Jim Cramer Blog
Boo-Boo Bears Will Pooh-Pooh Buffett Goldman MoveBy Jim Cramer
street.com Columnist
9/23/2008 6:50 PM EDT
How will the bears spin this Goldman Sachs (GS) investment by Warren Buffett?
How, if they are long the credit default swaps, will they explain it? How about if they owned the puts?
How about if they planted all of these stories about how
Foldman Sachs, as I started calling it, isn't a valuable franchise any more because of its new status?
OK, here we go: "Two drunken sailors, Berkshire Hathaway (BRK.A) and Goldman Sachs, team up," by Joe Blow Bear.
"In a desperate gamble to stay in business, Goldman Sachs decided to mortgage its future to Warren Buffett, with a wildly dilutive preferred deal that could eliminate any hope of big profits down the road for the once-venerable firm.
While the market cheered, of course totally overlooking some of the poorer investments Buffett has had of late, not to mention his disastrous experience with Salomon Brothers in the '80s, or US Air for that matter, the company's fund-raising is a tacit admission of the trouble this once-proud institution finds itself in.
CEO Lloyd Blankfein tried to put a good face on it, saying that he welcomed Buffett's investment, but the truth is that the investment bank model when put on top of a commercial bank model is going to mean that Goldman can't make as much money as it used to. The fact that the preferred has a low strike price is a further sign of the erosion in Goldman's once-solid business plan.
"This is a pure sign of desperation," said John Johnson, an assistant professor at Muscle Shoals University. "When you see these kinds of desperate moves, it is a sign that this once-blue chip firm, this once-gold standard firm, has fallen on hard times." Johnson went on to say that the stock, which had traded as high as $250, is now selling for slightly more than book value, which is a sign that this once-healthy institution is truly sick.
Others said Buffett's only got a passing interest in it or he would have bought it outright. "He has more invested in See's Candies than he has in Goldman," one wag sniffed. "The firm was once great. Too bad."
Goldman Sachs traded sharply higher after hours, but it is expected to give that up rather quickly.
There. That's what we have come to. You can bank on it.
At the time of publication, Cramer was long Goldman Sachs.
P.S. Jim Cramer war, bevor er seinen eigenen Hedgefonds Cramer & Berkowitz aufmachte (der 2000 schloss), Trader bei Goldman Sachs. Nach 2000 verdingte sich Cramer mit thestreet.com und seinen bizarren Fernseh-Shows zu Aktien, wobei man fairerweise hinzufügen sollte, dass er noch ca 50 Mio. aus seiner HF-Zeit in der Hinterhand hat.