waterlily57

Berkshire Hathaway: Worst Year Ever, and CDS Too

No one has asked who is on the other side of the bet. My guess is that they are funds (pension funds?) who want to insure against down markets in future years. These funds do not mind paying the premium, hence underperforming in the short term, but get insurance at the maturity date. To me, Buffet is just engaging in the futures market of equities. Not really CDS in nature. Currently he possesses the float to invest in. As someone said above, it is like the supercat insurance.

I am not totally agreeable to his idea and I don't see the global economic value of the whole thing. Just like gambling? I believe he is not explicit because he doesn't want imitators to come in too fast, not that there are many who can mimick at this time.

Also, he says he is totally responsible for the whole thing. Well, if he is younger, then he'll have a high probability of being around in 2019 to own up to that responsibility. As it is it is possible it will be the company who will own up to that responsibility.