Buffett in the 2008 Crisis: Investing When Everyone is Selling
How Warren Buffett invested $5 billion in Goldman Sachs in the midst of the panic — and why it was the trade of the decade
On September 23, 2008, in the middle of the post-Lehman panic, Warren Buffett invested $5 billion in Goldman Sachs on extraordinary terms. It was one of the greatest examples of 'being greedy when others are fearful'.
The Context: 8 Days After Lehman
It was September 23, 2008 — 8 days after the collapse of Lehman Brothers. The markets were in freefall. Credit was frozen. Nobody knew which banks would survive.
The Deal
Buffett invested $5 billion in Goldman Sachs preferred stock with a guaranteed 10% annual dividend, plus warrants to purchase common stock at $115 per share. The terms were extraordinary: Buffett was the only one capable of securing such terms because he was the only one willing to move.
The Market Signal
The announcement of Berkshire's investment in Goldman immediately stabilized sentiment. If Buffett was buying, maybe the banks wouldn't all fail. It was one of the few positive signals in weeks of devastating news.
The Return
Berkshire earned approximately $3.7 billion on the investment — between dividends and capital gains on the warrants.
Lessons
- 'Be greedy when others are fearful' requires preparation in advance: Buffett had liquidity specifically for such moments.
- Reputation is a financial asset: Buffett obtained terms no one else could have.
- The best trades seem impossible at the moment they are made: contrarian courage is built with years of discipline.