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Warren Buffett Loses $1.2 Billion Shorting Put Derivatives (betting AGAINST a decline in stocks)

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DERIVATIVES LOSSES Berkshire said it had a $1.2 billion pre-tax unrealized loss on put options it wrote on the Standard & Poor's 500 <.SPX> and three foreign stock indexes. It also reported a $490 million pre-tax unrealized loss on contracts that require payouts if some high-yield bonds default between now and 2013. In February, Buffett revealed that Berkshire ended 2007 with $40 billion of exposure to 94 of these kinds of contracts. Accounting rules require the company to regularly report unrealized gains and losses in earnings, Berkshire said. The exposure may at first seem odd given that, in his shareholder letter in 2003, Buffett called derivatives "financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal."

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