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The Thesis
In the depths of the 2008 financial crisis, Buffett invested $5 billion in Goldman Sachs preferred stock with a 10% dividend and lucrative warrants, betting that Goldman and the financial system would survive.
The Story
On September 23, 2008 — just days after Lehman Brothers collapsed and the financial world seemed on the brink of total meltdown — Warren Buffett invested $5 billion in Goldman Sachs. He received preferred stock paying a 10% annual dividend ($500 million per year) plus warrants to buy $5 billion worth of Goldman common stock at $115 per share. The terms were extraordinary, reflecting both the severity of the crisis and Buffett's unique position as the most trusted name in finance.
The investment served as a massive vote of confidence in Goldman and in the financial system at its most fragile moment. Goldman redeemed the preferred stock in 2011, paying Berkshire an additional $500 million premium. But the real prize was the warrants. When Goldman's stock recovered above $115, the warrants became hugely profitable. In total, Berkshire earned over $5 billion from the investment — a 100% return on a deal that also helped stabilize market confidence at a critical moment. Buffett proved once again that in times of crisis, being the person with both capital and reputation creates opportunities available to no one else.
Key Insight
Build your reputation over decades so that when crisis hits, you become the partner of choice — the best deal terms go to the most trusted name in the room.
“It takes 20 years to build a reputation and five minutes to ruin it.”
Warren Buffett
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See how Glen Bradford applies these principles to his own investing. Long Fannie Mae & Freddie Mac junior preferred — conviction meets patience.