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Post by jeffolie on Jul 3, 2007 11:52:00 GMT -6
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Post by unlawflcombatnt on Jul 4, 2007 3:49:56 GMT -6
Jeff,
Thanks for the link. That's truly an outstanding article. It provides a great explanation of several financial "instruments," including the Credit Default Swap, which I didn't really understand previously.
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Post by jeffolie on Jul 4, 2007 12:38:31 GMT -6
“‘We’ve had people in their 80s in here in tears,’ Blum said. ‘These people are devastated.’” “The seniors invested in securities called collateralized mortgage obligations, or CMOs. Some independent brokers working in Brookstreet offices pitched the CMOs to wealthy seniors at dinner seminars and condominium meetings.” “‘They presented these as very safe, like a bond, paying 7 to 8 percent,’ Blum said. The CMOs the brokers invested in, however, were complex and highly speculative, he said.” “Brookstreet has said the money was lost in part because of too much securities trading on margin, or borrowed money. The value of the CMOs declined, Brookstreet said, as the so-called subprime mortgage market worsened.” “The margin losses mean that investors not only lost their funds, but could owe money that was borrowed to trade in their accounts. Blum said he talked with one client Tuesday who has about $12 million in margin losses.” www.sun-sentinel.com/news/local/southflorida/sfl-flzinvest0704nbjul04,0,6094092.story?coll=sfla-home-headlines
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Post by jeffolie on Jul 5, 2007 10:10:08 GMT -6
In his letter Mr Buffett compares the derivatives business to "hell... easy to enter and almost impossible to exit".
Some derivatives contracts, Mr Buffett says, appear to have been devised by "madmen".
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