Warren Buffett on Derivatives

Discussion in 'Current Events' started by Chris, Sep 24, 2008.

  1. Chris
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    Chris Gold Member

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    Buffett On Derivatives: 'A Fool's Game'

    by: Michael Panzner posted on: May 07, 2007

    Warren Buffett, the billionaire investor and long-time chairman of Berkshire Hathaway Inc. (BRK.A), is a man who speaks his mind. I'm not sure whether he's always been that way, or whether it is his exceptional wealth or his age -- or both -- that emboldens him to cut through Wall Street B.S. like a hot knife and expose the bloody truth about the foibles of modern finance.

    Whatever the case, his comments on derivatives, in particular, have been always been especially enlightening -- and entertaining -- because they expose this supposed risk-sharing panacea for the house of cards it has become. In Derivatives Cause 'Mass Destruction', the Wall Street Journal reports on the 'Oracle of Omaha's' latest thoughts on the subject.

    Earlier Saturday, Mr. Buffet repeated his warning on the dangers of derivatives, saying that excessive borrowing by traders, investors and corporations will eventually lead to significant dislocation in the financial markets.

    In fielding a question about derivatives, which he once referred to as "financial weapons of mass destruction," Mr. Buffett told shareholders that he expects derivatives and borrowing, or leverage, would inevitably end in huge losses for many financial participants.

    "The introduction of derivatives has totally made any regulation of margin requirements a joke," said Mr. Buffett, referring to the U.S. government's rules limiting the amount of borrowed money an investor can apply to each trade. "I believe we may not know where exactly the danger begins and at what point it becomes a super danger. We don't know when it will end precisely, but...at some point some very unpleasant things will happen in markets."

    Buffett On Derivatives: 'A Fool's Game' - Seeking Alpha
     
  2. AVG-JOE
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    AVG-JOE American Mutt Staff Member Gold Supporting Member

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    Chris,

    Thanks... that's a good article.

    -Joe
     
  3. editec
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    editec Mr. Forgot-it-All

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    Now he tells us!
     
  4. xsited1
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    xsited1 Agent P

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    Damn Calculus!
     
  5. Chris
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    Chris Gold Member

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    Actually if you look at the date on the article, it's from a year and a half ago.
     
  6. Toro
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    Toro Diamond Member

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    He has been warning about derivatives for many years.

    But he also freely enters into them himself.
     
  7. editec
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    editec Mr. Forgot-it-All

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    Derivatives aren't bad.

    BADLY structured derivitives are bad.

    The ratings companies failed miserable to take into account the REAL RISK involved that's exactly why so many banks are in trouble.

    Hang those bastards, says I.
     

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