Buffett Knows the Score on Goldman

Warren Buffett is not an idiot. He has kept his powder dry through all of this madness and suddenly, within one week, he has opened his coffers and picked up not one, but two multi-billion-dollar steals, Constellation Energy (CEG - commentary - Cramer's Take) and Goldman Sachs (GS - commentary - Cramer's Take).

These investments are the first sign that someone, some grown-up, is coming in from the sidelines, not because he has been talked into something that he doesn't want to do or understand -- which has been the case in all of the other bank financings -- but because he sees a delicious rate of return that will be hard to take away now that he has put his balance sheet to work, one of the last with any firepower to make a difference.

First, Constellation. Here's a perfectly good utility that, because of its business model, needs capital to work. It made several miscues that brought it to its knees -- a business that is a regular, good generator of income gone bad because of financing. I have no idea how low it would have gone, but as long as it was intact, it was worth a lot more than it was selling for to someone who has financing, and that's what Buffett has in spades. He stole the company.

Now along comes Goldman Sachs, a company with a glorious history of making money in good and bad times -- and believe me, this is a bad time -- and he snaps up a huge chunk of the firm with a preferred deal that gives him a 10% return and a lot of upside, better terms than he could ever get from Wells Fargo (WFC - commentary - Cramer's Take), a well-run bank that he has a big position in but that's nowhere near as profitable as Goldman.

Why did he do it? Because, again, like Constellation, the company has a great business and great business model that, unfortunately, needs credit to work and, again, who has credit and its sister, credibility? Just Buffett.

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