In an interview with Reuters, Senator John McCain mentioned Warren Buffett and former eBay (NASDAQ: EBAY) CEO Meg Whitman as possible choices to succeed Hank Paulson as Treasury secretary: "I think it would be someone that Americans would recognize that would inspire trust and confidence. There's people like (Cisco chief executive) John Chambers, there's people like Meg Whitman, there's people like Warren Buffett."

That certainly would be interesting as, in addition to being the greatest financial mind in the world ever, Buffett is also a hardcore Democrat and a supporter of Senator Barack Obama.

It's also almost inconceivable that Buffett would leave Omaha and Berkshire Hathaway (NYSE: BRK.A) to go wrestle pigs in Washington. Buffett's pledge of substantially all of his fortune to the William and Melinda Gates Foundation demonstrates his commitment to charity and improving the world but there is nothing in Buffett's history to indicate he would want to spend his days devoted to matters of public policy: he enjoys investing.

So why would McCain bring it up? He probably just wants to look more competent and open-minded on matters of economic policy -- and name-dropping Buffett is easy because he knows nothing will ever come of it.

The market is bouncing around with every bit of news leaked from the Congress as well as company warnings and Federal reports. 'My pal Warren' is frequently being asked his opinion about the stock market and his 'stock answer' is that he ignores the overall market and its daily gyrations and focuses on individual investments and price (value).

Buffett drew plenty of attention this week when he invested $3 billion dollars in General Electric (NYSE: GE) preferred shares set at a permanent 10% return with a buyout clause allowing GE to get them back at a 10% premium. In addition Berkshire Hathaway (NYSE: BRK.A) received warrants to buy an additional $3 billion worth of stock anytime in the next five years at a strike price of $22.50.

The company recently announced that it would curtail its stock buyback plan in favor of maintaining its dividend and its rare Triple-A financial rating. Given the vote of confidence expressed by Buffett (he got a great deal again) and the dividend yield of about 5% this stock is just screaming at me to buy more, but at what price.

Well, I have no crystal ball, but if you can buy GE at something less then the BRK.A warrant price and below its ten- year price you have to at least give it consideration.



Even though GE warned that earnings would fall below expectations for the quarter, (they report October 10, 2008, in one week), they are still earning more than they were the last time they were at this price. As a matter of fact, the metrics are far better now than they have been, according to this weeks Barron's recent follow-up story dated September 29, 2008.

They report that revenue has gone from $13 per share in 2000 to $19 now; cash-flow has increased from $2.00 to $3.30; earnings are up from $1.29 a share to $2.00 and the dividend has escalated to $1.25 from $0.57, yet the stock is 50% off recent highs.

As I have stated many times in other stories, if you are looking for an alternative to bonds or low paying treasuries that will give you a very healthy yield and the potential of sizable appreciation GE is a place to look. And now you can call Warren Buffett partner...sort of.

UPDATE: GE closed today at $21.57. Disclosure: We bought in at $22.00.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own shares of BRK.B & GE.

Offering advice to Congress by phone, Warren Buffett had a message for lawmakers: act decisively now or face "the biggest financial meltdown in American history."

With all due respect to Warren Buffett, it seems a little bit self-serving. When he invested $5 billion in shares of Goldman Sachs (NYSE: GS) last week, Buffett told reporters that the investment was partly motivated by a belief that Washington would act quickly to allow Wall Street firms to dump their bad assets on taxpayers.

Therein lies the problem: the bailout will be a huge boon to equity holders in investment banks, and that's wrong. If a bailout is needed to save the economy from a depression, that's one thing, but it shouldn't be used to pump up share prices. As much as I love and respect Warren Buffett, I'm a little bit bothered by the fact that he stands to make billions from a bailout -- aren't there people more deserving of welfare? Of course, I don't blame him, but I do blame lawmakers for not pushing for huge equity stakes in the companies being offered cash for crap as part of the $700 billion plan.

Another question, one that I've raised before: if these "illiquid assets" are such a great deal, why is Warren buying stock in anticipation of a bailout instead of buying the bad mortgages?

Any smart gambler, amateur or professional, knows that you only risk what you can afford to lose. That may be $1, $100, $500, or even a million dollars in a real estate or other major transaction. But only a fool bets the farm. Only a fool risks all.

What made so many bright minds all around the world foolishly bet the farm? One after another, that is what they did. Now we are all paying for it, some more than others. It was not just greed. It was something else.

How did this happen? I call it 'The Great Disconnect'.

When the managers of public companies do not suffer the same fate or consequences as their shareholders you have a disconnect! When politicians give lip service to understanding the pain of their constituencies but accept huge contributions from the enterprises they are supposed to regulate and oversee creating gargantuan conflicts of interest, you have a great disconnect.

When investment houses create financial instruments that are so complex that they cannot fathom the risk and the ratings agencies put candy coated frosting on them, you have a great disconnect!

I would propose that legislators not be allowed to accept any contribution creating a conflict of interest based on the committees they sit on. $700 billion reprise: Conservative bankers? Surely you jest!

I might even consider creating an independent committee of citizens selected from the willing, be placed in a position to review such matters.

With shares of Goldman Sachs (NYSE: GS) rallying on the news that Warren Buffett is investing $5 billion in the company, it's a good time to reexamine some of the conventional wisdom about the bailout.

The theory behind the need for $700 billion of your money to buy mortgage assets from the big banks is the notion that the market is illiquid and that the securities are not trading at rational prices. The banks are short of capital and if they were to liquidate those assets now, they'd be forced to accept fire sale prices, gravely threatening their ability to continue as going concerns.

So here's my question: if the market for subprime debt is so irrationally pessimistic, why doesn't Buffett take his $5 billion and go hunting there? Either Buffett doesn't think those assets are a good deal or he's stupid. I'll take a guess: Buffett isn't stupid. He's uncomfortable with the level of uncertainty surrounding those dog crap assets, and so is any other rational investor. So the banks can't sell them for what they need to, scream "illiquid market!", and Uncle Sam rushes in with the pacifier.

Here's what's so despicable about this plan: the $700 billion of taxpayer money will shore up the financials enough to allow one of the world's richest men to line his pockets even further. Warren Buffett has no greater fan than myself, but I don't think that we should be bailing out the financials for the benefit of people on the Forbes list.

It looks like Berkshire Hathaway Inc (NYSE: BRK.A) CEO Warren Buffett needs another bite of the big apple. Bloomberg News reports that last night Buffett bought a stake in The Goldman Sachs Group (NYSE: GS). Let's hope he has better luck with this investment than the last time he ventured into New York to buy an investment bank -- his 1987 buy of a stake in bond trader, Salomon Brothers. Back then, Buffett doubled his money in a decade -- and went through nine months of misery cleaning it up after a bond trading scandal.

But let's get back to the present -- what exactly did Buffet do with Goldman? He bought "$5 billion of perpetual preferred stock with a 10 percent dividend. Berkshire also gets warrants to buy $5 billion of common stock at $115 a share at any time in the next five years," according to Bloomberg. Goldman can buy Berkshire's preferred stock in Goldman "at any time at a 10 percent premium" and it yields a "10 percent dividend," according to Bloomberg.

Will this work out better for Buffett than his ill-fated Salomon Brothers deal? in September 1987, 21 years ago, Buffett bought "$700 million of Salomon convertible preferred stock -- pay[ing] 9% and convertible after three years into Salomon common stock at $38 a share--against the $30 for which the stock had been selling. This equated to a 12% stake in the company," according to Carol Loomis.

TheStreet.com's Jim Cramer says he at least recognizes value when he sees it.

Warren Buffett is not an idiot. He has kept his powder dry through all of this madness and suddenly, within one week, he has opened his coffers and picked up not one, but two multi-billion-dollar steals, Constellation Energy (NYSE: CEG) (Cramer's Take) and Goldman Sachs (NYSE: GS) (Cramer's Take).

These investments are the first sign that someone, some grown-up, is coming in from the sidelines, not because he has been talked into something that he doesn't want to do or understand -- which has been the case in all of the other bank financings -- but because he sees a delicious rate of return that will be hard to take away now that he has put his balance sheet to work, one of the last with any firepower to make a difference.

First, Constellation. Here's a perfectly good utility that, because of its business model, needs capital to work. It made several miscues that brought it to its knees -- a business that is a regular, good generator of income gone bad because of financing. I have no idea how low it would have gone, but as long as it was intact, it was worth a lot more than it was selling for to someone who has financing, and that's what Buffett has in spades. He stole the company.

The market has been waiting for billionaire investor Warren Buffet's investment company Berkshire Hathaway (NYSE: BRK.A) to invest in a financial firm, and Buffet announced yesterday that he would invest $5 billion in Goldman Sachs (NYSE: GS).

The $5 billion will be used to purchase perpetual preferred stock bearing a 10 percent annual interest rate.

The move comes as Goldman is looking to raise $7.5 billion worth of fresh assets. In addition to the initial $5 billion investment, Berkshire also will be receive warrants to purchase an additional $5 billion worth of common stock in the company for $115 a share. The stock closed yesterday's trading at $125.05, and has jumped nearly 7% in after hours trading following this afternoon's announcement.

This is my 800th post, so I thought I would have to mark the occasion with something very serious, and R. P. Overmyer once again supplied the kindling for my fire.

Many comments we receive ask why George W. Bush should be blamed for the dire state of the economy; that the President is just one more victim of circumstance. Others think the legislature should take the blame, or that it's a Democratic vs. Republican dilemma.

As I have tried to do in each of my posts that stray into politics, I will try my best to focus on the financial issues. If anyone cares, I tend to vote independent of party affiliation and tend to follow a moderate path. Interestingly each party tries to paint the other as more extremist in an attempt to get my vote.

The easy things first; the Republicans controlled the executive and legislative branches of government for the majority of GWB's term. It is true that the Democrats were less than cooperative these last 20 months and all too eager to watch Bush boil in his own stew, but for half that time everyone has been cooperating to make sure the financial markets do not collapse. All the blame should not fall on Bush or the Republicans, but I think it is not a hard case to make that the leadership and opportunity was theirs this go round and they screwed up -- he screwed up!

"Warren Buffett's holding company, Berkshire Hathaway (NYSE: BRK.B), has been the single greatest investment of our lifetimes," says Alexander Green, noting, "His compounded annual gain from 1966 to 2007 was 21.1% vs. 10.3% or the S&P 500."

In the Oxford Insight, the investment director explains, "It is now time to buy the 'ultimate no-brainer'." Here's his assessment.

"Despite this strong long-term performance, Buffett experienced a rare earnings letdown during the second quarter of this year.

"Although revenue increased 10% to $29.3 billion, insurance related write-downs hurt the company's bottom line. Still, the shortfall was far from cataclysmic. For the quarter, earnings fell 7.6% to $2.88 billion.

"Despite the shortfall, the company still maintains a top-notch credit rating and has over $28 billion in cash, a war chest for the world's greatest investor. How has Buffett been so successful? He takes a disciplined value approach to investing. And he sticks with it.

The following two-part article puts forth ten stock ideas that I believe would be better off in your investment portfolio than one comprised primarily of Certificates of Deposits (CDs) or bonds, or even government treasuries. This is not to say that CD's do not have value or offer some level of security, but they are long term losers.

A basket of high yielding-high quality stocks can offer a higher return, better tax advantages, and the potential of significant appreciation for those with a long time horizon. Five year CD earning 4%, or a utility stock? I pick the utility every time.

My wife sent me the following quote from Ambrose Redman that I thought would be worth sharing with readers: "Courage is not the absence of fear but rather the judgment that something else is more important than one's fear."

It seems that might be extended to one's view on investing as well. What is really important, the short term or the long term, growth or value, the promise of riches or the hope for stability? In each case I would favor the latter over the former and this brings to mind one of my pal Warren's lessons: Do not buy a stock unless you would be happy to own it even if the market was closed for ten years.

Berkshire Hathaway (NYSE: BRK.A and BRK.B) is certainly a candidate. Take a look at last week's Chasing Value: Considering Berkshire Hathaway... again. However, it does not pay a dividend. The following five quality stocks do:

Over the summer, my twelve-year-old son proclaimed that he was going to be the world's first zillionaire! I had to explain to him that if he achieved that lofty goal he would be the only one because that is more capital than exists today; unless he meant Zimbabwean dollars. I suggested that long before he owned the whole planet there might be a few objections here and there.

This got me thinking about my pal Warren, a frequent topic of conversation in business and investment circles, and how he amassed such a great fortune over the past five decades.

He is a long way from owning the world but he has started to expand his horizons to the international scene. He has bought and sold PetroChina (NYSE: PTR) for a tidy $4 billion dollar profit and he has been hedging against the dollar for the last few years with mixed results. He bought an Israeli metal fabricator and he has splashed about in Europe and Asia.

If you read Berkshire Hathaway's (NYSE: BRK.B) annual reports you will find the chairmans letters, where Buffett discusses both his successes and his failures. It is his failures and the fact that he does not make the right call every time that I wish to draw attention today. BloggingStocks promotes much debate, sometimes name calling, and sometimes worse. However, it is important to understand that even the best investors make mistakes.

The stock market was down yesterday and it is down again today. Bearish sentiment is roaming through Wall Street right now, so I thought I would look back on another occasion when the market was going through similar turmoil and I wrote about the following eight stocks, which I thought would be "safe havens" in such a storm.

Six of the eight did well and two did not, and of course one of those two was a disaster. Among the losers, I do not think anyone is fretting about UPS, which is still one of the few triple-A rated companies along with Berkshire Hathaway. It has been well reported that the slowing economy and higher fuel prices have been the major culprits affecting UPS's earnings. In the case of WaMu, it's demise has also been well reported, but at the time I recommended it WaMu had a stellar reputation of growth and high yield for over two decades. There is no hiding, it turned out to be a lousy pick and an ANTI-SAFE Haven

NOT SAFE:

United Parcel Service (NYSE: UPS) closed Monday at $65.30 down from $78.40; a 16.71% loss

Washington Mutual (NYSE: WM) closed Monday at $4.21 down from $45.50; a 98% loss.

Fortunately the remaining six picks have done very, very well. If you had bought the pool, the average gain over the last two years would have been 7.14%. Adding the dividends over the two years would have raised this to 13.14%.

Mark your calendars: September 29th, 2009 will mark the debut of the long-awaited official biography of Warren Buffett: The Snowball: Warren Buffett and the Business of Life.

The list price is $35, but Amazon has it for $23.10, giving it a price/pages ratio of .023. This compares favorably with The Warren Buffett Way, which has a price/pages ratio of .037. Buffett would be pleased with the value proposition here.

The USA Today reports that the author, former insurance industry analyst Alice Schroeder has spent "thousands of hours" with Buffett, and also interviewed his friends extensively, and was given broad access to his records.

There are only a few topics that I'd be able to read 976 pages about without losing interest: I suspect that Mr. Buffett is one of them.

Not many companies in the insurance business largely dodged the current credit crisis. No one should be surprise that Warren Buffett's Berkshire Hathaway (NYSE: BRK.A) is on that list. The company's insurance underwriting operating division saw it business slow a bit, otherwise the company did remarkably well.

Berkshire's net income fell to $2.88 billion, or $1,859 per Class A share, from $3.12 billion, or $2,018, a year earlier. Revenue rose 10% to $30 billion. The numbers beat Wall Street estimates. Investment income actually rose 3% to $884 million, quite an accomplishment in a down market.

Investors sometimes forget how hard it must be to squeeze improving results out of a company like Berkshire. It operates businesses from furniture retail to jet leasing to Fruit of the Loom.

By any set of odds, Buffett should have some bad quarters, even one really bad quarter. That never seems to happen.

Douglas A. McIntyre is an editor at 247wallst.com.