Doug Kass
Spoiling the Bullish Nondurables Thesis
9:24 a.m. EDT Jim "El Capitan" Cramer concludes that, based on Buffett's Wrigley involvement and his comments on CNBC, consumer nondurables are cheap. I couldn't disagree more. I am short Colgate-Palmolive (CL Quote - Cramer on CL - Stock Picks), Kellogg (K Quote - Cramer on K - Stock Picks), General Mills (GIS Quote - Cramer on GIS - Stock Picks) and Kraft (KFT Quote - Cramer on KFT - Stock Picks) -- stocks that are trading between 17 times and 24 times earnings, with between 7% and 10% secular growth rates. PEG (price-to-earnings-growth) rates of 2 times have no interest for me, especially in the face of the commodity headwinds these companies now face and will likely face for years ahead.Buffett's Trick Gum Marketing Scheme
11:27 a.m. EDT Buffett demonstrated his brilliance this morning in the Wrigley deal, not as an investor necessarily but as a marketer. Why do I write this? I believe his $4.4 billion of subordinated debt to Mars used to finance a portion of the Wrigley purchase was a sideshow. The real brilliance is how Buffett has marketed himself and Berkshire Hathaway as the safe "go-to guys" without an agenda. As a result, Buffett got a sweetheart deal and was able to invest an additional $2.1 billion at a discount to the share price paid to other Wrigley shareholders in the tender. Here is the precise wording of the press release:Funding for the transaction includes about $11 billion from Mars, a $5.7 billion committed senior debt facility from Goldman Sachs, and $4.4 billion of subordinated debt from Berkshire Hathaway Inc. At closing, Berkshire Hathaway has committed to purchase a minority equity interest for $2.1 billion in a Wrigley Co. subsidiary at a discount to the share price being paid to the stockholders of Wrigley.
Doug Kass is the author of The Edge, a blog on RealMoney Silver that features real-time shorting opportunities on the market.
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