- Warren Buffett is getting unnecessary help from the Federal Reserve, experts say.
- The central bank’s emergency bond-buying program bought debt issued by the energy unit of Buffett’s Berkshire Hathaway conglomerate, one of its railroads, as well as Coca-Cola and other companies in its stock portfolio.
- The program also tracks a broad market index that includes other Berkshire holdings such as Apple and Amazon.
- “This is really embarrassing,” Danielle DiMartino Booth, the head of market-research firm Quill Intelligence, told CNN.
- “Warren Buffett doesn’t need a backstop from the Fed.”
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Warren Buffett is receiving unwarranted support from the Federal Reserve with its recent purchase of bonds issued by his Berkshire Hathaway conglomerate, experts say.
“This is really embarrassing,” Danielle DiMartino Booth, the head of market-research firm Quill Intelligence, told CNN.
“Warren Buffett doesn’t need a backstop from the Fed,” she added.
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Buffett is one of the world’s wealthiest people with a $70 billion fortune, and Berkshire boasted $137 billion in cash and short-term investments at last count. Buffett’s stellar reputation and Berkshire’s robust balance sheet mean they can access cheap financing already and don’t need the US central bank to lend a hand.
Yet the Fed disclosed on Sunday that its secondary market corporate credit facility (SMCCF), an emergency program launched in response to the coronavirus pandemic, bought $5.8 million in debt issued by Berkshire’s energy unit.
It also purchased debt issued by Berkshire-owned Burlington North Santa Fe and several companies in Berkshire’s stock portfolio: Coca-Cola, General Motors, Procter & Gamble, and UPS.
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The facility, managed by asset-management titan BlackRock and armed with $25 billion from the US Treasury, has spent nearly $430 million on individual bonds and $6.8 billion on exchange-traded funds as of June 16.
Moreover, the New York Fed detailed the broad market index of more than 750 corporate bonds that the facility will track. The list includes a few more Berkshire holdings such as Apple, Amazon, and Biogen.
“Warren Buffett, don’t worry, the Fed’s got your back,” Peter Boockvar, the investment chief of Bleakley Advisory Group, said in a Monday note to clients, according to CNN.
“Monetary policy has now reached a new low in the US,” Boockvar added.
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However, other commentators credited the Fed’s announcement of the unprecedented bond-buying program on March 23 with thawing credit markets and shoring up the tanking stock market.
“The mere presence of the backstops helped to restore the flow of private credit,” Goldman Sachs chief economist Jan Hatzius said in a note on Monday, CNN said.