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rwmcpar — Sat, 01 Dec 2007 10:50:10 -0500

Although GS will come out a major winner lets not forget that they managed to be only one step ahead. While Wall Street was talking about CDOs they just recognized that it was bad and took it one step further. BRK on the other hand has maintained a level of standard that is unparalleled. I think it goes to show the incredible restraint that Buffet and Co. have.

Now I understand that that I just summarized the entire article but I feel it is worth reiterating again and again and.....

Response to George

Bridge Street — Fri, 30 Nov 2007 15:19:29 -0500

Good question - I devoted Vol. 3.14 of the Bridge Street Journal to providing my thoughts.

Who Planned Correctly?

George — Thu, 29 Nov 2007 12:01:23 -0500

So the question is who actually prepared for this financial drought? I think Goldman Sachs and BRK did. Any other financials?

Bridge Street Journal 3.13: The Financials and the Scriptures

Bridge Street — Thu, 29 Nov 2007 08:33:46 -0500

Yahoo Finance reports that E-Trade Financial is selling a $2.5B stake to a private equity firm (Citadel) and firing its CEO. It seems that financial writers can make a template with fields like "Company Name," "Amount of Writedown," "Amount of Cash Infusion," "Percent of Stake Sold," and "Name of Ousted CEO," and then have Microsoft Word automatically generate a story upon each day's news. It was only a few days ago that Citigroup announced it sold a $7.5B stake to the Abu Dhabi Investment Authority (here's the story from Businessweek). Freddie Mac, meanwhile, halved its dividend AND raised cash via a stock offering AFTER already selling off assets to raise capital (as recounted here in this unintentionally hilarious article that focuses on the fact that FRE had its biggest one-day price gain in 19 years - but omits to note that the gain comes after the company's shares fell off the face of the world).

All of that leads to an important lesson. In the scriptures, when the Pharoah of Egypt promoted Joseph from prisoner to Director of the Department of Drought Planning (they knew they'd have seven years of good times before having seven years of drought), Joseph immediately began setting aside crops for the coming drought. Not heeding that lesson gets firms into the position recounted in the preceding paragraph: needing to sell shares and assets when things are bad. Companies go public at the top of a market for a reason - they can sell equity stakes at a high price. C and FRE's sale of equity/ assets comes at the BOTTOM of a cycle - the worst time to sell. But, they didn't store up in the good times, a la Joseph, so they don't have the luxury of choosing when to sell. They should have read the scriptures - they'd have noted that, when the drought came, Egypt's good planning not only ensured food for its own people, but allowed it to sell to neighboring nations - presumably for great profits. Such is the luxury of good planning - you can choose your buying/ selling instead of having the market choose for you.

Value Investing News - Bridge Street Journal 3.13: The Financials and the Scriptures - Comments

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Response to George

Who Planned Correctly?

Bridge Street Journal 3.13: The Financials and the Scriptures