with derivatives. From Reuters: Billionaire Warren Buffett warned of the risks of derivatives on Saturday, and said that the financial instruments could lead to a "huge problem" within the next 10 years. Speaking at the annual shareholder meeting of his Berkshire Hathaway Inc., Buffett cited the example of mortgage financier Freddie Mac to illustrate the risks of derivatives. He said that despite Freddie Mac having intelligent board members, being chartered by the U.S. Congress, and being followed by dozens of Wall Street analysts, it couldn't get a hold on the complexity of derivatives transactions. "With an auditor present, they managed to misstate earnings by $6 billion," Buffett said. "A lot of mischief can happen with derivatives." He said that derivatives are so complex that many CEOs he knows can't figure them out. "I know the people that run these companies and they don't have their minds around what is happening," he said. As a result, he said, derivatives are a major risk. "Some time in the next 10 years, you will have a huge problem that will either be caused by or accentuated by people's activities in derivatives," he said. Buffett's disdain for derivatives was compounded by the experience of buying insurer General Re in 1998 and later struggling to get out of the sizable derivatives business Berkshire inherited. Berkshire still holds some derivative positions.