Friday, April 27, 2007

Very worrying indeed

Financial crisis looms after rise in risky lending: Bank

"The credit derivatives market has doubled each year since 2003, with outstanding contracts worth $34,500bn, according to the International Swaps and Derivatives Association. Even before this explosive growth, America's most successful investor, Warren Buffett, described derivatives as "financial weapons of mass destruction" that threatened the stability of the world's entire economic system."

Who is going to argue with Warren Buffet?

Posted by sold 2 rent 1 @ 08:02 AM (1665 views)
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One thought on “Very worrying indeed

  • It’s well worth reading exactly what WB had to say about derivatives because “financial WMD” is a much abused quote and usually taken out of context.
    http://www.berkshirehathaway.com/letters/2002pdf.pdf pages 13-15

    What he is referring to is the winding down of long term swap contracts held by General Re following its acquisition by Berkshire Hathaway. “Charlie and I” don’t seem as concerned with the pass the buck/hot potato/who’s left holding the baby quality of derivatives as most commentators make out. They seem more worried about the ripple effect that the collapse of a single player would trigger across the market and their own exposure to it.

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