“People who aren’t finance people know nothing about hedging.”
Gents, my bets ride with Warren Buffet...a little known and marginally successful (pun intended) finance guy from Nebraska......Here is what he said in his 2002 Annual Report Letter to Investors pages 14-15
http://www.berkshirehathaway.com/2002ar/2002ar.pdf
“Charlie and I believe Berkshire should be a fortress of financial strength – for the sake of our owners, creditors, policyholders and employees. We try to be alert to any sort of megacatastrophe risk, and that posture may make us unduly apprehensive about the burgeoning quantities of long-term derivatives contracts and the massive amount of uncollateralized receivables that are growing alongside. In our view, however, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.”
“DERIVATIVES ARE FINANCIAL WEAPONS OF MASS DESTRUCTION.”
The prophet from Omaha said this 6 years before the last melt down....and he is still not trading this trash.
Illuminate us on the wonderful benefits of hidden tail risk, counter party risk, and large notational risk. This crap ain’t your grandaddy’s 2% interest rate hedge.
When the final bullet was pumped into the corpse of the 1933 Glass-Segal Act (which segregated the ownership and actions of commercial banks, insurance companies, and investment firms to prevent a repeat of 1929-1932) by the 1999 (Phil)Gramm-Leach-Bliley Act, the money boys just went wild didn’t they? And OOPS! We had 2007-20??.....
Yeah, but they say this time it will be different don’t they?
But, I don’t feel strongly about it and what the heck do Warren and I know about it anyway.
Warren Buffet is a liberal and liberals lie.
“DERIVATIVES ARE FINANCIAL WEAPONS OF MASS DESTRUCTION.”
Berkshire Profit Advances 49% on Buffett’s Derivatives
But, I don’t feel strongly about it and what the heck do Warren and I know about it anyway.
Warren does know more than you. I can hear him laughing at you now.
The prophet from Omaha said this 6 years before the last melt down....and he is still not trading this trash.
But he is trading derivatives.
Some people may be unfamiliar with the trade I’m talking about, but may be aware that Warren Buffett called derivatives financial weapons of mass destruction in the Berkshire Hathaway 2002 annual report. Part of the commentary around this thought had to do with Long Term Capital Management and the focus was more on over the counter derivatives. However, by 2004 Berkshire Hathaway began initiating a pretty interesting over the counter equity index derivative trade. They sold puts on major market indexes.