Warren Buffet and the $700 Billion Bailout

Big news today was that Warren Buffet was taking a $5-10 billion stake in Goldman Sachs. Two important points to point out is over the last few days Goldman has repeatedly stated that it was in no need of equity and sufficiently capitalized. The second point is not to get too excited. Yes Warren Buffet is the greatest investor of all time and yes he is very shrewd and yes he makes a ton of money on his investments but I would not go as far as the media to say that his investment marks the bottom and would not follow his lead just yet.

Listening to the media there has been 3 prior bottoms as well. His $10 billion is protected to the tune of a guaranteed return of 10% a year. So the bottom is a lot closer for him than us little guys. But this is a good this as a vote of confidence in the sense that the investment community is more willing to make investments in the financial sector…and this could be a turning point. But probably not THE turning point.

On the flip side  Fed Chairman Bernanke and Treasury Secretary Paulson had some trouble selling the $700 billion bailout to the Senate Banking Committee. There is a lot uncertainty regarding this bailout funding and the market will be very reluctant to go higher until it can see the plan come together.

So once again we are in a hurry up and wait mentality.

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