Warren Buffett has once again displayed both his genius and the deal-making opportunities that avail themselves to him because of his stature.
As in the case of newspapers, Buffett has long derided the fate of the financials, in their case due to mortgage trouble, or "folly," as he called it. Overall, then, it is decent news that he is investing at least $5 billion in
. And the terms he was granted to invest in it at this critical juncture were totally legitimate, even if unavailable to blokes like you and me.
So Warren Buffett finally budged. And when the business media ignores or downplays the preferential treatment it took to get the brilliant investor to finally do so, it is easy to conclude that the investing public -- with no access to such terms -- will immediately follow. Factor in the precise terms of Warren's deal, though, and it gets a bit more complicated.
Shouldn't the fact that he is able to negotiate himself a deal above and beyond what the public can, including a hefty dividend and warrants to buy stock below yesterday's closing share price, at least be weighed against all these ready-made business media declarations of how lured he was by Goldman's new business model or what a direct vote of confidence his move was in the future of the financials?
You didn't really ask that, did you?
The New York Times
this morning. This headline and lead showcased the new confidence but ignored the sweetheart terms:
Lead: "Warren E. Buffett, the country's most famous investor and one of the world's richest men, announced on Tuesday that he would invest $5 billion in Goldman Sachs, the embattled Wall Street titan, in a move that could bolster confidence in the financial markets.
"Until now, Mr. Buffett, who has navigated the stock market with legendary prowess, has largely refrained from investing in the stricken financial industry, saying repeatedly that things could get worse.
"Thousands of people on and off Wall Street follow Mr. Buffett's moves."
It's all true. But will Joe and Joan Public have the same confidence and follow Buffett without the warrants and dividend? Perhaps -- but it bears consideration, no? We don't even get fill-out on Buffett's terms until more than halfway through the article, and even though the
points out that "Mr. Buffett is not taking big risks based on the structure of the investment," nowhere does the article then ask:
Will those who have to take risk have confidence and follow him?
's sub-headline said Buffett was "lured" by Goldman's new business model as a bank holding company. And though terms of the deal were at least spelled out in the second paragraph (unlike in the
, which took its sweet time getting to the sweet terms), most of the rest of the article contained testaments to the
new banking structure that had "lured" Buffett
It included no analysis of the effects of those other bright shining lures: the warrants and dividends.
The Wall Street Journal
's sub-headline, the investor's move was a vote of confidence not just in Goldman but in the entire "
." Then, halfway through, we get this line:
"While Mr. Buffett's investment is unquestionably a vote of confidence in Goldman, it is structured to protect him from losses."
Well, right. It's a vote of confidence in Goldman, if a hedged one because of how protected Buffett is. But what about that vote of confidence in the entire banking system we just heard about? Considering the amount of protection it took to budge Buffett to Goldman, the banking system's best player, I guess not so much, huh?
At the time of publication, Fuchs had no positions in any of the stocks mentioned in this column.
Marek Fuchs was a stockbroker for Shearson Lehman Brothers and a money manager before becoming a journalist who wrote The New York Times' "County Lines" column for six years. He also did back-up beat coverage of The New York Knicks for the paper's Sports section for two seasons and covered other professional and collegiate sports. He has contributed frequently to many of the Times' other sections, including National, Metro, Escapes, Style, Real Estate, Arts & Leisure, Travel, Money & Business, Circuits and the Op-Ed Page. For his "Business Press Maven� column on how business and finance are covered by the media, Fuchs was named best business journalist critic in the nation by the Talking Biz website at The University of North Carolina School of Journalism and Mass Communication. Fuchs is a frequent speaker on the business media, in venues ranging from National Public Radio to the annual conference of the Society of American Business Editors and Writers. Fuchs appreciates your feedback;
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