Buffet's Berkshire admits slip-ups on derivative risks

BILLIONAIRE US investor Warren Buffett&rsquo;s Berkshire Hathaway underestimated the risks of falling stock prices to its billions of dollars of derivatives bets, yet still believes it is valuing the contracts fairly.<br /><br />Berkshire revealed its error in a 26 June letter to the US Securities and Exchange Commission, one of several pieces of correspondence with the regulator about the company&rsquo;s annual report, and made public yesterday.<br /><br />It also agreed to SEC demands for more explanation on $1.8bn (&pound;1.1bn) of writedowns on stock investments, and $2.7bn of auction-rate and other municipal debt holdings. On 29 June, the SEC said it completed its review without further comment.<br /><br />The correspondence shows Omaha, Nebraska-based Berkshire, which has close to 80 businesses and ended June with more than $136bn of stocks, bonds and cash, is struggling to comply with SEC requirements to disclose enough about its finances.