This week Bloomberg disclosed that Warren Buffett, the man who has called derivatives a weapon of mass destruction, has himself afterall leveraged his fund Berkshire Hathaway by making a $40 billion bet in derivatives.
Little known to most investors is that Buffett’s primary source of revenue is his 50 insurance companies, including General RE, his company in which top executives are going to jail for accounting fraud associated with transactions involving AIG. The derivaties revelation was accompanied by a sharp drop in the fund price and the downgrading of Berkshire Hathaway bonds.
It is probably also time that Buffett divest himself of Moody’s, he is the bond rating company’s largest shareholder. Moody’s played the key role in the subprime mortgage debacle and later claimed that it mistakenly overrated subprime debt due to a computer error.
It has been a tough month for Buffett in which the old expression “walk the walk” comes to mind.