{"id":18984,"date":"2023-03-26T23:56:00","date_gmt":"2023-03-26T15:56:00","guid":{"rendered":"https:\/\/www.granitefirm.com\/blog\/us\/?p=18984"},"modified":"2024-07-12T18:03:15","modified_gmt":"2024-07-12T10:03:15","slug":"derivatives-is-a-time-bomb","status":"publish","type":"post","link":"https:\/\/www.granitefirm.com\/blog\/us\/2023\/03\/26\/derivatives-is-a-time-bomb\/","title":{"rendered":"Derivatives are time bombs, several well-known cases"},"content":{"rendered":"\n<p>Buffett spent a long time explaining to investors in <a href=\"https:\/\/berkshirehathaway.com\/letters\/2002pdf.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">his 2002 shareholder letter<\/a> (the italicized part of this article is the original excerpt): Why does he think derivative financial products are time bombs?<\/p>\n\n\n\n<p><em>Charlie and I are of one mind in how we feel about derivatives and the trading activities that go with them: We view them as time bombs, both for the parties that deal in them and the economic system.<\/em><\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #ffffff;color:#ffffff\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #ffffff;color:#ffffff\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/03\/26\/derivatives-is-a-time-bomb\/#What_are_derivatives\" >What are derivatives?<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/03\/26\/derivatives-is-a-time-bomb\/#Wide_range\" >Wide range<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/03\/26\/derivatives-is-a-time-bomb\/#A_zero_sum_game\" >A zero sum game<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/03\/26\/derivatives-is-a-time-bomb\/#Case_from_Berkshire\" >Case from Berkshire<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/03\/26\/derivatives-is-a-time-bomb\/#General_Re_becomes_a_hot_potato\" >General Re becomes a hot potato<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/03\/26\/derivatives-is-a-time-bomb\/#Too_optimistic_about_future_contracts\" >Too optimistic about future contracts<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/03\/26\/derivatives-is-a-time-bomb\/#Too_many_loopholes\" >Too many loopholes<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/03\/26\/derivatives-is-a-time-bomb\/#No_fair_valuation\" >No fair valuation<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/03\/26\/derivatives-is-a-time-bomb\/#Problems_abound\" >Problems abound<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/03\/26\/derivatives-is-a-time-bomb\/#Only_dealer_get_benefits\" >Only dealer get benefits<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/03\/26\/derivatives-is-a-time-bomb\/#Difficult_to_react_quickly_to_market_changes\" >Difficult to react quickly to market changes<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/03\/26\/derivatives-is-a-time-bomb\/#Risk_of_domino_effect\" >Risk of domino effect<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/03\/26\/derivatives-is-a-time-bomb\/#Addressed_in_shareholders_meeting\" >Addressed in shareholders meeting<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/03\/26\/derivatives-is-a-time-bomb\/#Other_famous_cases\" >Other famous cases<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/03\/26\/derivatives-is-a-time-bomb\/#The_financial_tsunami_of_2008\" >The financial tsunami of 2008<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/03\/26\/derivatives-is-a-time-bomb\/#Largest_government_bankruptcy_in_US_history\" >Largest government bankruptcy in U.S. history<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/03\/26\/derivatives-is-a-time-bomb\/#Blue_chip_also_suffered_huge_losses\" >Blue chip also suffered huge losses<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-18\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/03\/26\/derivatives-is-a-time-bomb\/#Regulations_require_disclosure\" >Regulations require disclosure<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-19\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/03\/26\/derivatives-is-a-time-bomb\/#Berkshire_also_involved_in_derivative\" >Berkshire also involved in derivative<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-20\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/03\/26\/derivatives-is-a-time-bomb\/#Related_articles\" >Related articles<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_derivatives\"><\/span>What are derivatives?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Wide_range\"><\/span>Wide range<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p><em>Having delivered that thought, which I\u2019ll get back to, let me retreat to explaining derivatives, though the explanation must be general because the word covers an extraordinarily wide range of financial contracts. Essentially, these instruments call for money to change hands at some future date, with the amount to be determined by one or more reference items, such as interest rates, stock prices or currency values. If, for example, you are either long or short an S&amp;P 500 futures contract, you are a party to a very simple derivatives transaction \u2013 with your gain or loss derived from movements in the index. Derivatives contracts are of varying duration (running sometimes to 20 or more years) and their value is often tied to several variables.<\/em><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"A_zero_sum_game\"><\/span>A zero sum game<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p><em>Unless derivatives contracts are collateralized or guaranteed, their ultimate value also depends on the creditworthiness of the counterparties to them. In the meantime, though, before a contract is settled, the counterparties record profits and losses \u2013 often huge in amount \u2013 in their current earnings statements without so much as a penny changing hands.<\/em><\/p>\n\n\n\n<p><em>The range of derivatives contracts is limited only by the imagination of man (or sometimes, so it seems, madmen). At Enron, for example, newsprint and broadband derivatives, due to be settled many years in the future, were put on the books. Or say you want to write a contract speculating on the number of twins to be born in Nebraska in 2020. No problem \u2013 at a price, you will easily find an obliging counterparty.<\/em><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Case_from_Berkshire\"><\/span>Case from Berkshire<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"General_Re_becomes_a_hot_potato\"><\/span>General Re becomes a hot potato<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p><em>When we purchased Gen Re, it came with General Re Securities, a derivatives dealer that Charlie and I didn\u2019t want, judging it to be dangerous. We failed in our attempts to sell the operation, however, and are now terminating it.<\/em><\/p>\n\n\n\n<p><em>But closing down a derivatives business is easier said than done. It will be a great many years before we are totally out of this operation (though we reduce our exposure daily). In fact, the reinsurance and derivatives businesses are similar: Like Hell, both are easy to enter and almost impossible to exit. In either industry, once you write a contract \u2013 which may require a large payment decades later \u2013 you are usually stuck with it. True, there are methods by which the risk can be laid off with others. But most strategies of that kind leave you with residual liability.<\/em><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Too_optimistic_about_future_contracts\"><\/span>Too optimistic about future contracts<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p><em>Another commonality of reinsurance and derivatives is that both generate reported earnings that are often wildly overstated. That\u2019s true because today\u2019s earnings are in a significant way based on estimates whose inaccuracy may not be exposed for many years.<\/em><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Too_many_loopholes\"><\/span>Too many loopholes<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p><em>Errors will usually be honest, reflecting only the human tendency to take an optimistic view of one\u2019s commitments. But the parties to derivatives also have enormous incentives to cheat in accounting for them. Those who trade derivatives are usually paid (in whole or part) on \u201cearnings\u201d calculated by mark-to-market accounting. But often there is no real market (think about our contract involving twins) and \u201cmark-to-model\u201d is utilized. This substitution can bring on large-scale mischief. As a general rule, contracts involving<br>multiple reference items and distant settlement dates increase the opportunities for counterparties to use fanciful assumptions. In the twins scenario, for example, the two parties to the contract might well use<br>differing models allowing both to show substantial profits for many years. In extreme cases, mark-to-model degenerates into what I would call mark-to-myth.<\/em><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"No_fair_valuation\"><\/span>No fair valuation<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p><em>Of course, both internal and outside auditors review the numbers, but that\u2019s no easy job. For example, General Re Securities at yearend (after ten months of winding down its operation) had 14,384 contracts outstanding, involving 672 counterparties around the world. Each contract had a plus or minus value derived from one or more reference items, including some of mind-boggling complexity. Valuing a portfolio like that, expert auditors could easily and honestly have widely varying opinions.<\/em><\/p>\n\n\n\n<p><em>The valuation problem is far from academic: In recent years, some huge-scale frauds and near-frauds have been facilitated by derivatives trades. In the energy and electric utility sectors, for example, companies used derivatives and trading activities to report great \u201cearnings\u201d \u2013 until the roof fell in when they actually tried to convert the derivatives-related receivables on their balance sheets into cash. \u201cMark-to-market\u201d then turned out to be truly \u201cmark-to-myth.\u201d<\/em><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Problems_abound\"><\/span>Problems abound<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Only_dealer_get_benefits\"><\/span>Only dealer get benefits<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p><em>I can assure you that the marking errors in the derivatives business have not been symmetrical. Almost invariably, they have favored either the trader who was eyeing a multi-million dollar bonus or the CEO who wanted to report impressive \u201cearnings\u201d (or both). The bonuses were paid, and the CEO profited from his options. Only much later did shareholders learn that the reported earnings were a sham.<\/em><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Difficult_to_react_quickly_to_market_changes\"><\/span>Difficult to react quickly to market changes<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p><em>Another problem about derivatives is that they can exacerbate trouble that a corporation has run into for completely unrelated reasons. This pile-on effect occurs because many derivatives contracts require that a company suffering a credit downgrade immediately supply collateral to counterparties. Imagine, then, that a company is downgraded because of general adversity and that its derivatives instantly kick in with their requirement, imposing an unexpected and enormous demand for cash collateral on the company. The need to meet this demand can then throw the company into a liquidity crisis that may, in some cases, trigger still more downgrades. It all becomes a spiral that can lead to a corporate meltdown.<\/em><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Risk_of_domino_effect\"><\/span>Risk of domino effect<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p><em>Derivatives also create a daisy-chain risk that is akin to the risk run by insurers or reinsurers that lay off much of their business with others. In both cases, huge receivables from many counterparties tend to build up over time. (At Gen Re Securities, we still have $6.5 billion of receivables, though we\u2019ve been in a<br>liquidation mode for nearly a year.) A participant may see himself as prudent, believing his large credit exposures to be diversified and therefore not dangerous. Under certain circumstances, though, an exogenous event that causes the receivable from Company A to go bad will also affect those from Companies B through Z. History teaches us that a crisis often causes problems to correlate in a manner undreamed of in more tranquil times.<\/em><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Addressed_in_shareholders_meeting\"><\/span>Addressed in shareholders meeting<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>When Buffett faced shareholders at the<a href=\"https:\/\/www.wsj.com\/articles\/BL-MBB-49150\" target=\"_blank\" rel=\"noreferrer noopener\"> 2016 shareholder meeting<\/a>, &nbsp;<em>\u201c<\/em>Derivatives&nbsp;are still dangerous in large quantity,\u201d he says. \u201cIt&#8217;s still a potential time bomb in the system.\u201d&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Other_famous_cases\"><\/span>Other famous cases<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"The_financial_tsunami_of_2008\"><\/span>The financial tsunami of 2008<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>After the publication of Buffett\u2019s letter to shareholders denouncing derivative financial products, <a href=\"https:\/\/www.reuters.com\/article\/derivatives-credit-idUSCAS92670020080919\" target=\"_blank\" rel=\"noreferrer noopener\">the most serious financial tsunami in the history of world financial history triggered by derivative financial products broke out five years later<\/a>, and quickly expanded to the whole world, making Global stock and financial markets have been in turmoil for two years.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Largest_government_bankruptcy_in_US_history\"><\/span>Largest government bankruptcy in U.S. history<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Orange County, Los Angeles, USA, went bankrupt due to improper use of derivative financial products. <a href=\"https:\/\/go.gale.com\/ps\/i.do?id=GALE%7CA19354533&amp;sid=googleScholar&amp;v=2.1&amp;it=r&amp;linkaccess=abs&amp;issn=00420980&amp;p=AONE&amp;sw=w&amp;userGroupName=anon%7E993ec869\" target=\"_blank\" rel=\"noopener\">In December 1994, Orange County, California, declared bankruptcy after losing $1.7 billion<\/a>. It is also the largest government bankruptcy in U.S. history.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Blue_chip_also_suffered_huge_losses\"><\/span>Blue chip also suffered huge losses<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>In 1994, Procter &amp; Gamble (ticker: PG), a large listed company with excellent US stock performance, also operated financially on derivative financial products. <a href=\"https:\/\/www.nytimes.com\/1994\/04\/14\/business\/worldbusiness\/IHT-procter-gambles-tale-of-derivatives-woe.html\" target=\"_blank\" rel=\"noreferrer noopener\">It lost 157 million US dollars when the interest rate reversed<\/a>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Regulations_require_disclosure\"><\/span>Regulations require disclosure<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Therefore, the Financial Accounting Standards Bureau (FASB) of the United States later formulated new regulations, requiring companies to indicate that they operate derivative financial products for operational risk hedging, or simply for high-risk investment. True hedging operations\u2014such as forward transactions by airlines to prevent fuel oil price increases\u2014can save supervision, but other derivative financial product transactions must be listed in the books and included in the market value.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Berkshire_also_involved_in_derivative\"><\/span>Berkshire also involved in derivative <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>There are many who will counter: Berkshire is also involved in derivative financial products, it is true. But derivative financial products are really not suitable for retail investors.<\/p>\n\n\n\n<p>In the <a href=\"https:\/\/berkshirehathaway.com\/letters\/2006ltr.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">2006 shareholder letter<\/a>, Buffett admitted that in the past year, Berkshire was involved in the scale and achievements of derivative financial products: &#8220;Derivatives, just like stocks and bonds, are sometimes wildly mispriced. For<br>many years, accordingly, we have selectively written derivative contracts \u2013 few in number but sometimes for large dollar amounts. We currently have 62 contracts outstanding. I manage them personally, and they are free of counterparty credit risk. So far, these derivative contracts have worked out well for us, producing pre-tax profits in the hundreds of millions of dollars (above and beyond the gains I\u2019ve itemized from forward foreign-exchange contracts). Though we will experience losses from time to time, we are likely to continue to earn \u2013 overall \u2013 significant profits from mispriced derivatives.&#8221;<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"130\" height=\"102\" src=\"https:\/\/www.granitefirm.com\/blog\/us\/wp-content\/uploads\/sites\/2\/2023\/03\/d-1600x1200-1.jpg\" alt=\"Derivative\" class=\"wp-image-18985\"\/><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Related_articles\"><\/span>Related articles<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/08\/21\/no-derivative-product\/\" target=\"_blank\" rel=\"noreferrer noopener\">Don&#8217;t borrow money, shorting, or derivative products<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/09\/10\/wrong-investment-concept\/\">Investment concept not worth trying at all<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/03\/23\/shorting-is-dangerous\/\" target=\"_blank\" rel=\"noreferrer noopener\">Why shorting is extremely dangerous to retail investors?<\/a>&#8220;<\/li>\n<\/ul>\n\n\n\n<p><em><strong>Disclaimer<\/strong><\/em><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><em>The content of this site is the author\u2019s personal opinions and is for reference only. I am not responsible for the correctness, opinions, and immediacy of the content and information of the article. Readers must make their own judgments.<\/em><\/li>\n\n\n\n<li><em>I shall not be liable for any damages or other legal liabilities for the direct or indirect losses caused by the readers&#8217; direct or indirect reliance on and reference to the information on this site, or all the responsibilities arising therefrom, as a result of any investment behavior.<\/em><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Buffett spent a long time explaining to investors in his 2002 shareholder letter: Why does he think derivative financial products are time bombs?<\/p>\n","protected":false},"author":1,"featured_media":18985,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[318,943,11],"tags":[63],"class_list":["post-18984","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-derivatives-stock-trading","category-fasb","category-buffett","tag-pg"],"_links":{"self":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/18984","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/comments?post=18984"}],"version-history":[{"count":32,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/18984\/revisions"}],"predecessor-version":[{"id":19881,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/18984\/revisions\/19881"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/media\/18985"}],"wp:attachment":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/media?parent=18984"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/categories?post=18984"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/tags?post=18984"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}