Re: [Marxism] Key Obama backer worth $50 billion profits from taxpayer bailout of Wall Street

[Duane Roberts <duaneroberts92804@xxxxxxxxx>]

"S. Artesian" <sartesian@xxxxxxxxxxxxx> wrote:

> Ah yes, Mr. Buffett, once softly praised right here on
> this list by an  individual or two as being a different
> sort of capitalist than those scheming bankers; a "value"
> investor, in the for the long haul...

I should mention that another reason why Warren Buffett came out strongly in 
favor of a taxpayer bailout of Wall Street has to do with the fact he sold 
about $4.5 billion worth of "puts" in international financial markets shortly 
before the capitalist economy started it's downward spiral.

In layman's terms, a "put" is like an insurance policy sold at a premium, 
usually to big pension funds or insurance companies, with the purpose of 
hedging risk. In this case, some body made a $4.5 billion bet with Buffett that 
stock indices will be lower in a couple of years.

Buffett wants taxpayer dollars to prop up Wall Street because the deeper this 
depression goes, the longer it will take for these stock indices to recover. If 
these indices are below where they were when these "puts" were bought, he has 
to pay out about $40 billion when the expire.

Here is how one observer summed it up last November:

   About a month ago Buffett sold about $40
   billion worth of insurance against the four
   major indices in the world. The European-style 
   options (which can only be exercised on
   their expiration dates) were written (sold) are
   against four major international indices
   including the S&P 500. The options will expire
   between 2019 and 2027.

   Itâs reported Berkshire received $4.5 billion
   cash for writing these contracts. Considering
   the contracts donât start expiring until 2019,
   Berkshire is free to do what it sees fit with
   the cash.

   The short-term impact of being on the wrong
   side of the put options has caused investors to
   flee Berkshire shares. After all, they got the
   $4 billion cash, but if the markets crash, it
   could be on the hook for as much as $40 billion.

   As a result, creditors are getting very worried.
   Forbes reports in Betting Against Buffett, the
   credit default swaps (the cost to insure $10 million
   against a Berkshire default) is now $440,000. That
   puts the cost of insuring against a default of
   Berkshireâs top-rated debt right up there with GE,
   Goldman Sachs, and Citigroup.

See the following link:

http://seekingalpha.com/article/107341-buffett-s-gamble-40-billion-bet-on-volatility

Sincerely,

Duane J. Roberts
duaneroberts92804@xxxxxxxxx


      

________________________________________________
YOU MUST clip all extraneous text when replying to a message.
Send list submissions to: Marxism@xxxxxxxxxxxxxxxxxxx
Set your options at: 
http://lists.econ.utah.edu/mailman/options/marxism/archive%40archives.econ.utah.edu