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Berkshire Weekend: Buffett on Berkshire's Use of Derivatives

|Includes: Berkshire Hathaway Inc (BRK.A), BRK.B

Liz Claman of Fox Business Channel quotes or paraphrases the Berkshire chairman:

Question: You have referred to derivatives as financial weapons of mass destruction. In the 1964 movie Dr. Strangelove - King Kong rides a weapon of mass destruction out of the bombay of his B-52 - as a long-term BRK shareholder - I feel like him today… you think large derivative positions are appropriate for a highly-rated insurance company? Will you add to these positions?

Buffett: Our job is to make money over time. We have arranged them so we have minimal exposure to bigger dangers in derivative field. We posted collateral of less than 1% of total marketable securities. They pose problems to the world generally - that’s why I referred to them that way on the macro basis. But I also said we refer to them regularly .

Good odds that on equity put options - we’ll make money. On high yield index - will probably lose money.We’ve run into far more bankruptcies in the last year than before. We’ve been in a bit of a financial hurricane. We are more than an insurance company though. We’re ideally suited to hold this sort of instrument.