“Buffett defends using derivatives at Berkshire” By Jonathan Stempel
By Daniel at 28 February, 2009, 6:26 pm
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“NEW YORK (Reuters) - Saying “derivatives are dangerous,” Warren Buffett defended his use of them after they played the main role in driving Berkshire Hathaway Inc annual profit to a six-year low.
Buffett devoted one-fifth of his 21-page annual letter to Berkshire shareholders to explaining how he uses derivatives to make long-term bets on stock markets, corporate credit and other factors.
“It’s part of a portfolio of risk assumption that people appreciate in capital markets, and helps cement relationships that lead to more business for Berkshire down the road,” said Bill Bergman, senior equity analyst for Morningstar Inc in Chicago and a former Federal Reserve economist.
As regulators had requested, Buffett provided far more detail on the 251 derivatives contracts that Berkshire has, which the company said in theory could require $67.29 billion of payouts in the event every bet went 100 percent wrong.”
The full article is at:
http://uk.reuters.com/article/gc06/idUKTRE51R1LW20090228
Talk about MASSIVE DERIVATIVES EXPOSURE - and huge risks ahead for Berkshire.
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