So he’s way ahead on his warrants now, but he was way behind, i.e. a “loser”, when Goldman common was at $47. Wrong!! The warrants cannot have a negative value. His cost base is zero. Now, if he had bought Goldman common, then it would matter more. If he bought Goldman common on margin, well then your point would actually be relevant. But he did neither of these. Haven’t you asked yourself why he didn’t buy the common?

Then weirdly you bring in GE. An interesting ploy to introduce a supposed “loser” to water down the big winner. It would have been far more effective if you had included ConocoPhillips, which Buffett has characterized as an “unforced error”. But why stop there? How about throwing in his ill fated investment in Dexter Shoes in 1993?

Whatever, sure, then let’s throw GE into the mix. The “two collectively are losers”? How do you reckon that? Again, that might be true for somebody who bought the common on those dates, but that somebody wasn’t Warren. To say he lost half of his investment in three months is ridiculous.

Now we get to the fun part. Buffett’s warrants to purchase GE at $22.25 on October 1, 2013 are apparently worthless. You might want to send a memo to the poor slob who bought the Jan 2011 calls, strike $22.50 at $0.30 today. Tell you what Jim. How about you write a big pile of those warrants, and I’ll back up my truck and take that worthless crap off your hands. I’d like that a lot.

Does Buffett make mistakes? Of course he does, and he is more forthright in admitting them than 99.9% of money managers. But Goldman wasn’t one of them, rather, it is a sterling example of why he has had such a remarkable career. In your piece, you did bring up some worthy points about Goldman’s business model, but that is just one facet of a unique financial entity. What you’re missing is the big picture, Goldman in its totality, which Buffett with his wealth of experience, is a master at assessing.

With most managers almost everything they do is twisted into a “why they are wrong” scenario. With Buffett almost everything he does is twisted into a “why he is right” scenario?

Regarding his buy into Goldman … He bought his preferred on September 24 when Goldman’s stock was at $133. It bottomed on November 21 at $47. Today it is $155. Can I be graded on this scale too when my investments are judged “right or wrong?”

Recall that he bought the week TARP was passed. He said he bought in anticipation that it would pass and it was a wonderful idea to do it. How has this idea worked out?

His 10% coupon on September 24 compares to a 8.75% yield on the overall Preferred index and 8.52% on the investment grade bond index. So yes he received a premium but it is not a huge as you imply.

Additionally, when you compare it to GE, an investment he made a week later (October 1) with the same terms, the two collectively are losers. GE was at $24 on October 1 versus $11.60 today. Those warrants are worthless.

Buffett admits one of the worst investments he ever made was Solomon in 1987. These investments prove the guy is bad when investing in brokers.

Or, can I lose over half my investment in three months and then pretend I never made it until it bounces back? That is what Buffett is doing.

But, this digresses from the point of the post. Buffett bought a leveraged position in LQD or JNK and thinks it is something other than that.

Collateral Use Increases By 86% to $4 Trillion

http://www.rgemonitor.com/financemarkets-monitor/256551/collateral_use_increases_by_86_to_4_trillion

http://www.reuters.com/article/fundsFundsNews/idUSN0939714920090609

Financial Chaos: The Invisible One Quadrillion Dollar Equation

http://www.intent.com/blog/2008/09/29/stop-a-financial-bomb

https://www.kbcmerchantbanking.com/WPP/D9e01

A failure at CIT could result in losses for Goldman Sachs and Wells Fargo. Goldman last year agreed to a $3bn secured financing facility for CIT and Wells Fargo provided $500m in secured financing.

http://www.ft.com/cms/s/0/980ffa7a-6fe3-11de-b835-00144feabdc0.html?nclick_check=1

So what is tax cheat timmy government sachs doing?

Despite the tough talk about CIT Group not being systemically important enough to be bailed out by the government, it looks like the bailout is coming.

http://www.businessinsider.com/the-cit-bailout-looms-ever-closer-2009-7

Who is really picking up the tab?

The panel, charged with determining whether taxpayers are receiving maximum benefit from the TARP, conducted its own valuation of the warrants the Treasury holds. It found that the 11 banks that have repurchased their warrants from the Treasury for a total amount that the panel estimates to be only 66 percent of current market value, shortchanging taxpayers by $10 million.

http://washington.bizjournals.com/washington/stories/2009/07/06/daily90.html

Goldman Sachs Group Inc executives sold almost $700 million worth of stock since the collapse of rival Lehman Brothers last year, the Financial Times said on Monday.

The newspaper said that most of the stock sales took place while the biggest U.S. investment bank was bailed out by the government with $10 billion of taxpayer money, according to filings with the Securities and Exchange Commission.

http://www.reuters.com/article/ousivMolt/idUSTRE56D03R20090714

http://greenhellblog.com/2009/07/08/goldman-sachs-to-be-carbon-regulator/

http://greeninc.blogs.nytimes.com/2008/11/12/goldman-sachs-buys-into-carbon-offsets/

The bottom line is that Buffett and Munger have more business savvy in one of their grey hairs, than in all of Jimbo’s big brain. To hear him questioning their investment prowess is laughable.