warren buffet and derivatives

Today I was surprised to read that the Financial Wizard who used to say

Derivatives are financial weapons of mass destruction.

lost more than 1.6 Billion USD. Isn’t it odd that people do not practice what they preach?

7 replies on “warren buffet and derivatives”

read him properly,
i think he was talking about complex derivatives in hands of people who dont know how much risk they are getting into… aka pvt banks and small corporates taking yen based derivative risk …
not the run of the mill stuff

Nyways insurance business is akin to derivatives and some are marked to mkt losses

what surprised me was that Warren buffet publicly hates technical analysis and investing in Derivatives but his firm still has a huge exposure. and even though the article says that these losses are unbooked losses and if the index recovers Warren buffet should be able to make good of them… but still in today’s market i am skeptical of any bad news.

i agree writing options is like selling insurance business but there are a lot of things in derivatives are not for transfer of risk.. but only speculation/gambling

dude aint it calculated risk
dont u take calculated risk when u invest on a technical cue?
and he has a team of experts – and they are generally given freedom
they take calculated risk -insurance / derivatives etc

Buffet has mostly written put options on S&P with maturity dates as long as 2018 etc. He has generated a considerable amount of float from premium charged on these options. He would use this money to go long on securities which is essentially the business of Berkshire Hathway..

Generate money by writing insurance, re-insurance etc and go on buying businesses…and if we think that S&P etc will not recover till 2018 then who are we kidding..

Jaimie’s appetite dpneeds on the mood and food (wah~~ still can rhyme!). like today, she finished a bowl of fishball noodles on her own. sometimes, she eats a little and refused to eat anymore. so it was quite hard for us to estimate the amt of food we shd order… and that’s why i usually wait for her to finish and see if the leftover (if there is ) is enough for me.besides setting a 2pax-3dishes HL day, maybe i shd also ban Clement from eating the side dish. muahahahaha!!

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