Tag: Margin Trading

Derivatives: An Investment on Nothing!

Warren Buffet gave a prophetic pronouncement back in 2003 about the Derivatives market, seeing the exponential dangers of this “paper-thin” type of investment.

Buffet did not mince words. He called them “financial weapons of mass destruction“:

Buffett warns on investment ‘time bomb’

BBC – 4 March, 2003

The derivatives market has exploded in recent years, with investment banks selling billions of dollars worth of these investments to clients as a way to off-load or manage market risk.

But Mr Buffett argues that such highly complex financial instruments are time bombs and “financial weapons of mass destruction” that could harm not only their buyers and sellers, but the whole economic system.

[…]

Some derivatives contracts, Mr Buffett says, appear to have been devised by “madmen”.  […]

http://news.bbc.co.uk/2/hi/bus…