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Wednesday, August 22, 2012

Warren Buffett: Investor or Trader?

President Barack Obama and Warren Buffett in t...
 (Photo credit: Wikipedia)
Earlier this week we learned that Warren Buffett's Berkshire Hathaway (BRK-A) recently backed out of credit-default swaps (CDS) in the municipal bond market. Berkshire terminated $8.25 billion in swaps that were not set to expire for another five years, according to government filings. The Wall Street Journal says Berkshire's move "raises a red flag," possibly signalling that the Oracle of Omaha is turning bearish on municipalities.
According to Lee Munson, head of Portfolio LLC and author of the book Rigged Money, Buffett is merely looking for a trade. "The dude still has $8 billion of exposure," notes Munson, "so he basically cut his exposure in half." The CDS amount to insurance against municipal bond failure. The idea of reducing exposure now would be to resell the contracts later at a better price. It's a position shift, not a sea change.... Continue to read.
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