My bad on the misspell. Ironic for sure. I'm not saying Buffet is a genius soley because of this investment. I meant in general, the man is a genius. You don't make as much money as he has by not being one.
Sure do, still have another 10 years before you can say I was wrong. Said the recession was going to last until 2020+. Just because the markets jump 40%+ in 4 months doesn't mean the economy is in great shape as it was, how many millions of people are going to retire now that the market is up 40% or withdraw from the gains they saw over the last few months. No one is feeling richer because the dow crossed 9000, maybe warren does after gaining $2 Billion from GS but in reality people are still losing their jobs and trying to pay their mortgage on time.
Keep holding on to hope... I've never heard of anyone making calls like that 10 years into the future...pure silliness.
The original point was not about ethics, it was about Warren's ability to still invest. Buffet will come out of this recession as more of a genius. Depending on how you value the warrants he has in GE his interest is not 10% but it could be way more than three times that. 50%+ return on his investment in Constellation Energy along with 9.9% stake in the company. GS has been already talked about.
I can't believe all the blowing being done in this thread... you guys should receive PR fees from BRK. The constellation and GS gains haven't recovered half of the losses he's seen on his SPX short put position. "Derivatives are WMDs" yet he's booked $6-8B in losses on puts and his Gen RE portfolio.
Oh please... Goldman needed the money and the credibility, that's why Buffett was able to get those terms. Had any of you been the world's greatest investor, you would have been able to get the deal instead. People on ET criticizing Buffett on investing is like ants criticizing Einstein on physics.
This was filed with the SEC in Q1, 2006. If you assume ATM options and if he entered those contracts in Q4 2005 that puts the SPX portion of the contracts somewhere around the 1100/1200 ballpark. The interntaional stock indexes probably likewise. Other than that, some puts were allegedly also written on a "high yield corporate debt index". A HY Bonds index I am following ( http://www.bloomberg.com/apps/quote?ticker=NBBHYL:IND ) was yielding 9.5% in Q4 2005, now around 12%.
Buffett's strategy had collected a $4.9 billion option premium on his $37.1 billion notional index options as of the date on his annual report, but the Black-Scholes model estimated a $10 billion liability, so he had to show a $5.1 billion loss on a generally accepted accounting principles basis. However, on a fundamental basis, as he says, "It's only the price on the final day that counts." In addition, he gets to use that $4.9 billion of cash for the duration of the option. Buffett also discussed these positions at the company's annual meeting on May 2. He has been managing these positions in the open market, and has shortened up his S&P 500 put options from 18 years to 10 years while lowering the strike price from 1,514 to 994 because he thinks the latter options are an even better deal. You can think of it this way: If you're looking at a 9 foot tree, is it better to bet that the tree will be 16 feet tall in 18 years or 10 feet tall in 10 years? The second hurdle is easier to clear. http://finance.yahoo.com/special-edition/active-investor/options-buffett He's marking a back-dated vol, so assuming a 5.1B liability is fucking absurd. In addition, he hedged his position in the first-half, well-under the current level on SPX. He traded a 7.5 to 1 risk at a 1517 put-strike on SPX.