Money and Finance
- Links
William Deresiewicz: How To Learn How To Think (LINK) [A great find/post/excerpt from Shane. It also reminds me of a recent comment Charlie Munger made about how he thinks the younger generations' lack of focus is doing them a great disservice. And...
- 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...
- Derivatives
“In our view, however, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.” –Warren Buffett, 2002 Letter to Shareholders The chart below was found via Zero Hedge. The related paper...
- 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...
Money and Finance
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 revenues. I think it's a disgrace.It's bonkers, and the accountants sold out. Everyone caved, adopted loose [accounting] standards, and created exotic derivatives linked to theoretical models. As a result, all kinds of earnings, blessed by accountants, are not really being earned. When you reach for the money, it melts away. It was never there.It [accounting and derivatives] is just disgusting. It is a sewer, and if I'm right, there will be hell to pay in due course. All of you will have to prepare to deal with a blowup of derivative books....We tried to sell Gen Re's derivatives operation and couldn't, so we started liquidating it. We had to take big markdowns. I would confidently predict that most of the derivative books of [this country's] major banks cannot be liquidated for anything like what they're carried on the books at. When the denouement will happen and how severe it will be, I don't know. But I fear the consequences could be fearsome. I think there are major problems, worse than in the energy field, and look at the destruction there.I'll be amazed if we don't have some kind of significant [derivatives-related] blowup in the next five to ten years.
- Links
William Deresiewicz: How To Learn How To Think (LINK) [A great find/post/excerpt from Shane. It also reminds me of a recent comment Charlie Munger made about how he thinks the younger generations' lack of focus is doing them a great disservice. And...
- 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...
- Derivatives
“In our view, however, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.” –Warren Buffett, 2002 Letter to Shareholders The chart below was found via Zero Hedge. The related paper...
- 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...