixth largest outside shareholder in the company. At the time of the deal, Buffet said, according to MarketWatch, “We intend to hold a significant investment in Goldman Sachs, a firm that I did my first transaction with more than 50 years ago.”
Barry G Hartman, a 30-year veteran of the financial services industry who specializes in helping both retired clients and those approaching that stage, had nothing but praise for Buffett's investments.
“Buffett used his smarts, savvy, and expert forecasting to lend a helping hand to those companies that were going through a hard time, but showed promise for the future,” says Barry G Hartman. “He chose wisely which corporations have the ability to come out of the recession, begin contributing to the economy again and propel the nation out of the crisis. He positioned correctly and I can't think of a single person who thought he would be wrong. While most other investors were overwhelmed with fear, Buffett saw it as an opportunity to step in, help prop the economy up, and ultimately benefit in the end.”
The Goldman Sachs investment was very good for Buffet and his company, as Hartman notes, but he also made investments in companies such as Bank of America, GE, and Dow Chemical. According to Nasdaq, Buffett's deals during the financial crisis totaled $14.5 billion.
As Buffet himself wrote in a 2008 letter, “We very much like these commitments, which carry high current yields that, in themselves, make the investments more than satisfactory. But in each of these three purchases, we also acquired a substantial equity participation as a bonus.”
In the end, Buffett was only living by one of his philosophies: “Be fearful when others are greedy, and be greedy when others are fearful.” It's a goal that seems to be working for him stilll, as his investments in that period earned him over $10 million five years later, in 2013.
Only the future will know if Buffett's actions and advice will lead others to invest when all looks bleak, but there's a good chance that the Oracle of Omaha will be there. To him, it's just the smart thing to do.
As he once said: “You make your best buys when people are overwhelmingly fearful.”
More about barry g hartman, Warren buffett, Investing, Recession
 
Latest News
Top News