Mr Warren Buffett warned today derivatives were "financial weapons of mass destruction" and "potentially lethal" to the economic system, according to today's Financial Times.
In a letter from the legendary investor to shareholders of Berkshire Hathaway, the investor said he and Mr Charlie Munger, Berkshire Hathaway's vice chairman, viewed derivatives and derivative trading as "time bombs".
"Charlie and I believe . . . that the macro picture [for derivatives] is dangerous and getting more so," Mr Buffett wrote, because of the concentration of credit risk in the hands of relatively few derivatives dealers.
Advance extracts from his letter were published last night, with Mr Buffett's consent, on the website of Fortune magazine.
Mr Buffett - whose investment advice is closely followed by retail investors - also said Berkshire was "not inclined to add" to its equity holdings, which include stakes in American Express, Gillette and Coca-Cola.
"Despite three years of falling prices, which have significantly improved the attractiveness of common stocks, we still find very few that even mildly interest us," he wrote. "Occasionally, successful investing requires inactivity".
AFP