Ultimately, Berkshire is likely to profit on the puts because they're apt to expire worthless, assuming markets recover in the next 11-to-19 years, which is a pretty fair bet notwithstanding the current plunge in stocks. Berkshire will then...Ultimately, Berkshire is likely to profit on the puts because they're apt to expire worthless, assuming markets recover in the next 11-to-19 years, which is a pretty fair bet notwithstanding the current plunge in stocks. Berkshire will then pocket the puts' premiums of almost $5 billion plus investment income on that money.
As of now, the puts are under water, perhaps to the tune of $3 billion.
Arguably, Buffett was too early. If he had sold the puts recently, he would have generated enormous premiums because of high market volatility. One volatility measure involving the S&P 500, the so-called vix index, has doubled since June 30 to over 50%.
Berkshire also has made bullish derivative bets on the junk-bond market, involving so-called credit default swaps on $8.8 billion of high-yield debt, which means the company would have to pay off if a group of junk bonds defaults. Those swaps, carried at $2.2 billion, may have declined in value by several hundred million dollars in the third quarter due to the setback in the junk market. Berkshire didn't have an immediate comment.展开 |
|
转播
