The Buffett Effect
Tuesday's late news that Berkshire Hathaway chairman Warren Buffett is sinking $5 billion into Goldman Sachs kick-started today's stocks futures market in the moments before today's opening of the stock market.
Buffett is the world's richest man, according to Forbes, and is a Washington Post Co. director. He is a renown "value investor," which sometimes is another way of saying "bargain hunter." Goldman is a relative bargain right now.
What's interesting is that for the past several months, Buffett has eschewed the financials, saying he doesn't understand how they work. It's a reason he gave for buying into the Mars-Wrigley tie-up earlier this year, saying these are businesses he understands and whose products he uses.
However, it's worth noting that Goldman was the investment bank on the Mars-Wrigley deal.
Historically, the move is reminiscent of J.P. Morgan personally rescuing the crashing stock market in the little-remembered Panic of 1907, when the wealthy financier ponied up $3 million of his own money and directed a $35 million federal bailout to save the system.
September 24, 2008; 9:35 AM ET
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