If you are a Berkshire Hathaway Inc. shareholder right now, you might be questioning just how well you knew Mr. Warren Buffett after all these years. The “Oracle of Omaha,” who famously wouldn’t invest in Microsoft Corporation because he didn’t understand the business, the same man who prudently called derivatives “financial instruments of mass destruction,” couldn’t help but play with fire himself.
Of course, it was widely known that Berkshire Hathaway was involved with credit default derivative transactions worth some $40 billion as it is clearly stated in its financial reports, but the long-term (often 20 years) nature of the contracts combined with Buffett’s aura of invincibility allowed people to put his derivatives in a different category from other people’s.
Unfortunately, with the cost of protecting its own debt from default over the next year having more than doubled over the last two months – from 140 to 388 base points – investors are starting to wonder just how immune Berkshire Hathaway actually is to all the ongoing financial turmoil.
Posts
No comments:
Post a Comment