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Warren Buffett sought to capitalise on the woes of global business again yesterday as he announced plans to buy $3 billion of preferred shares in General Electric as part of a $15 billion (£8.4 billion) capital-raising by America’s largest conglomerate.
Mr Buffett, who agreed last week to invest $5 billion in Goldman Sachs after a sharp fall in its share price, will also secure the shares in GE at a relatively low price as the group’s stock has declined by 34 per cent this year.
The shares have been hit by a poor performance from its GE Capital Finance arm, which brings in close to half its revenues, and concerns about the outlook for the broader economy. Mr Buffett said: “GE is the symbol of American business to the world. I am confident that GE will continue to be successful in the years to come.”
His comments came a week after he appeared to position himself for an investment in GE by giving the group his vote of confidence. At that time, Mr Buffett, who always invests in high-profile companies, pointed out that GE has “strong global brands and businesses with which I am quite familiar”.
Although GE had repeatedly said its finance arm was solid, it was forced to change tack last week as it cut its third-quarter and full-year profits guidance.
The group cited “unprecedented weakness and volatility in the financial services markets” for the profits warning and announced a series of moves to bolster its position. These included suspending its share buyback programme and making a forecast that the group would probably not increase its dividend this year, for the first time since the 1970s.
Jeff Immelt, chairman and chief executive of GE, said: “The environment remains volatile. However, the company’s performance remains on track with the earnings guidance we provided last week for 2008.” Mr Buffett, who has more than $35 billion of cash to invest at a time when money is an extremely scarce commodity, has the option of buying $3 billion in the GE rights issue, in addition to his $3 billion investment in newly issued preferred shares.
The fund-raising will help GE to retain its AAA credit ratings, which Mr Immelt said remained a top priority for the group. He assured investors that GE continues to “successfully meet our commercial paper needs”.
Shares in GE, which fell by as much as 8 per cent yesterday, recovered after the announcement to trade down about 65 cents, or 2.6 per cent, at $24.85 in afternoon trade.
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Well of course, since GE owns NBC, and Buffet wants to ensure that the network continues to follow the lib pro-democrat line. King Warren and King George (Soros), pulling strings, as usual. When are these guys going to quit messin' up the rest of us?
B. S. Davis, HACKENSACK, United States
Why doesn't Buffet invest $700 billion more and bail out Fannie and Freddie, instead of allowing the government to stick it to the little taxpayer once again? Buffet thinks rich people should pay more in taxes, so this would be a perfect opportunity for him to put his own money where his mouth is on a volunteer basis, and share his wealth so the little peons don't get stuck with the bill.
Ron, Riverton, Wyoming, USA
P Flannery, WB has made a major charitable donation already, see http://news.bbc.co.uk/1/hi/5115920.stm
Pam Nash, Thornton-Cleveleys, UK
Warren Buffett interviewed on "Charlie Rose", a TV talk show on American public television, pretended he was everyone's favorite uncle or grandfather by giving an hour of "free financial analysis". In reality, Buffett was promoting the fact that HE has preferred stock of GE and You don't!
A.A., Milwaukee, USA
Buffet has stated he supports Obama, knowing he has the money to survive no matter what happens to our country. But he must be concerned about the negative feelings people have against GE's CEO Immelt because he allows NBC to be in the tank for Obama. This creates anti-GE feeling throughout.
Vince Hugh, Atlanta, USA
Why doesn't Mr Buffett, and people like him, invest in social projects: housing, schools, hospitals?
Surely this would be a far greater, and far more admirable legacy to leave.
$35billion would build a lot of homes!
P Flannery, Glasgow,
We all sit here in amazement and nod in agreement at what a great investment Buffett has made - yet none of us vote with our feet.
If you have money to invest - there is no reason why Joe Public cant follow exactly what Mr Buffett is doing and gain (percentage wise) very similar returns.
Pete, London, UK
Is he mad? GE is almost a bank.
mark hood, london, uk
is buffett a genius or what? he hoarded all of that cash while people were telling him to spend it. he wouldn't buy anything because he said everything was overpriced. now he's the only guy who showed up for the fire sale and he's going to make a killing. this guy is incredible.
Anthony, Chicago, USA
I wish I had a few billion left to invest...
Toby Martin, Munich, Germany
great time to buy stable stocks at bargain basement prices.
Nanc, Saint Paul, USA
Warren Buffet comes out on top everytime.
GEORGE KING, DUMFRIES, SCOTLAND
Good deal for Buffet and GE.
I only wish that GE had not gotten out of the appliance and heavy electrical equipment business. Both, could have remained big money makers for GE.
Unfortunately, the management is looking for a quick buck. So, GE Capitol got all the attention. Too Bad!
Bill , COLUMBIA, USA / South Carolina
This is what happens when you look ahead further then next week, as most investment companies have been doing. I also agree with Kim, having moved over here from the UK, the whole media in this country is shambolic, not just the news.
Phil , Atlanta, USA
Great! Maybe now my retirement won't be spent sleeping in an underpass with a grocery cart at my side!
Betty, Cincinnati, USA
All hail the United States of Warren. Next up: GM IBM and Intel.
tom, San Jose CA,
Maybe mr. Buffett can persuade the GE board to fire CEO Immelt. Mr. Immelt has led the company to ruin and he no longer deserves to lead it.
Patrick C., Irvine, USA
Warren Buffet is short $4.5 billion in S&P and other foreign exchange puts.
Chad, ann arbor, USA
Perhaps he can influnce GE to straighten out it's NBC news department so that Americans can once again have a reputable news channel. It's shameful that I have to read a UK news site to get balanced US news. Many thanks to this site for providing me what my country will not ; authentic unbiased news
Kim, Pennsylvania, US
Buffett--He's my man.
willis Genoa, Ingram, Usa
Well he would, wouldn't he?
m wilson, bidache, france