Monday, March 02, 2009

Et tu, Warren?

Looks like all our pop idols have feet of clay.

Buffet Versus The Hedge Funds

It turns out that even while Buffet was denouncing derivative contracts as "financial weapons of mass destruction" and " time bombs", he was amassing one of the world’s largest position in them. For example, he sold derivative contracts on four stock market indexes– the S&P 500 in America, the FTSE 100 in the U.K., the Dow Jones Euro Stats 50 index in Europe and the Nikkei 225 Stock Average in Japan– for $4.9 billion that expose his company to over $35 billion in losses. In 2008 alone these contracts had lost on paper nearly $10 billion and with the market in free fall in 2009, they lost another $3 billion. Indeed, each percent these indexes decrease adds another $350 million to the loss Berkshire Hathaway is liable for.

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