Did Value Investor and Living Investment Legend, Warren Buffett, invest US $ 5 Billion in Goldman Sachs in September 2008 for reasons other than Value !?

On September 23,2008,Warren Buffett’s (WB) Investment Behemoth,Berkshire Hathaway (BH) announced it would invest US $ 5 Billion in preferred stock of Goldman Sachs and would receive 10% annual dividend.It would also be alloted warrants that would give it an option to invest a further US $ 5 Billion in Common Stock at a strike Price of US $ 115 to be exercised inside five years

This was seen at the time as a WB Confidence booster for the US Financial System and the Share Price of Goldman Sachs closed high at US $ 133 after the announcement

What it apparently was,was just a consequence of the tottering US Financial System….The Share Price of Goldman Sachs has since dived to close at US $ 69 yesterday with a Market Cap now at a low of US $ 27 Billion 

There are strong suggestions that this Investment in Goldman Sachs is linked to the Mark to Market Loss Margins on the Bets on S & P 500 and three other Foreign Indices made by WB’s BH in 2007 when Dow Levels were around 13000…Dow has since dropped to 8500 levels

This is the Bets that WB’s BH has made in 2007…he has bet that in the next 15 to 20 years the S & P 500 and three other Foreign Indices would be at higher levels than around the levels  at the time the bet was made..BH has used Goldman Sachs as the Broker and has sold Option Contracts of  ‘Naked Puts’ and got a premium aggregating US $ 4.5 billion for underlying contract values of US $ 37 Billion to a group of undisclosed buyers

As BH has impeccable credit it was not required to put up any collateral margin at the time of the bet in 2007.However alongwith the Dow which has fallen to levels of 8500,so have all the four Indices on which the bets were made and there is a mark to market loss of around US $ 6.7 Billion  till date and the Counter Parties were demanding that Goldman Sachs put up some collateral

Reportedly this Collateral has been provided and disguised by BH as an Investment of US $ 5 Billion in preferred stock of Goldman Sachs  

Apparently Mislead Investors,mislead by leading Investment Experts and Investment Media had followed WBinto Goldman Sachs in September and October 2008 at over US $ 100/share…They have seen an erosion of 40% inside two months

SEC must investigate and exonerate WB if this is not true….but the blemish does remain that a Living Investment Legend like WB has drifted away from his Value Investment Philosophy and speculated with Index based Derivative Instruments…which he has constantly cursed as Weapons of Mass Destruction…the temptation was probably just too much and US $ 4.5 billion premium received looked at the time as money for jam…Of course if the Dow revives and crosses 13000 in the next 15 to 20 years,BH would be back in the money as there will be a recovery of the S & P 500 and the other three Foreign Indices too…till then it’s a notional loss supported by a collateral margin now read more