Whats Happening to Berkshire Hathaway?
Jonathan Stempel of Reuters has a very useful look at what’s going on at Berkshire Hathaway, which fell $6,500 per share today to close at its lowest level in over five years. After reading his article, I think we might be one step closer to understanding why Berkshire’s CDS are trading so very wide right now. But first, here’s David Gaffen: In recent weeks, the credit-default swaps has seen a marked decline in liquidity and trading, so a smaller amount of insurance contracts purchased can still cause large shifts in prices of a particular credit-default swap. “It only needs a little bit to move the market a long way,” says Tim Backshall, chief credit derivatives strategist at Credit Derivatives Research. Now here’s Stempel: A credit rating downgrade would likely not be material. Berkshire would have to post “nominal” additional collateral on derivatives of “far below 1 percent of assets” if Berkshire lost its “triple-A” ratings, Buffett’s assistant, Jackie Wilson, said. It was posting
