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Matt Levine

Buffett Makes Millions Selling 500-to-1 Monkey-Linked Derivatives

Much as bankers are in the business of putting cheap funding to work, bloggers are in the business of putting cheap irony to work, and one of the cheapest of ironies has long been that Warren Buffett (1) has called derivatives "financial weapons of mass destruction" and (2) has been known to dabble in the occasional high-proof derivatives trade himself. Selling long-dated S&P 500 puts is perhaps the best-known example, though he'll buy big chunks of bank warrantstoo if the situation calls for it.

And in that vein, this Wall Street Journal item is a delight: Buffett's Berkshire Hathaway Inc. is insuring a $1 billion prize that Quicken Loans has offered to pay to anyone who can pick a perfect NCAA basketball tournament bracket. Because oh, sure, derivatives are evil, but let's bet a billion dollars on an essentially random outcome!