The Buffett Bump - Fast Money Recap (9/24/08)

Recap of CNBC's Fast Money, Wednesday September 24.

For a second day Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke urged Congress to act swiftly on a Wall Street bailout or risk "serious consequences" for the economy and financial markets. Time is of the essence, explains Dylan Ratigan, because if Congress does not act quickly, banks won't resume lending. In turn, the company you work for, or the small business you run, will have to lay people off or struggle with much higher borrowing costs. As Congress argues over the provisions the White House has backed down on a major sticking point. Treasury Secretary Henry Paulson said he would agree to limit the pay packages of Wall Street executives whose companies would benefit from the proposed bailout. Nonetheless, politicians continue to bicker. Democrats want to add assistance for homeowners while some conservative Republicans recoil at the prospect of federal intervention, at all. It’s clear to me that many members of Congress don’t understand how the financial system works, says Karen Finerman. They’re under the impression that the $700 billion is a payment and that they get nothing back. This is not by any stretch lost money. As the market stabilizes it’s quite possible the $700 billion could appreciate.

Later in the conversation CNBC’s Steve Liesman reveals some of the major points under review by Congress. They follow:

• Limits on incentive for inappropriate or excessive risk taking
• Claw-back provision for bonuses based on info later shown to be false
• Two year golden parachute prohibition
• Treasury must obtain warrants if they buy directly from companies
• Foreclosure forbearance
• Bankruptcy cramdown
• Judicial review
• Establishes strict GAO oversight
• FDIC to manage whole loans
• Mandates normal government contracting rules

After watching the Congressional hearings I defy anyone to be more confident in this system, exclaims Jeff Macke. All politicans want to do is lollygag.

Buffett Bump for Goldman Sachs (GS)

Shares of Goldman Sachs enjoyed a modest bump after investors learned that Warren Buffett had invested $5 billion in the firm. Many take the move to signal a vote of confidence in the bailout plan before Congress. When Goldman got Warren Buffett to invest, they didn’t get just anyone. They got a name that everyone loves, explains Pete Najarian. That has a lot of value. In an interesting twist, an unusual surge in Goldman Sachs' share price in the last 10 minutes of trading on Tuesday raised eyebrows on Wall Street, as it came two hours before news of Warren Buffett's big investment in the bank. Goldman Sachs shares rose more than $5 heading into the close of trading even as the rest of the market tumbled, leaving traders suspicious that inside information was used to make a profit. "Obviously someone knew the Buffett news that was coming out. I noticed it yesterday and I was telling my colleagues something is going on with Goldman," said Dave Rovelli, managing director of US Equity Trading at Canaccord Adams in New York. "That was insider trading and market manipulation," exclaims an irritated Jeff Macke. "Somebody had some information that you didn’t and they took advantage of you. I don’t understand why more people aren’t outraged!"

Seeking Alpha is not affiliated with CNBC, or Fast Money

Comments

[sr9web:]

Buffet buying into GS is a good sign we are near a market bottom.

2008 Sep 25 02:00 AM

[Urbane Gori...:]

"Near a bottom" What does that mean? Kinda reminds me of "Bill and Ted's Excellent Adventure" when they fell into the 'big hole'. They just kept falling and falling, and had to stop screaming to catch their breath only to begin screaming again.

Seems to me I've hearing 'near a bottom' for the last 20% drop in the S&P. Buffet doesn't look for bottoms. He looks for value and expects that sooner or later things will improve. With the returns he's getting, he can afford to wait.

If I recall, he lost a fair hunk of change on his purchase of BUD. It wasn't until the sale that he actually picked up a return. His purchases don't portend any turn-around.

jegan ;-)

2008 Sep 25 03:44 PM

[ATLBob:]

Buffett buying into GS was a good sign that there was an opportunity for BRK to own a nice piece of a 'best of breed' company at a great price, and nothing more.

Since I'm long BRK, it's certainly a good sign.

2008 Sep 26 01:25 PM