crosswordbebop

For those who haven't seen it already, Berkshire Hathaway agreed to invest $5 billion in Bank of America this morning. The pop in stocks lasted all of 30 minutes. But I wanted to discuss the last Buffett Bailout - of Goldman and what it may portend. My operating thesis is that WB has morphed into a completely political creature and will only make big, publicized investments for propaganda purposes. That certainly was the case with GS in 2008. But like any actor, he has to receive something in return for the use of his name and image. That something is a political guarantee for his "investment" and the history of 2008 supports this. Buffett's deal with Goldman was announced before the US market opened on September 23, 2008. But behind the scenes a lot of political moves were being made that he obviously knew about but few others did at the time. The Fed of course was involved. Over the next few days (through 9/29) they established or increased swaplines with a large nu...

During the Universal Debt Bubble ( UDB ), corporations borrowed a lot of money, so where did it go? Quite a bit of it went into buying other companies as worldwide buyouts reached a record $4.06 trillion in 2006, with about 40% of that in the USA. That was well above the previous record $3.3 trillion in 2000. The difference was that the M&A boom in 2000 was done largely with stock; this one is funded with debt. When things went bad in 2000, the equity didn't have to be paid back, but the debt from the current frenzy will. While a lot of money went to buy other companies' stock, another big chunk funded companies who bought back their own stock. Naturally, all of this debt-funded stock buying has served to prop up equity prices. Many shareholders came to believe that they were in a no-lose position because of continuous demand from buybacks. And if anything went wrong, someone else would swoop in and buy the whole company as part of the M&A wave. That sort of overconfide...