Buffet warns of problem in the next 10 years

Discussion in 'Wall St. News' started by Richard England, May 2, 2004.

  1. 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.
  2. the former America is becoming the Brazil of the North....a hodgepodge of overtaxed, purposely under-educated muddled trash ruled by a hostile government.......wow and it only took 2 generations...time to head for the exits.

  3. And where do you think the exits lead to?

  4. OnGoing


    And what do YOU know about Brazil?

  5. ========================

    Mr Buffet has some good points occasionaly.

    However i ''value'' the markets opinion [$] more than Buffet on for example;

    Tek companies , many of them debt free, which Buffet aparently never has understood.

    And derivatives including the market example of FRE on the charts with 6 billion mistatement.:cool:
  6. Great news!! How soon will your continuously sour attitude be leaving?
  7. it seems that people live month by month and don't care much about ten years in the future that's why catastrophes occur since most people just want the max in the present without willing to preserve the future except when medias brainwash them on some subject like ecology whereas ecology is a lobbying driven to make the idea of energy scarcity and so justify high price of oil as well as more taxes to "protect" the earth whereas there are much more efficient way and much less costfull way to do so.
  8. Buffet is not a trader.

    He is a "value" investor with a long-term buy and hold type of philsophy based on fundamental value. His comments on derivatives make me "yawn" . . .
  9. vinigar


    Buffet sure knows how to scare the crap out of people so that later on he can go in with a change of heart and scorff them all up. Smart ...real smart!:cool:
  10. if you have $43 billion, you get to say what you want and people listen.

    same goes for $42 billion.
    #10     May 3, 2004