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.
Credit is a system whereby a person who can not pay gets another person who can not pay to guarantee that he can pay.
Long-term investing has gotten so popular, it's easier to admit you're a crack addict than to admit you're a short-term investor.
If the fluctuations in your investment portfolio are reduced, the impact of emotions and behavior on your account is also reduced.
All the time and effort people devote to picking the right fund, the hot hand, the great manager have, in most cases, led to no advantage.
Never pay the slightest attention to what a company president ever says about his stock.
Finance is not merely about making money. It's about achieving our deep goals and protecting the fruits of our labor. It's about stewardship and, therefore, about achieving the good society.
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