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Subject:  Fleck: The next crisis: The economy Date:  10/5/2008  9:15 AM
Author:  SuisseBear Number:  257703 of 536512

Fleck on the bailout, the coming economic crisis, and Buffet's investment:

[...] I continue to be against the bailout. [...] I especially haven't liked the tactics of the bailout proponents. They said that if this bill didn't pass, we would experience turmoil and chaos, the implication being that if the bill did pass, we wouldn't have much trouble.

That is an absurdity, brought to you by the folks who maintained that the problem was just subprime, contained, etc., and who still do not understand the environment. Turmoil and chaos were preordained once the credit and real-estate bubble was allowed to go on for so long.[...]

The current phase of the financial crisis is getting later in the day. Maybe we're two-thirds or more of the way through it. The next crisis will be in the economy.[...]

So this financial crisis is a global one, and the recession will be as well -- because the notion of U.S. problems being decoupled from everything else is fallacious. Nothing can easily be decoupled from the financial system.[...]

Also in the misconception department, folks have heralded Warren Buffett's investment in General Electric (GE, news, msgs), similar to the one he made in Goldman Sachs (GS, news, msgs), as something akin to a vote of confidence. It's actually quite the opposite.

What he's doing is making the most senior equity investment that he can via preferred stock, and getting paid quite a large coupon to do so, with call options thrown in. Buying the common stock would be a vote of confidence. This is an investment you make when you're still worried about lots of damage yet to play out.
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