Erich Riesenberg

2 Noteworthy Points From Warren Buffett's Annual Shareholder Letter

Comparing BRK to PRS is a mistake. BRK has minimal credit default exposure, less than $2 billion in current value and $5 billion in notional value. It is a fraction of BRK's equity. I conclude the opposite, if Buffett saw credit default premiums as a great investment in the second half of 2007, he would have sold more.

And of course, PRS is making unhedged investments, it is impossible to know precisely why BRK is selling credit default protection.

TheStreet.com on Primus Guaranty: Wacky and Uninformed

I am curious about the comparison between PRS and BRK. A minor (5% in notional terms) of BRK's derivative contracts are credit default, most are equity, interest, foreign exchange. Those could be hedges or outright investments of the type BRK has always made. Also, BRK could pay off all its derivatives liabilities without much of a dent.

With Buffett offering to reinsure so many municipals the concept of credit default coverage seems reasonable, but it doesn't appear to have been done in bulk at least through Dec of 2006.

Also, a typo, I hope no one is paying $91,000 a year to insure $1 million in BRK default.