As regular readers know all too well, there are few people in these United States that I find more disingenuous than the mainstream media celebrated, crony capitalist extraordinaire Warren Buffett. The man who used to warn about trade deficits, the U.S. dollar’s vulnerable position and famously called the derivatives “weapons of mass financial destruction,” has become nothing more than a political stooge for the status quo ever since he was bailed out in the financial crisis. So with the derivatives market bigger and more dangerous than ever, you’d expect “Uncle Warren” to be shouting from the rooftops about how much risk they pose right? Wrong. Rather, America’s number one crony is using derivatives to drive earnings at his company, Berkshire Hathaway, and pimping stocks on CNBC like a cheap used car salesman every other day. From Bloomberg:
Berkshire Hathaway Inc. (BRK/A) said fourth- quarter profit rose 49 percent on gains tied to derivatives wagers made by billionaire Chairman and Chief Executive Officer Warren Buffett.
Net income rose to $4.55 billion, or $2,757 a share, from $3.05 billion, or $1,846, a year earlier, Omaha, Nebraska-based Berkshire said today in a statement. Gains on derivatives surged to $1.4 billion from $163 million.
Buffett, 82, uses index put options to speculate on long- term gains in stock-market indexes in the U.S., Europe and Japan. Those bets added $2 billion to profit in the fourth quarter before taxes as Japan’s Nikkei 225 (NKY) Stock Average rallied.
“The probability of Berkshire ever having to take a loss on these contracts is very low” because they won’t be settled for years, said David Kass, a professor at the University ofMaryland’s Robert H. Smith School of Business, who has taken groups of students to visit Buffett in Omaha.
You’ve gotta love how the one person Bloomberg decides to quote with regard to the wisdom of Buffett’s derivatives strategy is a professor so entrenched in the “Uncle Warren” cult that he takes his students on pilgrimages to Omaha. Nice journalism guys.
Full article here.
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