Berkshire Profit on Goldman Sachs Passes $2 Billion

[atticus]

Quote from asiaprop:

you trade discretionary...and...you trade arbitrage...interesting combination...or could not decide which one to pick? Also, I never mentioned I am an index trader, while I mentioned I also trade index options. As you already seem to infer from my previous posts you should possibly read more carefully. As an aside, there are very different types of index options guys, I highly assume you know that. I dont get your spin on words. Your modality comments in one of your earlier posts also made zero sense and did not add anything to the discussion.

Agree that one can only book what has expired or been offset? How he marks the trades is another story but I and others dont get why it does not get into your little head that if by expiration the cash ends above strike - prem he has nothing to worry about. His counterparties also mark their book in WHATEVER way they want (who decides where 10yrs vol is anyway) but the day when anything gets booked is far away.

A second thing you really dont get at all is that he pulled 5billion out of the very pockets that kissed the street for a dime months later. Not a bad trade to turn around and dictate the precise terms of the returns he wanted for the reinvested 5bil. You are an options brain but you pathetically fail in getting outside of your little box.

You spent days arguing that he hedged elsewhere and that I am not privy to his book. Then 666 posted the letter and you started another utterly moronic tangent.

The majority of CDS gains (ISDA data) from the crisis were offset via crossing with new counterparties. The buyers of Buffett's puts have many options by which to lock their unrealized gains.

Risk-modality on the term structure (switch-risk). Buffett infers that the term structure should be flat, and therefore he was gaming his counterparties by selling back/front vol > 1. I estimate that he received an additional $1MM per bp on the term structure, or roughly $300MM. So his discovery of a BSM "error" earned him $300MM, but he lost billions on the vol-line and delta.

I'll admit that selling that size against a failing bank was a f*cking coup, but Buffett's counterparties have now received govt and Buffett bailouts.

 

[Trader666]

Wrong again asskiss... the annual letter clearly states the "$10B liability" is the YEAREND liability which includes liabilities for contracts on three additional indexes and the S&P500 wasn't anywhere near that at yearend. Not to mention that, counting the premium received, that liability was a mark-to-market paper loss of $5.1 billion.

And don't pretend that these derivatives are Berkshire's only holdings or that Buffett put them on out of the context of the rest of the Berkshire portfolio.

Quote from atticus:

Buffett's talk of a $10B liability in the annual letter infers an SPX valuation <1135 and we're currently trading at 980.

No mention of an attenuation of the liability is mentioned anywhere in the letter. No hedge.

 

[Trader666]

asskiss is a pompous phony who throws around 10 cent words and pretends he knows more about investing than Buffett and more about physics than Einstein. This is his legacy... his fantasy world on ET

Quote from atticus:

"666" was born with microcephaly and convinces his caretakers that he can be more independent. He embarks on a trip to 7-11 for a box of twinkies and some blow-pops.

He crosses against the light and is critically-injured by a city bus. His caretakers' sue the city, winning "666" 300MM on damages.

After an arduous rehabilitation, "666" invests his 300MM by writing an SPX 1514 put, thereby insuring his legacy as a shrewd investor.

 

[atticus]

Quote from Retardo666:

Wrong again asskiss... the annual letter clearly states the "$10B liability" is the YEAREND liability which includes liabilities for contracts on three additional indexes and the S&P500 wasn't anywhere near that at yearend. Not to mention that, counting the premium received, that liability was a mark-to-market paper loss of $5.1 billion.

And don't pretend that these derivatives are Berkshire's only holdings or that Buffett put them on out of the context of the rest of the Berkshire portfolio.

Dear Microcephalic666,

Buffett states that a 25% drop in the SPX will result in a $9B liability (including premium). 1514 * 0.75 = 1135.50 at expiration. The SPX closed the year at 903.25. He's carrying convexity, so the marked loss prior to expiration would be MUCH greater than his expiration numbers.

Now, take the c*ck out of your mouth.

 

[asiaprop]

you are pathetic, because you twist the truth each time it gets inconvenient for you. a) you completely mistated our previous index options discussion. b) I mentioned he MAY HAVE hedged and that I and YOU possibly cannot know. Be careful when you put words in others' mouth.


The buyers of Buffett's puts have many options by which to lock their unrealized gains.

And so did Buffett right at the time global indexes ticked south. You know nothing whether he completely hedged, whether he partially hedged, whether he did not hedge at all. That was my point all along. You cannot know whatever you say. Don't imply you are the only guy in the know here, it makes you look increadibly naive.

Your comments on modality and term structure are utter nonesense. You STILL DID NOT COMPREHEND that this whole deal was to raise money others were in urgend need of just months later. Instead you imply Buffett put on trades with a specific view on the term structure, you are either increadibly naive or plain dumb.

Quote from atticus:

You spent days arguing that he hedged elsewhere and that I am not privy to his book. Then 666 posted the letter and you started another utterly moronic tangent.

The majority of CDS gains (ISDA data) from the crisis were offset via crossing with new counterparties. The buyers of Buffett's puts have many options by which to lock their unrealized gains.

Risk-modality on the term structure (switch-risk). Buffett infers that the term structure should be flat, and therefore he was gaming his counterparties by selling back/front vol > 1. I estimate that he received an additional $1MM per bp on the term structure, or roughly $300MM. So his discovery of a BSM "error" earned him $300MM, but he lost billions on the vol-line and delta.

I'll admit that selling that size against a failing bank was a f*cking coup, but Buffett's counterparties have now received govt and Buffett bailouts.

 

[atticus]

Quote from asiaprop:

you are pathetic, because you twist the truth each time it gets inconvenient for you. a) you completely mistated our previous index options discussion. b) I mentioned he MAY HAVE hedged and that I and YOU possibly cannot know. Be careful when you put words in others' mouth.

And so did Buffett right at the time global indexes

That's it? You're busted on your faggy replication and this is your response? Be careful? If you only knew.

WTF does your/my trading have to do with Buffett's sale of a put at $5 that's trading at $12? Yeah, Napoleon, it was an AWESOME trade. He really taught Mr. Merton a lesson on term-structure.

Funny, I don't see any mention of a potential hedge in your posts:

You seriously believe a guy of such acumen who buys into GS at such time at such conditions will put on such options positions without regard to the larger context of his book? Come on, reading entertaining stories of a fun website and implying thats all there is to the whole story is the same as believing Jim Rogers or the like are in all honesty revealing their true positions which makes you look slightly stupid. All I have to say...

In fact, there is no hedge.... and he began underwriting CDS too!

 

[asiaprop]

You seem to be on fire, dude. My post was still in the making... here is the complete reply:

you are pathetic, because you twist the truth each time it gets inconvenient for you. a) you completely mistated our previous index options discussion. b) I mentioned he MAY HAVE hedged and that I and YOU possibly cannot know. Be careful when you put words in others' mouth.


The buyers of Buffett's puts have many options by which to lock their unrealized gains.

And so did Buffett right at the time global indexes ticked south. You know nothing whether he completely hedged, whether he partially hedged, whether he did not hedge at all. That was my point all along. You cannot know whatever you say. Don't imply you are the only guy in the know here, it makes you look increadibly naive.

Your comments on modality and term structure are utter nonesense. You STILL DID NOT COMPREHEND that this whole deal was to raise money others were in urgend need of just months later. Instead you imply Buffett put on trades with a specific view on the term structure, you are either increadibly naive or plain dumb.

Quote from atticus:

That's it? Your busted on your faggy replication and this is your response? Be careful? If you only knew.

WTF does your/my trading have to do with Buffett's sale of a put at $5 that's trading at $12? Yeah, Napoleon, it was an AWESOME trade. He really taught Mr. Merton a lesson on term-structure.

Funny, I don't see any mention of a potential hedge in your posts:

You seriously believe a guy of such acumen who buys into GS at such time at such conditions will put on such options positions without regard to the larger context of his book? Come on, reading entertaining stories of a fun website and implying thats all there is to the whole story is the same as believing Jim Rogers or the like are in all honesty revealing their true positions which makes you look slightly stupid. All I have to say...

 

[atticus]

Quote from asiaprop:

You seem to be on fire, dude. My post was still in the making... here is the complete reply:

you are pathetic, because you twist the truth each time it gets inconvenient for you. a) you completely mistated our previous index options discussion. b) I mentioned he MAY HAVE hedged and that I and YOU possibly cannot know. Be careful when you put words in others' mouth.


The buyers of Buffett's puts have many options by which to lock their unrealized gains.

And so did Buffett right at the time global indexes ticked south. You know nothing whether he completely hedged, whether he partially hedged, whether he did not hedge at all. That was my point all along. You cannot know whatever you say. Don't imply you are the only guy in the know here, it makes you look increadibly naive.

Your comments on modality and term structure are utter nonesense. You STILL DID NOT COMPREHEND that this whole deal was to raise money others were in urgend need of just months later. Instead you imply Buffett put on trades with a specific view on the term structure, you are either increadibly naive or plain dumb.

The term-structure is apparently pretty important to Buffett... as he alludes to it in the letter -- the BSM failure on long-dated contracts.

He sold a put at $5 that is marked to $12. So where is the hedge? Still looking? No mention of it in the letter...

OK, so he sold 14% and bought 1514. Now you're stating he hedged before the meltdown, yet he discusses the "25%" mark in the letter. If he hedged, he certainly got raped on vol and price, but then again, there is no hedge.

Perhaps it's my "naivity".

 

[atticus]

Quote from asiaprop:

you are pathetic, because you twist the truth each time it gets inconvenient for you.

asiaprop: he hedged

asiaprop: listen motherf*cker, he HEDGED!

[Buffett letter posted]

asiaprop: I never said he hedged

asiaprop: he MAY HAVE hedged

asiaprop: he hedged right before the meltdown. (Of course, it's not in Buffett's numbers, but I can work with that.)

 

[asiaprop]

he talked about this specific trade so obviously there is no mention of other positions he held. Also you are incorrect in inferring that the liability, he mentioned, on a 25% drop already includes the premium. He clearly stated that thats the liability he owes to his counterparties should the indexes close 25% below the inception level. That obviously DOES NOT include premium.

You simply do not understand the true reasons and implications of this trade thats why you need to talk about cocks and make other sexual connotations towards those who disagree with you and your arrogance. Maybe its manly in your circles to imply others are sucking cock? Hmm, to me its a testimony to your level of sophistication nothing else. The dumb guy here seems to be you, implying Buffett put the trade on because of what he thought an attractive term structure and option mispricing. Maybe you should consider that a guy of WB's caliber may need to phraze things in particular ways when selling his ware to his followers.

Quote from atticus:

The term-structure is apparently pretty important to Buffett... as he alludes to it in the letter -- the BSM failure on long-dated contracts.

He sold a put at $5 that is marked to $12.

So where is the hedge? Still looking?