Sage of Sugar Land

Buffett's Biography: Is Goldman Sachs the New Salomon Brothers?

Sorry about the typos--obviously, I meant 2016 where I typed 1916.


On Dec 28 09:58 AM Sage of Sugar Land wrote:

> Some interesting thoughts, but overall the author seems to be out
> of touch on many key points.
>
> Examples: The similarities between Salomon and GS--Warren never
> will, and will never need to, take on a role at GS that is similar
> to the one he did at Salomon. The only way Buffett will lose with
> the GS deal is if the company goes under--not impossible, but extremely
> unlikely. In the meantime he is collecting 10% interest, is assured
> return of capital (except if GS goes under), an is assured a 10%
> fee if the debt is repaid early. The warrants, if he gets to exercise
> it for a profit, is icing on the cake.
>
> Another example: his 1999 call of a sideways market until 1916 was
> brilliant indeed. But remember the SP500 was in the 1300 to 1400
> range then. In Nov 2008, with the SP500 around 750, the 1999 call
> if proven right, means a 1350 or so SP 500 in 1916--or an approximately
> 80% gain in 8 years. This is a annualized return of about 7 or 8%,
> plus a dividend of over 3% --for a cumulative return of around 10%
> for the next 8 years. Perhaps Mr. Cooper considers this inadequate.
> REMEMBER: Graham defined Investment as "an operation which, upon
> thorough analysis promises safety of capital and an adequate return"

Buffett's Biography: Is Goldman Sachs the New Salomon Brothers?

Some interesting thoughts, but overall the author seems to be out of touch on many key points.

Examples: The similarities between Salomon and GS--Warren never will, and will never need to, take on a role at GS that is similar to the one he did at Salomon. The only way Buffett will lose with the GS deal is if the company goes under--not impossible, but extremely unlikely. In the meantime he is collecting 10% interest, is assured return of capital (except if GS goes under), an is assured a 10% fee if the debt is repaid early. The warrants, if he gets to exercise it for a profit, is icing on the cake.

Another example: his 1999 call of a sideways market until 1916 was brilliant indeed. But remember the SP500 was in the 1300 to 1400 range then. In Nov 2008, with the SP500 around 750, the 1999 call if proven right, means a 1350 or so SP 500 in 1916--or an approximately 80% gain in 8 years. This is a annualized return of about 7 or 8%, plus a dividend of over 3% --for a cumulative return of around 10% for the next 8 years. Perhaps Mr. Cooper considers this inadequate. REMEMBER: Graham defined Investment as "an operation which, upon thorough analysis promises safety of capital and an adequate return"