May 22: Whitney Tilson on Buffett and derivatives

Whitney Tilson, managing partner of T2 Partners and well-known as a value investor and shareholder of Warren Buffett's Berkshire Hathaway, discusses the recent pressures on the share price of Warren Buffett's Berkshire Hathaway. Berkshire Hathaway shares are Mr Tilson's fund's biggest position. The huge increase in spreads on Berkshire Hathaway, which were the equivalent of those often quoted for highly distressed companies, followed the need of counterparties to hedge exposure to future payments they were due to receive from Berkshire Hathaway. The costs became so high that the original contracts were renegotiated in Berkshire's favour. The wider CDS spreads - the result of technical factors - contributed to the decision by Moody's Investors' Services to cut Berkshire Hathaway's triple A credit rating. Mr Tilson supports regulators' plans to shift the CDS market to centralised clearing and for more disclosure about CDS positions.