Wilmott Forums - Soros and Buffett never traded derivatives (NYT)

Thomson Reuters

Forum Navigation:

login

FORUMS > General Forum

Topic Title: Soros and Buffett never traded derivatives (NYT)
Created On Thu Oct 09, 08 03:34 PM

Topic View:

View thread in raw text format

gelfand
Member

Posts: 110
Joined: Jul 2002

Thu Oct 09, 08 03:34 PM

User is offline

http://www.nytimes.com/2008/10/09/business/economy/09greenspan.html

'George Soros, the prominent financier, avoids using the financial contracts known as derivatives �because we don�t really understand how they work.� Felix G. Rohatyn, the investment banker who saved New York from financial catastrophe in the 1970s, described derivatives as potential �hydrogen bombs.�

And Warren E. Buffett presciently observed five years ago that derivatives were �financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.�'

The implication that these "wise men" are untainted by trading in derivatives is absurd! Soros ran a global macro fund where he traded derivatives such as futures contracts on stocks, bonds, and commodities.

Warren Buffett has sold long-dated puts on stock indices http://seekingalpha.com/article/66749-trading-put-options-with-buffett . Ooh, that's an especially evil derivative the "over-the-counter" kind.

Maybe derivatives do need further regulation, but the regulation should be done by people who know what they are talking about.

quantmeh
Senior Member

Posts: 5968
Joined: Apr 2007

Thu Oct 09, 08 04:22 PM

User is offline

Quote
Originally posted by: gelfand
the regulation should be done by people who know what they are talking about.

daveangel
Senior Member

Posts: 9067
Joined: Oct 2003

Thu Oct 09, 08 05:17 PM

User is offline

and he has sold tons of protection in HY index ...

-------------------------
Knowledge comes, but wisdom lingers.

Anthis
Senior Member

Posts: 4047
Joined: Oct 2001

Thu Oct 09, 08 05:36 PM

User is offline

Quote
Originally posted by: jawabean
Quote
Originally posted by: gelfand
the regulation should be done by people who know what they are talking about.

like Fuld?

quantmeh
Senior Member

Posts: 5968
Joined: Apr 2007

Thu Oct 09, 08 06:17 PM

User is offline

interestingly, Fuld admitted mistakes. AIG execs didnt. Lehman was let go down. AIG was bailed out. => never admit mistakes

ppauper
Senior Member

Posts: 40351
Joined: Nov 2001

Thu Oct 09, 08 08:48 PM

User is offline

Quote
Originally posted by: gelfand
Warren Buffett has sold long-dated puts on stock indices http://seekingalpha.com/article/66749-trading-put-options-with-buffett . Ooh, that's an especially evil derivative the "over-the-counter" kind..

indeed, there have been threads about him losing a lot of money

DominicConnor
Senior Member

Posts: 11300
Joined: Jul 2002

Fri Oct 10, 08 08:59 AM

User is offline

You can't avoid an exposure to derivatives, as this market is showing very clearly.

All firms of all kinds have exposures to future market changes. Even a streeet vendor punting newspapers sees his costs vary. Implicit exposure to several commodities, inflation, interest rates and FX.

If you hedge you use derivatives, but if you do not hedge then it should be clear to the sort of people who read this that you are in effect taking the other side of a forward contract.

A share is itself a derivative, composed of several underylings :capital value changes, dividends, an option that it might be taken over upping the price, and a set of entertaining variable tax consequences, since dividends and capital growth/lose are taxes quite differently from each toher and for different classes of investor.

Also take Warren Buffet's analogy about derivs being "weapons of mass destruction".
No country which has a long position in WMDs has been seriously attacked since acquiring them.
Iraq did not have WMDs and got trashed, N. Korea which has WMDs is treated very politely.

View thread in raw text format

FORUMS > General Forum

Forum Navigation:

© All material, including contents and design, copyright Wilmott Electronic Media Limited - FuseTalk 4.01 © 1999-2013 FuseTalk Inc. Terms & Conditions