Buffett/Comments -2: Worries About Concentration Of Risk
By Richard Gibson DOW JONES NEWSWIRES DES MOINES, Iowa (Dow Jones)--Famed investor Warren Buffett calls derivative contracts "financial weapons of mass destruction, carrying out dangers that while now latent are potentially lethal," according to excerpts from his forthcoming annual letter to Berkshire Hathaway Inc. (BRKA, BRKB) shareholders.
Buffett, whose company is now seeking to divest of a derivatives business tied to its General Re purchase, also worries that substantial credit risk has become concentrated "in the hands of relatively few derivatives dealers."
The Berkshire chairman also discloses that he is not enamored of most common stocks today. "We will sit on the sidelines," he said in the letter, portions of which appeared Monday on the Fortune.com Web site.
The excerpts include a section on junk bonds. "Last year we were ... able to make sensible investments in a few 'junk' bonds and loans," he is quoted as writing. "Overall, our commitments in this sector sextupled, reaching $8.3 billion by year-end," he said.
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