Buffett Affirms Derivative Sale, Says Berkshire May Do It Again

Discussion in 'Wall St. News' started by ASusilovic, Mar 12, 2009.

  1. March 12 (Bloomberg) -- Billionaire Warren Buffett said Berkshire Hathaway Inc. plans to sell more derivative contracts, a tactic some investors have said may cause the insurer to suffer billions of dollars in losses.

    “Oh, we’ll continue,” he said in a Bloomberg Television interview, portions of which will be broadcast today and tomorrow. “We do anything that I think I understand and where I think that the odds strongly favor making money, which doesn’t mean you make money every time.”

    Berkshire’s stock has plummeted this year on concern that Buffett’s bets on derivatives -- which he has called “financial weapons of mass destruction” -- will crush profit at the Omaha, Nebraska-based insurer. Berkshire is backing derivatives tied to corporate junk bonds, municipal debt and the performance of stock indexes on three continents, with liability of more than $14 billion as of Dec. 31.

    The company’s liability could grow, or shrink to zero, by the time the contracts come due at set dates as many as 19 years away. The increase in liabilities on 251 derivatives, coupled with a drop in equity holdings, last year contributed to the steepest decline in the book value per share in Buffett’s 44-year tenure.

    Book value, a measure of assets minus liabilities, still outperformed the return of the benchmark Standard & Poor’s 500 Index in 2008. Buffett gives both figures on the first page of Berkshire’s annual report each year.


    Warren B. is my hero ! Ha, ha, ha!
  2. asap


    now we know -- buffett DOES average down his losers.

    as the arab prince demonstrated in monte carlo a couple of years ago, as long as your bankroll is immense, you can break the house doubling down your bets.
  3. Are you "short" BRKA or BRKB? :cool: