Skip to main content

Again With The Berkshire Puts

Though he claims to be unmoved by share price, it is hard to imagine that Buffett is totally ignoring the crazy ride that is Berkshire's share price, or the constant drubbing the firm (and WB himself) keeps taking over the variety of "Financial Weapons of Mass Destruction" it has collected over the last several years. Bloomberg, gleeful as a grandfather telling war stories to the grandkids and pawning off that scar he got falling off the ladder changing the kitchen lightbulb while drunk as a war wound, isn't missing this chance to retell the story, and is, therefore, on the case again:

Chief Executive Officer Warren Buffett's increasing use of derivatives -- contracts whose value is based on the performance of stocks or bonds or the outcome of a specific event. That Buffett once called derivatives "time bombs" doesn't calm investors.
Berkshire held contracts with a combined notional value of $67.3 billion at year-end. While this figure is used mostly for reporting purposes and isn't indicative of potential losses, it dwarfs the company's $25.5 billion in cash.

Though not quite as bad as the sinkhole it fell into back in February, Berkshire is getting tagged again and, at least to the extent you can believe any reason financial journalism comes up with to describe stock movements, the Berkshire Puts seem as good a reason as any. Sort of.
We've managed to harp on the poor reporting surrounding the Berkshire Puts morethanonce before, so it should come as no surprise that these are no ordinary puts and that Berkshire's exposure isn't typical of options writers. In this connection, we think we can be forgiven for thinking the issue of Berkshire's ratings is a bigger one than the options themselves.
Berkshire's 31% Decline Spurred by Derivatives Buffett Derided [Bloomberg]