We've used derivatives for many, many years. I don't think derivatives are evil, per se, I think they are dangerous.
Interpretation
Derivatives can be useful in finance but also carry significant risks.
Warren Buffett highlights that while derivatives have been a part of financial markets for a long time and can serve useful purposes, they also have inherent dangers that can lead to significant financial instability. This statement reflects a cautious approach to complex financial instruments, suggesting that their power should be managed wisely.
In practice
In a discussion about investment strategies, one might quote Buffett to emphasize caution regarding derivatives.
I have no views as to where it will be, but the one thing I can tell you is it won't do anything between now and then except look at you. Whereas, you know, Coca-Cola (KO) will be making money, and I think Wells Fargo (WFC) will be making a lot of money and there will be a lot - and it's a lot - it's a lot better to have a goose that keeps laying eggs than a goose that just sits there and eats insurance and storage and a few things like that.
If the world couldn't see your results, would you rather be thought of as the world's greatest investor but in reality have the world's worst record? Or be thought of as the world's worst investor when you were actually the best?
Cash never makes us happy, but it's better to have the money burning a hole in Berkshire's pocket than resting comfortably in someone else's.
I think you should read everything you can. In my case, by the age of 10, I'd read every book in the Omaha public library about investing, some twice. _x000D_ You need to fill your mind with various competing thoughts and decide which make sense.
The most common cause of low prices is pessimism - some times pervasive, some times specific to a company or industry. We want to do business in such an environment, not because we like pessimism but because we like the prices it produces. It's optimism that is the enemy of the rational buyer.
Oneβs objective should be to get it right, get it quick, get it out and get it over. Your problem wonβt improve with age.
If you're trading individual securities, you're almost certainly making a mistake. Because most professional managers can't outperform their benchmarks, and there's little reason to think that individuals can.
I cannot invest the way I want the world to be; I have to invest the way the world is.
Have rational expectations for future returns and avoid changing those expectations in response to the ephemeral noise coming from Wall Street.
I'm not emotional about investments. Investing is something where you have to be purely rational and not let emotion affect your decision making - just the facts.
If you owe your bank manager a thousand pounds, you are at his mercy. If you owe him a million pounds, he is at your mercy.
Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.
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