http://www.fool.com/investing/value...-final-questions-from-the-annual-meeting.aspx You've gotta love good ol' Warren! He's never been a huge fan of derivatives, and he certainly isn't shy about speaking his mind when he has an opinion on a subject. Of course, this isn't the first time that he's run off at the mouth about derivatives causing doomsday... http://www.telegraph.co.uk/money/ma...ff04.xml&sSheet=/money/2003/03/04/ixcity.html Seems to be a familiar refrain for him...
Also hypocritical given the enormous notional value of derivatives he holds directly and indirectly...
im way ahead of Buffet... S2007S Registered: Aug 2006 Posts: 3369 03-19-07 04:38 PM Anyone know when this will start to unwind??? Along with the private equity sector... I think this is the next huge problem that is going to be more serious than the dot.com bust and the subprime mortgage fallout combined. Too many are over-leveraged. Edit/Delete ⢠Quote ⢠Complain
The 1929 crash involved some horrendous over leveraging. From what I read people could buy some stock with lots of leverage, take physical possession of the certificates and deposit them in a bank, then borrow on them to buy more stock with leverage. The Orange County California treasury and Barings Bank were both damaged by derivative investments that went way wrong, there may be other examples. There may be an overall saving grace in that derivatives are uncorrelated.
Buffet's last statement regarding derivatives: I hold 65 options positions and manage them all personally. Or something to that effect. I'll try to find it.
The counterparty risk is the huge problem. Look at the investors who took the other (winning) side of the subprime cds market. It hard to be a crisis hunter as Taleb would say when you can't collect. No wonder everyone wants to write insurance.