Money and Finance
Thanks to Lincoln for passing these along.
Links to articles:
The risk that won't go away
UNTANGLING THE DERIVATIVES MESS
- Charlie Munger On Accounting For Derivatives
This is from a few years before the financial crisis (from Poor Charlie's Almanack):I hate with a passion GAAP [Generally Accepted Accounting Principles] as applied to derivatives and swaps. JP Morgan sold out to this type of accounting to front-end...
- Credit Default Swaps (cds) Are Insurance Products, Not Tradeable Assets - By Barry Ritholtz
Our story thus far: The Commodity Futures Modernization Act of 2000, sponsored by Texas Senator Phil Gramm as a favor to his wife Wendy (who sat on the Board of Directors of Enron, which wanted to trade energy derivatives without oversight) was rushed...
- Buffett Warned Us In 2003, Few Listened - By Todd N Kenyon
Warren Buffet foresaw the current financial disaster more than five years ago. I pulled out his 2002 Chairman’s Letter, wherein he addresses derivatives and their potential to scuttle the entire financial system. Here are some key passages:- “Charlie...
- Excerpt From Buffett's 2002 Annual Letter
Excerpt from Mr. Buffett's 2002 Letter to the Shareholders of Berkshire Hathaway that is worth reviewing in light of recent market developments: When we purchased Gen Re, it came with General Re Securities, a derivatives dealer that Charlie and I...
- Warren Buffett On Derivatives – From 2005 Berkshire Hathaway Letter To Shareholders
In light of recent events, I thought it may a good time to review the brief discussion on derivatives from Mr. Buffett in his 2005 letter to shareholders. Many companies, executives, analysts, and members of the media are claiming that current derivatives...
Money and Finance
Carol Loomis' Derivatives Articles from 1994 & 1995
Thanks to Lincoln for passing these along.
Links to articles:
The risk that won't go away
UNTANGLING THE DERIVATIVES MESS
..........
Excerpt:
Given the range of complications that derivatives present, outside directors cannot possibly achieve close communion with the contracts their companies hold. Most chief executives won't master the game, either. In the end, the choice of what risks to hedge, what derivatives to employ in doing it, and how to draw the bright line between risk management and speculation will be largely left to financial people down the corridor --some of whom, recent train wrecks notwithstanding, may think of themselves as running a profit center. And on the other end of their phones will be derivatives salespeople trying to sell the latest innovation, which assuredly will not be a plain-vanilla hedge.
It's not a particularly cheerful picture-not for a problem as big as derivatives. So maybe what we need is new thinking, a fresh approach, a suggestion so radical it goes off the page. Here's one: Warren E. Buffett, chairman of Berkshire Hathaway, says he'd deal with derivatives by requiring every CEO to affirm in his annual report that he understands each derivatives contract his company has entered into. Says Buffett: "Put that in, and I suspect you'll fix up just about every problem that exists." In a market that seems to thrive on complexity and obfuscation, such a solution won't happen. It's too simple. But he's right.
- Charlie Munger On Accounting For Derivatives
This is from a few years before the financial crisis (from Poor Charlie's Almanack):I hate with a passion GAAP [Generally Accepted Accounting Principles] as applied to derivatives and swaps. JP Morgan sold out to this type of accounting to front-end...
- Credit Default Swaps (cds) Are Insurance Products, Not Tradeable Assets - By Barry Ritholtz
Our story thus far: The Commodity Futures Modernization Act of 2000, sponsored by Texas Senator Phil Gramm as a favor to his wife Wendy (who sat on the Board of Directors of Enron, which wanted to trade energy derivatives without oversight) was rushed...
- Buffett Warned Us In 2003, Few Listened - By Todd N Kenyon
Warren Buffet foresaw the current financial disaster more than five years ago. I pulled out his 2002 Chairman’s Letter, wherein he addresses derivatives and their potential to scuttle the entire financial system. Here are some key passages:- “Charlie...
- Excerpt From Buffett's 2002 Annual Letter
Excerpt from Mr. Buffett's 2002 Letter to the Shareholders of Berkshire Hathaway that is worth reviewing in light of recent market developments: When we purchased Gen Re, it came with General Re Securities, a derivatives dealer that Charlie and I...
- Warren Buffett On Derivatives – From 2005 Berkshire Hathaway Letter To Shareholders
In light of recent events, I thought it may a good time to review the brief discussion on derivatives from Mr. Buffett in his 2005 letter to shareholders. Many companies, executives, analysts, and members of the media are claiming that current derivatives...