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Warren Buffett’s Berkshire Hathaway

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During these uncertain economic times many companies have been turning to private equity funds and sovereign wealth funds (SWF) of East Asia and the gulf countries to raise capital. In addition to those two sources of funds, companies have also been turning to Warren Buffett’s Berkshire Hathaway for badly needed capital.

The one big difference is The Oracle of Omaha’s investment is also a stamp of approval in that company’s future since Warren Buffett is a legendary investor.

Mr. Buffett is smart to take advantage of his status as an investor to drive a hard bargain when making investments in companies.  This past week Swiss Re paid for the privilege of having Berkshire Hathaway make an investment in the form of convertible notes paying a 12% coupon,  Berkshire can convert them to Swiss Re shares after three years or continue to receive “perpetual” payments of 12% a year.

Other recent investments made by Berkshire include Goldman Sachs selling Berkshire $5 billion in preferred stock late last year that pays a 10% divided and can be converted to common stock at any time at a 10%premium. In the 4th quarter of last year General Electric also sold Berkshire $3 billion of GE’s preferred stock at a guaranteed 10% dividend.

Having the Berkshire Hathaway seal of approval is expensive for companies these days but not being able to raise capital to run a business is more costly. For investors a best way to invest money is by purchasing Berkshire Hathaway stock.

Author: Jason P. Jones
February 11th, 2009

MBR In the Press

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