This is Buffett's MO
Reader comment on: The Ultimate Crony Capitalist
Submitted by mobius (United States), Nov 5, 2009 00:26
Another brilliant example is Buffett denouncing derivatives as financial weapons of mass destruction. Yet, Berkshire Hathaway is one of the largest derivatives traders on the street. Not only that, but they refuse to sign collateral agreements with their counterparties (read: broker-dealers). THEY are among the ones posing massive systemic risk to the financial system. What's funny is that Berkshire is taking risks on a lot of the same stuff AIG took risks on. Too bad for AIG, some of those risks blew up in their faces, but then again, AIG wasn't smart enough to get the banks to agree to let it not post any collateral. When BH sold those long-dated deep out of the money puts on S&P it was several billion in the hole when the markets tanked. If they had to post collateral, it would not have been pretty. BH's financial arm's entire business is taking one-way directional bets on tail events without having to post collateral tied to mark-to-market. They're like a hedge fund, but more dangerous to the financial system.
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