Buffett trumps Paulson

The big news did not come during the market hours, it came in after hours.   In case you haven't heard yet, Berkshire Hathaway is making a 5 billion investment in Goldman Sachs' preferred shares.   Why is this news important?   Because we don't remember the last time Mr. Buffett lost money on a large investment like this.    It's also particularly interesting that Mr. Buffett chose Goldman Sachs, out of all of the financial institutions and at such a turbulent time to make this kind of investment.   We can only conclude that he sees value and opportunity in the sector, and especially in Goldman Sachs.   Perhaps, he's also feeling that the end of the financial turbulence may be near an end.    More importantly is what all his followers will think and hopefully follow in time into the financials.    In any case, this is huge news, in our opinion.   The significance of Mr. Buffett venturing into the financial market just beats about any sovereign investment into our financial system.

Frankly, we wish Buffett could be running things instead of Paulson.     Overall, market had another bad day today as the market is losing the confidence of this called government bailout.  This is the volatility we discussed coming out of the Washington struggle into the trading day.   In addition, the fear of slowing economic growth worldwide is hurting a lot of companies too.    As a result, a lot of beta stocks that performed well in a booming economy all suffered badly today. 

Our "love and hate" group of commodity stocks also suffered a pretty big pullback today due to world economy stresses.  For a few plays, they have given back quite bit of gains from the recent runup.   As we have said before, we aren't buying huge chunks of these plays but rather, building small bits at a time and we did add some positions throughout the day.

Again, the focus is going to be centred around Goldman tomorrow and we think what's good for Goldman is probably good everyone else.   We should have a good start tomorrow.    The last thing we need, at this point is to get sold off right after the open.    The scary thing is, with today's drop is last week's low is already coming into play and believe us, nobody wants it to be tested anytime soon.  The overdone action from high to low in the past few days should work great,  if the Goldman/ Buffett news can also coincide with some positive developments out of Washington.   We could have a big day or two to finish the week.