Question about Buffett's Puts

Quote from jem:

I still want to know who the counter parties were and why they did the transactions.
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The long puts are used to secure a structured product offering by the counterparty.
 
With mark-to-market accounting, the value of a put will increase in a down quarter, and therefore give the appearance of more earnings. It is a way of making your company look good in a down market. However it's basically just a poor long term investment with short-term goals in mind.
 
Quote from Wolfgang1756:

The next two years are so uncertain. All this spending by the governments, which is barely keeping the economy alive, can't last forever. When the plug is finally pulled then what? This V stock market will be very W.

Look at unemplyoment - highest ever. Things for the next 2-3 years are not certain. I am sure we will see the Dow fall below 7000 again and we might very likely see Dow touch 5000.

Sure 20 years from now, the Dow will be 30,000 but it may touch 5000 before then!!! :eek:
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Do you even know that employment generation always lag GDP growth?
 
We don't know the strike price on the puts do we? That's rather critical here as the strike speaks directly to risk. Buffett and company would have had to make some assumptions about future inflation, if their estimates are too low they are safe, but woe be unto them if they are too high. For example if there was a deep and lasting deflation in the next 15 years they would be in trouble. That, in my opinion and apparently in Buffett's too, is highly unlikely, though a lasting sluggish economy accompanied by inflation is a real possibility. The mere fact that Buffett went for this suggests to me that he is very confident that we will not have significant deflation in the next 20 years and that we will instead have very significant inflation. The more significant, the safer their position; regardless, the strike is critical. So what is the Strike?
 
It amazes me that everyone here is praising Buffett's genius and all.

BUT I bet this time last year (when these Puts were down more than 100% - a paper loss of $5B or so) on this very same forum the exact same people (myself included) would have been mocking him and saying what a lousy trade!

And we traders/investors have VERY SHORT MEMORY!!!
 
Quote from Wolfgang1756:

It amazes me that everyone here is praising Buffett's genius and all.

BUT I bet this time last year (when these Puts were down more than 100% - a paper loss of $5B or so) on this very same forum the exact same people (myself included) would have been mocking him and saying what a lousy trade!

And we traders/investors have VERY SHORT MEMORY!!!
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I have always said that it was a good trade... I think there was a thread about it last year or earlier this year.
 
Buffet has become the victim of style drift. Why a value investor would insure high yield and stock index risk is beyond me.
 
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