Seeds of Economic Catastrophe (2003)


	Seeds of Economic Catastrophe (2003)

abailart

9-29-2007 2:05 PM

302 views

tags:

warren buffet, deriratives, economics, finance, risk

abailart says:

From 2003. They didn't listen then, perhaps they never will.

1 Comment |

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9-29-2007 6:45 PM

BobbyRutan

It's going to be up to the Financial Accounting Standards Board (FASB) to require companies to prominently display derivatives valued at Fair Value on their income statements before investors "might be" savvy enough to make judgments about companies risky behaviors.

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<div style="margin: 12px 0px; font-family: arial; color: #333333; background: #ffffff; border: solid 4px #e5e5e5; width: 100%; clear: left;"><div class="CM_CTB_Content_Wrap" style="margin: 0px; padding: 0px;background-color: #ffffff;"><div style="border-bottom: solid 1px #dcdcdc; white-space: nowrap; margin-bottom: 8px; background-color: #eeeeee ;background-image: url(http://www.clipmarks.com/images/source-bg.gif); background-repeat: repeat-x; height: 24px; line-height: 24px; vertical-align: middle; padding-bottom: 4px; color: #666666; font-size: 10px;" ><a href="http://clipmarks.com/clip-to-blog/" title="see clips that are hot right now"><img src="http://content.clipmarks.com/blog_embed/48762ea2-2b14-4995-b4ec-ec24f2abd6fb/3531F1A2-5C30-4CF3-B112-392DACAF36CF/" alt="" width="19" height="19" border="0" style="vertical-align: middle; margin: 0px 4px; display: inline; border: none; float:none;" /></a>clipped from <a title="http://news.bbc.co.uk/1/hi/business/2817995.stm" href="http://news.bbc.co.uk/1/hi/business/2817995.stm" style="font-size: 11px;">news.bbc.co.uk</a></div><blockquote style="text-align: left; padding: 0px 8px; margin: 4px 0px 8px 0px; background: transparent; border: none;" cite="http://news.bbc.co.uk/1/hi/business/2817995.stm"><FONT size="2"><B>The rapidly growing trade in derivatives poses a "mega-catastrophic risk" for the economy and most shares are still "too expensive", legendary investor Warren Buffett has warned. </B>
</FONT><P>
<FONT size="2">The world's second-richest man made the comments in his famous and plain-spoken "annual letter to shareholders", excerpts of which have been published by Fortune magazine.
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<FONT size="2">The derivatives market has exploded in recent years, with investment banks selling billions of dollars worth of  these investments to clients as a way to off-load or manage market risk.</FONT></P></blockquote><div style="height: 2px; font-size: 2px; background: #dcdcdc; border-bottom: solid 1px #f5f5f5; margin: 2px 4px;"></div><blockquote style="text-align: left; padding: 0px 8px; margin: 4px 0px 8px 0px; background: transparent; border: none;" cite="http://news.bbc.co.uk/1/hi/business/2817995.stm">such highly complex financial instruments are time bombs and "financial weapons of mass destruction" that could harm not only their buyers and sellers, but the whole economic system.</blockquote><div style="height: 2px; font-size: 2px; background: #dcdcdc; border-bottom: solid 1px #f5f5f5; margin: 2px 4px;"></div><blockquote style="text-align: left; padding: 0px 8px; margin: 4px 0px 8px 0px; background: transparent; border: none;" cite="http://news.bbc.co.uk/1/hi/business/2817995.stm"><P><FONT size="2"><B>Contracts devised by 'madmen'</B>
</FONT></P><P>
<FONT size="2"></FONT></P></blockquote><div style="height: 2px; font-size: 2px; background: #dcdcdc; border-bottom: solid 1px #f5f5f5; margin: 2px 4px;"></div><blockquote style="text-align: left; padding: 0px 8px; margin: 4px 0px 8px 0px; background: transparent; border: none;" cite="http://news.bbc.co.uk/1/hi/business/2817995.stm">Derivatives are like 'hell'</blockquote><div style="height: 2px; font-size: 2px; background: #dcdcdc; border-bottom: solid 1px #f5f5f5; margin: 2px 4px;"></div><blockquote style="text-align: left; padding: 0px 8px; margin: 4px 0px 8px 0px; background: transparent; border: none;" cite="http://news.bbc.co.uk/1/hi/business/2817995.stm"><table background="undefined" bgcolor=""><tr><TD width="10" valign="top"><IMG width="10" vspace="0" hspace="0" height="1" border="0" src="http://news.bbc.co.uk/shared/img/o.gif" alt="" /></TD></tr></table></blockquote><div style="height: 2px; font-size: 2px; background: #dcdcdc; border-bottom: solid 1px #f5f5f5; margin: 2px 4px;"></div><blockquote style="text-align: left; padding: 0px 8px; margin: 4px 0px 8px 0px; background: transparent; border: none;" cite="http://news.bbc.co.uk/1/hi/business/2817995.stm"><DIV class="mva">
		<IMG width="24" height="13" border="0" src="http://newsimg.bbc.co.uk/nol/shared/img/v3/start_quote.gif" alt="" />
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	Large amounts of risk have become concentrated in the hands of relatively few derivatives dealers ... which can trigger serious systemic problems
</B>
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