Friday, October 24, 2008

Buffetted by the Market

I am getting very tired of sloppy articles which recommend buying GE and Goldman Sachs (GS) stock because Warren Buffett recently bought them. Like the Smartmoney article linked here, they frequently neglect to mention that what Berkshire Hathaway bought were specially issued, privately placed securities which the private investor cannot buy, and which have very different terms and very different risk/reward relationships from those which are available to the private investor.

That article also has another serious problem. Anybody who runs a screen looking for safe dividend stocks in the current market - and maybe in any market - without including payout ratio as one of his criteria should have his head examined. Or maybe it's the people who take articles like that seriously who should have their heads examined. And it turns out that the article was written by a high-ranking editor of a well known, respectable publication on personal finance, an editor who is also the author of a book on buying stocks.

Haven't the financial conniptions of the past two years taught us anything?

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