Derivatives: The Next Shoe?
Buffett criticizes hedge funds at Omaha meetingSat May 1, 2004 06:27 PM ET
By Philip Klein
OMAHA, Neb., May 1 (Reuters) - Warren Buffett on Saturday criticized hedge funds and warned of the dangers of derivatives and looming inflation in front of nearly 20,000 shareholders who trekked to Omaha, Nebraska for the annual meeting of his Berkshire Hathaway Inc.
Buffett called hedge funds a "fad" that was more about Wall Street marketing than sound investing. "People that are now investing in hedge funds in aggregate are going to be disappointed," Buffett, who is known as the "Oracle of Omaha", said. The fees that hedge fund managers charge were unfair, he said.
In his remarks to shareholders, he used the example of the $6 billion accounting scandal at mortgage financier Freddie Mac to demonstrate the risks of derivatives. Despite having intelligent board members, being chartered by the U.S. Congress, and being followed by dozens of Wall Street analysts, he said Freddie Mac could not get a hold on the complexity of these financial instruments. "Sometime in the next 10 years you will have a huge problem that will either be caused by or accentuated by people's activities in derivatives," he said.
posted by Richard at
Saturday, May 01, 2004
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