Buffet’s Berkshire admits slip-ups on derivative risks
BILLIONAIRE US investor Warren Buffett’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.
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’s annual report, and made public yesterday.
It also agreed to SEC demands for more explanation on $1.8bn (£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.
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.