During time of financial turmoil like right now, Buffet always treats the financial market like.... his own buffet!! =)
He just bought $5 billion in Goldman Sach's preferred stocks paying 10% dividend. And warrants to purchase another $5 billion in common stocks at $115 per share. GS stock is trading at 125 right now.
Only a man with billions to throw around can drive such bargain. There an economic principle described as "diminishing marginal returns", I wonder if there is a principal that describes the increasing marginal returns when investing in the financial market because you have more money?
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Mille m...
5 years ago
2 comments:
is that another way of saying "you have to have money to make money"?
pretty much...
Now that I think about it, I guess the increasing marginal returns would just be the higher interest rate you have to pay for every additional dollar you borrow. Kind of like if you borrow $10,000 from the bank, the interest rate on that would be lower than if you borrow $1,000,000 from the bank. Of course you would want to use the money to invest something that has higher expected returns than the cost of your borrowing.
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