Warren Buffett Sees Derivatives as a Potential “Time Bomb” for Financial Markets

by John Galt
May 1, 2016 22:40 ET


CNBC did not report on this subject on their web page.

Marketwatch did not make a big deal about this story either:


The Financial Times of London, Wall Street Journal, Bloomberg, hell, even that rag the New York Times Business section do not even have this headline:

Buffett sees derivatives as potential “time bomb” in financial markets

So my American readers can thank the Communist Chinese government’s semi-official official propaganda outlet, Xinhua?!?!?!


OMAHA, Nebraska, April 30 (Xinhua) — Warren Buffett, Berkshire Hathaway’s chairman and chief executive, said on Saturday that derivatives remain a potential “time bomb” in financial markets.

When answering a question about the derivatives exposure of the banks in Berkshire’s portfolio, Buffett said he was not worried about the company’s investment in Bank of America or Wells Fargo, but the level of derivative exposure at large banks remains “a great danger” if there’s a discontinuity in the financial markets.

“Derivatives are still dangerous on a large basis,” Buffett said at the company’s annual shareholder meeting, often known as Woodstock for Capitalists, held at the CenturyLink Center in downtown Omaha of Nebraska, noting that a major attack on the country that severely disrupts the financial system would reveal dangerous derivative positions.

“It’s still a potential time bomb in the system,” he warned, adding that Berkshire will never engage in dangerous derivative positions involving collateral. In the past, Buffet has described derivatives as “financial weapons of mass destruction.”

Buffet also said the company would not think about investing in largest banks. “If you take the 50 largest banks in the world, we wouldn’ t even think about probably 45 of them,” he said.

The annual meeting was livestreamed to the public on Saturday for the first time in Berkshire’s history and it was also translated into Mandarin in real-time, indicating the company’s increasing interest in China. Around 40,000 investors all around the world came to Omaha to attend this year’s meeting, about 3,000 of which were from China, according to local media.

The highlight of the annual gathering was the Q&A session, in which Buffett and his partner Charlie Munger took questions from shareholders, analysts and journalists about everything ranging from Berkshire, the stock market, the economic outlook to investment philosophy for around six hours.

Thus if he is willing to come out on the record and say this, why the hell isn’t the MSM and so-called business media in the U.S. focusing on this story?

Because it is so terrifying!

The latest quarterly information from the OCC (Office of the Comptroller of the Currency) in the United States should make everyone pay attention to their finances and banking situation immediately(click graphic to enlarge to full size):


Whew. It’s down as of the end of Q4, 2015 to a paltry $180.9 trillion. I thought it was a lot of money.

Of course when one reviews the banks involved, well, it gets a wee bit more interesting:


The good news is of the top 25, only 5 of the major banks have about $170 trillion of the $180 trillion of total exposure. Woah. What? Wait a second. How bad is it really, no I mean seriously:


Ah much better. So those derivatives do not include exposure to overpriced real estate, commercial loans (C&I), and securities not in their trading account, you know, like the naked shorts they have on gold, silver, etc.

Dear God people, it this news story from China via Omaha, Nebraska doesn’t wake you up to go out and buy a buttload of precious metals to protect your family (along with a lot of firearms and ammunition) I don’t know what will. The wealthy are way ahead of the masses but then again, isn’t that they way it has always been throughout history?

Here is the full OCC report which probably got old Warren’s attention:

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