Goldman Sachs posted better than expected results and the share price closed at $ 130.15. The warrants which Buffett purchased for Berkshire are again in the money and the 10% yield on the preferred stock looks heavenly.
Currently Goldman is clamouring to repay the TARP funds received from the US government in the past. Who wants to work under compensation restrictions after all? $ 500,000 (half a million) is hardly anything after all! However there seems to be a catch. The US government may not accept back the funds under the assumption that banks not paying back would be seen as weak.
Will Goldman pay off Berkshire instead? If it were to, Berkshire would make 15% on the preferred for around 6 month holding (including the 10% redemption premium). This would translate to a 30% annualised return. Plus Berkshire would have a free ride on $ 5 billion worth of Goldman stock at a price of $ 115 per share.
The rating agencies have got to be nuts to downgrade Berkshire.