Buffet on the ropes?

Not really. He still has loads of cash, loads of companies and loads of intelligence. Nonetheless, his CDS rates, i.e. rates to buy credit default swaps protecting Berkshire Hathaway ("BH") debt, are near those of much lesser companies. Actually, that is an understatement. It is near or below those of much, much, much lesser companies. So why?

Well, according to Bloomberg it is due to some derivatives on the S&P 500 that will not pay out until 2019 at the earliest. From what I know, CDS contracts only go out five years, so you would not likely have a default within that time, but they are OTC, so the counterparties can negotiate different terms if they desire. Alternatively, if the S&P goes down too low, or stays down too long, or BH has a ratings downgrade, then there is the prospect of BH having to post collateral. Still, this should be drop in the bucket for BH. So the cost of their CDS protections seems to me a bit silly. Then again, I don't do that dance, so what do I know. I am not so sure why protecting $10 million in BH debt would cost nearly half a million a year for five years (math majors, that is almost $2.5 million) but perhaps someone else has an idea. Anyone out there know? Really, either of you have an idea?

http://www.bloomberg.com/apps/news?pid=20601087&sid=awMIhCcHAcXU&refer=home

GEEEEEEEE

In the interest of full disclosure, I have some GE stock, which I bought this week. I read an article yesterday predicting GE has too much debt to survive. I hope not. Yet, they are doing some downsizing (who isn't) and other changes to cut costs and boost capital. Time will tell.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aJd9ubB_EQSA&refer=home