It would be helpful if he would actually explain how this meltdown would occur, rather than just yelling about how crazy terrible it will be. I personally know little about derivatives and how they work, other than they seem to be a way to securitize a bet on a non-equity occurrence ... like the Giants winning the Superbowl or a storm killing the Florida orange crop.
I agree with this statement and will make an additional comment.
I wonder to what extent Warren Buffett's treatment as a oracle by the financial press creates a non-helpful feedback loop where complex financial activities that can't be reduced to simple homilies (i.e., buy low, sell high) are immediately viewed as inevitably catastrophic and diabolical.
I say this with particular focus on the notion, which is once again stated in this article, that if Buffett doesn't understand it, who does? Apparently, a whole lot of very very smart people understand these systems (exotic financial instruments, electronic trading systems) enough to make them a significant part of the modern economic structure. Certainly, there is something more complex and nuanced going on here but you would not know it from the way the press (via Buffett) is presenting it.
As far as I can tell, this entire article was based on two sentences in Buffett's letter to shareholders six years ago. Buffett is obviously a financial genius, but it isn't very easy to see exactly what he meant from these two sentences. Basing two entire pages of doom and gloom on that with nothing but arbitrary statistics to back up the point doesn't seem very trustworthy to me. If the author is serious that there is a massive bubble flying under the radar, he's not making a particurlary solid argument.
Headlining this story 'Warren Buffet: *' is very misleading. Please don't.
Actually Buffett has pretty much been shouting this from the rooftops. In 2003 he even spoke at length about this at my school. So the "Warren Buffet.." part is not misleading. However I don't think the 16 trillion number came from Buffett, so I think linking the two is misleading
