Mastery

Why Yahoo Finance Is Wrong About Buffett

A) Exchange traded Goldman Sachs Preferred stock is down about 30% in value since Buffet invested - see NYSE listed GS-B This means that a five billion investment in GS prefs made then might indeed therefore now be said to have lost 30% of its value as measured against the market performance of pref shares..
B) Even if the warrants were purchased as part of a package in combination with the pref shares they still had some value. To suggest WB bought them for free is ludicrous. GS is not in the business of giving away options on its equity for free! Looking at traditional Black Scholes models to value this it has indeed lost half its value.
I think it therefore entirely reasonable to say that Buffet is down $2 bln on his $5bln investment on a mark to market basis.
What is also ignored in this discussion is the huge number of put options Berkshire Hathaway wrote on Stock Indexes in 2007 - see the 2007 letter to investors. If these are properly marked to market they must be costing Berkshire billions and billions. What about the other 94 derivatives such as credit default swaps. Was this the reason for Buffets very public announcement of investment in GS - was this an alternative to putting up margin?