April 04, 2006

Buffett is not fighting the trend

Yesterday it was widely reported that Warren Buffett added to his cash hoard using a derivative his bankers created. He will collect about $900 million in premium over the next few years if the markets globally do not tumble.

If true, he has telegrapghed some market support at lower levels. That quickly put an end to yesterday's stock reversal. I will be covering my short sales, likely tomorrow. Fighting this uptrend has been a bad idea, even for a day.

If the market craters, he will be long at lower levels which he would need to do anyways as he is 46 percent in cash.

This is an interesting play as he takes $900 million in premium to reinvest. Yet he does not have a place for the capital that he is already managing. Furthermore, I thought he hated derivatives.

The way the media covers this story, Buffett can't lose. Either could the "retards" (I mean geniuses) running Long-Term Capital. There is always an outlier event that can f&*(^^)*&^ck up the best of models. Buffett is not immune.

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