What did Buffett say about derivatives being weapons of mass destruction?
Buffett described derivatives as “financial weapons of mass destruction.” He warned that long-term derivatives contracts and large uncollateralized receivables could create latent but potentially lethal risks. He also emphasized Berkshire’s need to remain a fortress of financial strength.
“In our view, however, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.” (Excerpt 2002_86)
How did Buffett describe Berkshire’s response to the 2008 financial crisis?
Buffett wrote that the credit crisis created paralyzing fear and caused business activity to fall at a pace he had never witnessed before. He described Berkshire as a supplier of liquidity and capital during the crisis, rather than a company seeking a government bailout.
“When the financial system went into cardiac arrest in September 2008, Berkshire was a supplier of liquidity and capital to the system, not a supplicant.” (Passage 2009_p0021)
What was Buffett’s view on share repurchases?
Buffett supported repurchases when a company had sufficient funds for its operational and liquidity needs and when its shares traded at a material discount to intrinsic value. He warned that buying shares above intrinsic value could destroy value for continuing shareholders.
“We favor repurchases when ... its stock is selling at a material discount to the company’s intrinsic business value.” (Excerpt 2011_32)
