Did GE (and GS for that matter) essentially use Buffett as a tool to prop the stock? The deal, especially the options to buy $3 Billion in stock at a 22.5 strke within 5 years, seems ridicuouly rich to me. Since they're selling $12 billion in stock anyway, is the thought process that if they simpily announed they were raising $15 billion in stock (and no Buffet deal) that the stock would have completely fell apart today? Seems that's the case... and thus it seems that Mr. Buffett gets can't lose deals (especially if he creatively hedges up) to be a poster boy.
I am really starting to see something rotten behind Buffet's moves. First the GS deal with warrants and preferred with a dividend. Then he proceeds to tell congress the sky will fall if they don't pass the bailout. Then this deal with GE again buying preferred with a dividend and warrants to dilute common stock. So the man is going to profit off the greatest financial scam ever perpetrated on the American people the Emergency Economic Stabilization Act. What good can be said about someone like that? Has he lost his magic and his new investment strategy is to invest in the companies that will benefit most from this fraud?
You can't blame buffet for doing what he has always done, buy deep value. He is in a position to capitalize on others problems for the sound descisions he has made thus far, he did not put anyone in this position. His track record supports the celebrity- endorsement premium he is receiving. What scares the shit out of me is why does GE need $$$??? I know they have a big financing unit, but I thought they were mostly financing the big industrial shit they were producing. I can see the direct link between the problem companies thus far and the mortgage / insurance / over levergage mess. But GE? I saw the news flash on TV and turned to watch the sell off. ??? I don't get it. GE?? OMFG. It takes a lot for me to reduce myself to 6th grade texting lingo, but again, OMFG> These off- exchange trades have created counter-party risk that I don't think anyone can guage. I think the pressure to produce returns will show unexpected exposure in surprising places...
I can't figure this deal out in terms of Warren Buffett guidelines. It looks like Mr. Buffett is buying GE stock near the five year price support level established during year 2002. The support level might be about US $ 22 / share. The part that does not make sense to me is yahoo.com http://finance.yahoo.com/q/ks?s=ge reports total debt / equity ratio 4.697 and price / book value of 2.06. Both values seem too high to me for a deep value type investment.