Buffett and Cramer: Bailout Could Prove Profitableby Tim Manni
World-renowned investor Warren Buffett and his company Berkshire Hathaway will reportedly invest $5 billion in Goldman Sachs, a move many are calling an astonishing vote of confidence for financial markets. Is this a sign that private investors like Buffett can control the market’s direction and future stability without a government intervention? Or does Buffett believe, despite the Senate’s seemingly strong opposition to Paulson’s $700 billion bailout, the plan will be voted into law anyway, re-energizing the profitability of the market?
Either way, Warren Buffett is an intelligent investor who obviously sees a profitable opportunity in not only Goldman, but perhaps the financial markets in general. Buffett also told CNBC that, if handled correctly, the US government could turn a profit on their purchase of billions in bad assets:
While “no one likes to write” a $700 billion check, Buffett thinks the government could make a profit when it eventually sells the now-toxic debt it would be acquiring in a bailout. “They could make money on this,” he predicts, if it’s handled properly.
Buffett isn’t the only one who believes the US has the potential to, not only leave taxpayers unscathed, but make a profit on their acquisitions of bad debt. Mad Money’s Jim Cramer believes Paulson’s bailout may not even cost a thing:
Once Paulson’s plan is put in motion, home-price depreciation should stop. That means the mortgage-related paper the government will then hold would no longer be worthless. Plus, the government can work with owners in any way necessary to keep them in their homes. And it looks like Washington will be taking an equity stake in any company that takes part in the plan, which means there’s even a chance to make money rather than lose it.
Fed Chairman Ben Bernanke continues another day of testimony before lawmakers today, in which he continues to urge that a swift decision will prove most effective in securing the future of the economy.