Aug. 30, 2011, 9:21 a.m. EDT
Follow Buffett into B. of A. at your own risk
Commentary: Why other investors won’t match Berkshire’s return
By David Weidner, MarketWatch
NEW YORK (MarketWatch) — When it comes to Warren Buffett, an old axiom comes to mind: “It takes money to make money.”
For Buffett’s legion of copycats, there is an addendum: “... and unless your name is Warren Buffett, even if you have money, you might not make money at all.”
That’s the reality facing investors after Buffett shocked Wall Street on Friday by announcing a $5 billion investment through Berkshire Hathaway Inc. in star-crossed Bank of America Corp.
Simply put, this is a great deal for Warren Buffett. For everyone else, it’s probably a loser.
Two big reasons stand out. As many have noted, Buffett’s investment is a sweetheart deal aimed at giving B. of A. a much-needed lift through both a cash infusion and the cachet of having Warren Buffett as a big investor. He may end up owning as much as 6.5% of the Charlotte, N.C.–based bank.
Secondly, and more importantly, nothing has changed at B. of A. It’s still one of those “too big to fail” institutions that the government must support. So, even though it’s added some short-term capital — a drop in the bucket of what the bank actually needs — the deal will actually end up hurting shareholders by cutting into profits (if the bank actually makes some).
Indeed, Buffett’s deal actually makes things worse by creating a new cost.
Full story: http://www.marketwatch.com/story/sorry-warren-bank-of-america-still-stinks-2011-08-30
Gold is $1,581/oz today. When it hits $2,000, it will be up 26.5%. Let's see how long that takes. - De 3/11/2013 - ANSWER: 7 Years, 5 Months
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