Regulatory risk

Megan blogs Berkshire Hathaway:

Does Warren expect to take cramdowns on his financial services investments? Buffett replies that these things are institution-specific, and there's quite a lot of underlying common equity left in his holdings, so there's no reason to worry about a cramdown. But this whole line of question highlights something for me: regulatory risk is a gigantic concern this year. Every third question seems to be about some major government project, and what sort of havoc it might wreak on his business. Last night, I went to dinner with some investors, where a long conversation about the difference between investment in gambling ensued. Warren Buffett followers aim to invest, not gamble. But when the government is involved, it's all gambling--none of the people I've spoken to, and (I'd wager) virtually none of the people in the arena, have any particular insight into the workings of the government processes. Hell, these days, the people I speak to at Treasury and the Fed don't seem all that certain about what they're going to do next. An investment in Goldman Sachs and Wells Fargo is a bet that, first, the world economy won't really collapse, and second, the government won't get mad and take your money

Uncertainty is awful for capital markets—and it's difficult to place bets with any certainty when politicians are choosing winners and losers.