Thursday, October 25, 2007

Buffett cautious on $75bn superfund

From the Financial Times:

The US banks creating a $75bn-plus “super fund” to buy the assets of troubled investment vehicles should sell a portion of the fund into the open market to help determine the actual value of the underlying assets, Warren Buffett said on Thursday.

The billionaire investor is the latest in a stream of influential figures – including Alan Greenspan, the former chairman of the Federal Reserve – to question the superfund being promoted by Citigroup, Bank of America and JPMorgan Chase with the encouragement of the US Treasury.

“One of the lessons that investors seem to have to learn over and over again, and will again in the future, is that not only can you not turn a toad into a prince by kissing it, but you can not turn a toad into a prince by repackaging it,” Mr Buffett said during a one-day visit to South Korea
“But very imaginative people in the securities market try to do that. If you have bad mortgages they do not come better by repackaging them. To some extent the chickens are coming home to roost for the mortgage originators and securitisers,” he said....MORE