Warren Buffett Lost $534 Million On His Financial Weapons Of Mass ...

The Story Recently

Warren Buffett Lost $534 Million On His Financial Weapons Of Mass ... Nov 3rd 2012, 13:05 Berkshire Hathaway's Q3 earnings are out. The company run by Warren Buffett earned $3.92 billion or $2,373 per share, up from $2.28 billion or $1,380 per share a year ago. One nugget we're always interested in is the value of his long-term derivative bets on the global stock markets.  In case you forgot, Berkshire had sold put options on the S&P 500, FTSE 100, Euro Stoxx 50, and the Nikkei 225. The value of these positions increase when stocks go up and vice versa. In Q3, their value fell by $534 million.  Of course, these are just paper losses as Buffett expects to hold them until they expire. From Berkshire Hathaway's 10-Q (click to zoom): SEC Some details from the 10-Q: The equity index put option contracts are European style options written on four major equity indexes. Future payments, if any, under these contracts will be required if the underlying index value is below the strike price at the contract expiration dates. We received the premiums on these contracts in full at the contract inception dates and therefore have no counterparty credit risk. We have written no new contracts since February 2008. At September 30, 2012, the aggregate intrinsic value (which is the undiscounted liability assuming the contracts are settled on their future expiration dates based on the September 30, 2012 index values and foreign currency exchange rates) was approximately $5.4 billion. At December 31, 2011, the aggregate intrinsic value of these contracts, assuming the contracts were settled on that date, was approximately $6.2 billion. However, these contracts may not be unilaterally terminated or fully settled before the expiration dates which occur between June 2018 and January 2026. Therefore, the ultimate amount of cash basis gains or losses on these contracts will not be determined for many years. The remaining weighted average life of all contracts was approximately 8.2 years at September 30, 2012. In his 2002 letter to Berkshire Hathaway shareholders, Warren Buffett dubbed derivative securities as "financial weapons of mass destruction." SEE ALSO: Here Are 18 Brilliant Quotes From The Greatest Investor Of All Time > Source: http://www.businessinsider.com/warren-buffett-derivatives-financial-weapons-of-mass-destruction-2012-11

You are receiving this email because you subscribed to this feed at blogtrottr.com. If you no longer wish to receive these emails, you can unsubscribe from this feed, or manage all your subscriptions