Warren Buffett And His Golden Slacks (GS)

The world's greatest investor, Warren Buffett, is throwing his confidence behind Goldman Sachs (NYSE: GS) today. After the close, Buffett agreed to buy $5 billion in perpetual preferred from Goldman Sachs. Buffett is not making the investment to show his patriotism, as he will collect a cool 10% dividend on the preferred shares. Buffett will also receive warrants to purchase $5 billion of common stock with a strike price of $115 per share, which are exercisable at any time for a five year term. Goldman can call the preferred shares at any time at a 10% premium.

Goldman is also raising an additional $5 billion, for a total of $10 billion in fresh capital, by selling 40.65 million common shares at $123 per share. Originally, Goldman planned to raise just $2.5 billion from the sale of common stock.

In a CNBC interview today, Mr. Buffett commented on the Goldman Sachs investment. Buffett said there is no better firm on Wall Street and said he feels good about Goldman's marks on their books. Buffett said he has been approached by a number of financial firms about investments but did not participate. Buffett said he did the deal with Goldman Sachs because it made sense. Buffett also commented on the Paulson bailout plan, being reviewed in Congress, and called its passage "absolutely necessary."

Shares of Goldman Sachs are trading up 1.5% today to $127.

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