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In 1997: 10 Myths About Financial DerivativesGee, I guess time will only tell.In 2008: Gambling on Derivatives
The tremendous growth of the financial derivatives market and reports of major losses associated with derivative products have resulted in a great deal of confusion about those complex instruments. Are derivatives a cancerous growth that is slowly but surely destroying global financial markets? Are people who use derivative products irresponsible because they use financial derivatives as part of their overall risk-management strategy? Are financial derivatives the source of the next U.S. financial fiasco--a bubble on the verge of exploding?
Those who oppose financial derivatives fear a financial disaster of tremendous proportions--a disaster that could paralyze the world's financial markets and force governments to intervene to restore stability and prevent massive economic collapse, all at taxpayers' expense. Critics believe that derivatives create risks that are uncontrollable and not well understood.  Some critics liken derivatives to gene splicing: potentially useful, but certainly very dangerous, especially if used by a neophyte or a madman without proper safeguards.
In this paper 10 myths, or common misconceptions, about financial derivatives are explored. Financial derivatives have changed the face of finance by creating new ways to understand, measure, and manage financial risks. Ultimately, derivatives offer organizations the opportunity to break financial risks into smaller components and then to buy and sell those components to best meet specific risk-management objectives. Moreover, under a market-oriented philosophy, derivatives allow for the free trading of individual risk components, thereby improving market efficiency. Using financial derivatives should be considered a part of any business's risk-management strategy to ensure that value-enhancing investment opportunities can be pursued."We view them as time bombs both for the parties that deal in them and the economic system ... In our view ... derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal."
The world's greatest stock market investor, known as "the Sage of Omaha", in his Chairman's Letter in the Berkshire Hathaway 2002 Annual Report.