Closely watched Buffet recalculating his bets - Essay Example

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Warren Buffet gives us a very interesting insight into the brilliant mindset of this very famous investor. The head honcho of Berskhire Hathaway is a living legend with his own inimitable style of takeover strategies in the world of financial cesspool…
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Closely watched Buffet recalculating his bets
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Mr. Warren Buffet – Into the Mindset of a Genius This short article on Mr.Warren Buffet gives us a very interesting insight into the brilliant mindset of this very famous investor. The head honcho of Berskhire Hathaway is a living legend with his own inimitable style of takeover strategies in the world of financial cesspool. His own investment policies tread very much on the same lines as that of Mr. Benjamin Graham, a leading name in the realm of modern security analysis.
The year 2008 saw a heavy landslide fall in American economic conditions and a downward spiraling of stocks in the Wall Street markets leading to a financial crash down that shook even the high and the mighty. Even financial wizards like Mr. Buffet took a beating, amounting to around $25 billion in personal losses. However proving that he was made of sterner stuff, he took the initial beating and then decided to turn round this very crippling period of economic recession to his own advantage. Here he treaded paths where very few would have ventured and he dared to turn tides in his own favor. It was Mr. Buffet who advised the American government to bail out the plummeting financial market. It was again him who at the very middle of this turmoil advised all Americans to buy as many stocks as possible. And true to his given advice he led the way. Against all common sense and amidst general misgivings he decided to invest $5 billion in Goldman Sachs in September 2008. This was perhaps the boldest step ever taken by him in his entire career as a financial investor. After about eight days he declared that he was going to invest another $3billion in General Electrics which was at that time on rather shaky grounds. Mr. Buffet has labeled such companies as “sleeping beauties” as their stock market values are far lower than their actual book values. He believes in taking over such companies that are in turmoil and may look for takeovers or getting grounded. He invests in them by buying large amounts of stocks in the company and gets financial help in the form of concessions, in exchange.
If we take a closer look at his modus operandi we will see a very sharp mind and a logical pattern of thinking behind these seemingly very absurd moves. As the Government sets off to bail out these companies to stabilize the failing economy we find that Mr. Buffet does not get any direct personal help. However, his stocks get the benefit of being bailed out by using the general taxpayers’ money. He invested in Goldman Sachs and General Electrics which all received financial bail outs from the government. So public money helped Mr. Buffet make billions where others were turning paupers.
At present Mr. Buffet however seems to have had a change of mind. After going on a stock buying spree last year, now we find that Berskhire Hathaway is treading a little more cautiously. Less stock are being bought at the moment and investing is being made mainly on government security and debt bonds. According to Mr. Buffet the economic crisis though on the way to recovery may yet stumble and fall back once more. In his words “We are not out of problems yet... We have got to get the sputtering economy back so it is functioning as it should be.” (quoted in Bowley, “Closely Watched Buffet Recalculating His Bets”). He has had his share of mistakes too. His investment in an energy production company when the fuel prices went sky high did not fare well and so did his stocks in two Irish bank investments. In fact we find that in the present scenario his company is selling more stocks than buying, especially those that of the infamous Moodys and has pulled down its investment in its share to only 2%.
As we read the article we understand what stuff geniuses and legends are made of and why they stand apart. This economic crisis which perhaps has been the worst in this decade saw the fall of many giants and stalwarts in the financial world. The gravity of this economic meltdown can be best understood the way Mr. Buffet framed it by comparing the financial damages to be equivalent to that sustained in the attack of the Pearl Harbor, only this time the Pearl Harbor was happening in Wall Street. He definitely suffered initial setbacks (his company made a loss of $1.53 billion and lost one fifth of its value in the market in the first quarter of 2008) and as he says, he believes in bargaining and buying things now, he pulled himself up and put on his thinking cap and made millions where others made none. As Mr. Buffet himself tells us “It has been an incredibly interesting period in the last year and a half. Just the drama...Watching the movie has been fun, and occasionally participating has been fun too, though not in what it has done to people’s lives.”(quoted in Bowley, “Closely Watched Buffet Recalculating His Bets”). Mr. Buffet, a living legend and a financial wizard to many small time investors and financiers, have lived up to his title even in this scene of economic meltdown worldwide and in spite of some of his failures in his recent investments.

Works Cited
Bowley, G. “Closely Watched Buffet Recalculating His Bets”. New York Times, Economy.
8th September 2009. B1. Read More
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