billion dollar plus bet made by buffet on equities

Discussion in 'Wall St. News' started by SethArb, Apr 3, 2006.

  1. well...he's into insurance and prolly got interested into these kind of contracts; very similar in structure to binary deficits bets...he prolly saw he can make money with them..heck good luck to him [in case he needed it! ror]
  2. Sanjuro


    Buffet scares the public about terrorist attacks to raises the premium for insurance companies against terrorism. Then he places his bet and collects his raised premium. It's pretty smart.

    It's just a brokers who upgrades a stock at the end of a long trend and dump their position.
  3. Well, 911 didnt hurt the markets, look at the rebound we had after 911 in Sept-Nov/01. Aside from the U.S Govt buying up securities.... someone was. Like in 1987, someone got rich buying at the bottom... the market went up 30% in a few months after October.

    But regardless, I'm sure some caveats are in place for this type of transaction, like you cannot exercise the contract during or shortly after a "terror event".
  4. bitrend


    I still think 10-20 years ahead...

    Wait a moment please - How old am I? :D
    I hope someday he will reach his goal since now he's pretty closed to Bill Gates.
  5. You are an ignorant buffoon and obviously know nothing about insurance. Terrorism has always been excluded on any type of policy up until recently. Even now, the premiums(for terrorism) charged are less than .05% of total policy premium, and losses are capped at $4 million, and in some jumbo policies maybe $10 million exposure.

    Every state has a different terrorism charge but most stipulate that terrorism premiums can not exceed one tenth of one percent of policy premium.

    Your argument is laughable and uninformed.
  6. fascinating trade he's made. could this be construed in any way as throwing good money after bad on a thus far unsuccessful dollar short? now all of a sudden he's betting 14B that everything will be peachy

    is it possible his reputational equity is being tapped and spent by a larger entity?
  7. range


    "Berkshire is also subject to equity price risk with respect to certain long duration equity index put contracts. Berkshire’s maximum exposure with respect to such contracts is approximately $14 billion at December 31, 2005. These contracts generally expire 15 to 20 years from inception. Outstanding contracts at December 31, 2005, have been written on four major equity indexes including three foreign. Berkshire’s potential exposure with respect to these contracts is directly correlated to the movement of the underlying stock index between contract inception date and expiration. Thus, if the overall value at December 31, 2005 of the underlying indices decline 30%, Berkshire would incur a pre-tax loss of approximately $900 million." (10-K, page 43)

    Berkshire has probably hedged this, and is, more or less, simply collecting the premium. I doubt Berkshire wrote naked puts.

    BTW, the FT was a world-class paper, but they are not speed readers apparently. Berkshire filed the 10-K on 3/13/06. I suppose we can look forward to an FT story on page 79 of the K in a couple weeks?
  8. its a bet with limited payout and limited risk; very similar to a digital exp. settles at 100 or zero..not above no below no ways in between.
  9. bitrend


    What I find contradiction in his investment decision is his move to currency. He didn't like technology stocks because of many reasons I don't know but maybe due to its high volatility and instability compare to Gillette, Washington Post, etc. But currency is more volatile then technology stocks.

    #10     Apr 3, 2006