Wednesday, October 01, 2008

Buffett's buffet

Warren Buffett is showing value leadership again, making a $3-billion deal with General Electric (NYSE:GE) for preferred stock.

"GE announced that it has reached agreement to sell $3 billion of perpetual preferred stock in a private offering to Berkshire Hathaway, Inc. The perpetual preferred stock has a dividend of 10% and is callable after three years at a 10% premium. In conjunction with this offering, Berkshire Hathaway will also receive warrants to purchase $3 billion of common stock with a strike price of $22.25 per share, which is exercisable at any time for a five-year term.

Berkshire Hathaway Chairman and CEO Warren Buffett said, "GE is the symbol of American business to the world. I have been a friend and admirer of GE and its leaders for decades. They have strong global brands and businesses with which I am quite familiar. I am confident that GE will continue to be successful in the years to come."

This deal, as well as Buffett's earlier deal with Goldman Sachs (NYSE:GS), is dependant on the Treasury bailout of the financial system. Nevertheless, investor confidence in these stocks is buoyed by the Oracle of Omaha's blessings. Trend traders, though, should stand clear. Both GE and GS are Stock Trends Bearish.
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