Buffett - past his time?

[tech/a]

Warren Buffett wouldnt be Warren Buffett and Berkshire Hathaway wouldnt be $90,000 a share if Buffett didnt get involved in the derivatives market.

Share holders just want the good times.
Unlike Buffett they dont look at the possibility of hard times and even now with it staring them in the face they still think that Buffett should be beyond and above that which everyone else is a part of.

Fickle lot.

Yet they will look at Buffett to guide them through.
If he does --- well he will be back on the mantle piece and you'll be buying books on surviving the recession "The Buffett Way"


I seem to remember one Donald Trump facing imminent Bankruptcy---doing JUST that!

Its business--BIG business and Buffett is right there being judged by the minows

 

[truevalue]

Warren Buffett is past his prime. He is 76 for goodness sake!

I doubt WB would contemplate selling one of his beloved businesses just because he was worried about an economic downturn. He manages to look through those cycles. He is sitting on so much cash now because he did forsee much of this downturn.

His insurance business is a global leader and incredibly strong. He has made a majority of his money through insurance. Insurance allows him to borrow money at no cost and invest it.

His derivative contracts are low risk, long term bets that will make berkshire plenty in years to come. He has not used derivatives to leverage Berkshire's positions in any way (the weapons of mass financial destruction) but the contracts he has written are subject to mark-to-market accounting which will cause volitility in asset values and earnings as a result.

You can bet against him if you want but you would have to be very sure because he hasn't under performed for 45 years.

 

[tech/a]

76

A chicken.

More business savvy than 10 academics a third of his age.
How lucky share holders are that he still has such enormous passion.

Rupert Murdoch is another.
We need MORE people with this vast amount of experience not less.

 

[kincella]

Richard Pratt was on the same level...up on the top 10 list

 

[Trembling Hand]

His derivative contracts are low risk,

nonsense. This is a VERY low reward and very high risk.
just how is that low risk

His sold puts to get some premium while exposing Berkshire to far greater losses. This is not a low risk trade

 

[It's Snake Pliskin]

76

A chicken.

More business savvy than 10 academics a third of his age.
How lucky share holders are that he still has such enormous passion.

Rupert Murdoch is another.
We need MORE people with this vast amount of experience not less.

I agree.

Tech perhaps one day you can inspire en mass.

 

[truevalue]

nonsense. This is a VERY low reward and very high risk.
just how is that low risk

His sold puts to get some premium while exposing Berkshire to far greater losses. This is not a low risk trade

You got some inside knowledge of his positions?

Buffett is famous for being completely risk averse. He would never write a contract unless he felt sure offered massive upside with very small downside.

If you write a put on the market being lower than it is today in 15 years how is that high risk? I would write that contract any day of the week.

 

[prawn_86]

If you write a put on the market being lower than it is today in 15 years how is that high risk? I would write that contract any day of the week.

Are you kidding me?? So you can forecast 15 years into the future and know whats going to happen?

In 1990 the Internet was virtually only a concept, look at what it did to the indexes. Disruptive technology makes it impossible to forecast with conviction that far in advance

 

[Trembling Hand]

You got some inside knowledge of his positions?

Buffett is famous for being completely risk averse. He would never write a contract unless he felt sure offered massive upside with very small downside.

If you write a put on the market being lower than it is today in 15 years how is that high risk? I would write that contract any day of the week.

Yeah!! do you understand the payout diagram for selling puts??

A small and CAPPED reward now for unlimited potential losses till expiry.

LOL. seen a 20 year chart of the Nikkei??

 

[sails]

Yeah!! do you understand the payout diagram for selling puts??

LOL. seen a 20 year chart of the Nikkei??

Oh here you are TH - was wondering where the market depth on the SPI had disappeared to...

Yeah, it's amazing how people are taught that these extremely high risk strategies are low risk...

I guess the only thing is if he was planning to buy the stock any way - he might lose a bit less by starting off with short puts, but also wouldn't make so much if his stock took off to the upside.

 

[truevalue]

Yeah!! do you understand the payout diagram for selling puts??

A small and CAPPED reward now for unlimited potential losses till expiry.

LOL. seen a 20 year chart of the Nikkei??

Dont forget he gets to invest that premium at no cost for 15 years, he is not subject to margin calls, and the holder of the put cannot put it to him anytime in the next 15 years he can only exercise the put at expiry.

I didn't say it was risk free but history and the odds would heavily favour it.

His insurance business is all about taking on this sort of risk (in may different forms) and he has showen that he can price the risks very well and make plenty of money from it.

 

[Trembling Hand]

Dont forget he gets to invest that premium at no cost for 15 years, he is not subject to margin calls, and the holder of the put cannot put it to him anytime in the next 15 years he can only exercise the put at expiry.

I didn't say it was risk free but history and the odds would heavily favour it.

Hahahahaha.

now you walked right into it. Companies such as his trade their Balance sheet. With this one transaction he has knocked 6 bil at least off it. That's a bad trade just on that alone. And you are saying this is good.


+ there is talk of the holders wanting guarantees of capital against the puts!!

 

[alphaman]

I think Buffett made a reasonable bet, but low probability of losing is not quite the same as low risk.

 

[truevalue]

Hahahahaha.

now you walked right into it. Companies such as his trade their Balance sheet. With this one transaction he has knocked 6 bil at least off it. That's a bad trade just on that alone. And you are saying this is good.


+ there is talk of the holders wanting guarantees of capital against the puts!!

Where do you get $6 billion from?

He took $5 billion in premium and has $35billion risk if the four stock indecies go to zero.

Maybe if he was taking 30 second bets like you guys you would say it was a bad trade but he is has a 10+ year time horizon and from a liquidity perspective there is no risk until the contract is exercised.

I know long term investing is hard to understand for some but we are not all judged by the short-term emotional outpourings of the stockmarket.

 

[impala_group]

Where do you get $6 billion from?

He took $5 billion in premium and has $35billion risk if the four stock indecies go to zero.

Maybe if he was taking 30 second bets like you guys you would say it was a bad trade but he is has a 10+ year time horizon and from a liquidity perspective there is no risk until the contract is exercised.

I know long term investing is hard to understand for some but we are not all judged by the short-term emotional outpourings of the stockmarket.

...and on that note, I think we all ought to respect an investor of tramendous achievements like Warren Buffett.

 

[Uncle Festivus]

You got some inside knowledge of his positions?

Buffett is famous for being completely risk averse. He would never write a contract unless he felt sure offered massive upside with very small downside.

If you write a put on the market being lower than it is today in 15 years how is that high risk? I would write that contract any day of the week.

He better bet that things return to 'normal' then, but then again he probably won't be around to deal with the consequences?

Potential Losses
Shanker also sketched out grimmer scenarios. Starting with the 50 percent decline, if the S&P 500 rises at the stock market’s post-1800 average annual rate of 2.8 percent, Berkshire could be out $5.4 billion at the end of the bet. That assumes an initial one-third loss on the premiums followed by 2.5 percent annualized returns.

Worrisome Bets
The final category is the most worrisome, Shanker says. Berkshire has sold contracts that require it to pay when credit losses occur at companies that are included in certain unnamed high-yield-bond indexes. The notional value is $7.9 billion.
Berkshire took in $3.4 billion in premiums on these contracts and has paid losses of $542 million. The company has also recognized a noncash, $3 billion mark-to-market loss. With these contracts, payments are made when a credit event occurs. They expire from September of this year to December 2013.
Losses on these contracts are accelerating as bankruptcies grow, Buffett said in his shareholder letter in February. “Now with the recession deepening at a rapid rate, the possibility of an eventual loss has increased,” he wrote.

 

[freddy2]

+ there is talk of the holders wanting guarantees of capital against the puts!!

Well they should have asked for that before the contracts were written. Plus if they had asked for this, the price of the contract would have been higher or not be written at all.

 

[tech/a]

I agree.

Tech perhaps one day you can inspire en mass.

Im past my prime.

 

[It's Snake Pliskin]

Im past my prime.

Ok. You've given here so that helps I guess.

 

[tech/a]

Im past my prime.

Did I say that!
Damned Dimentia!