Post #16059 by DTB on the Berkshire Hathaway board

Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A) ❤

Unthreaded | Threaded | Whole Thread (33)

Post New | Post Reply | Report Post | Recommend It!

No. of Recommendations: 1

I think the quote is probably referring to people who are writing puts without the cash backing, then thinking of the premiums as income. In effect, using an infinite amount of leverage. In my analogy it's like taking a perfectly innocent hammer and throwing it up in the air above your head with your eyes closed.

The analogy would be a good one, if most people writing puts were NOT using leverage and had 100% of the necessary funds to cover the potential losses. Hammers are usually used for sensible things like hitting nails - puts, I'm not so sure. The use that the quote is referring to ("make a few bucks that you get to keep if you’re right, but you lose your home if you’re wrong") is clearly what most investors should not be doing, so it's more like saying throwing hammers up into the air, with one's eyes closed, is a good way to eventually come to grief...

DTB

Post New | Post Reply | Report Post | Recommend It!

Print the post

Unthreaded | Threaded | Whole Thread (33)

Prev | Next

Announcements

Berkshire Hathaway FAQ

Contact Shrewd'm
Contact the developer of these message boards.

A community forum supporting civilized, and highly helpful, self-educating investors that come together for Shrewdness and merry spirits. These message boards closely follow the look and feel of the old message boards at boards.fool.com prior to the boards redirected to discussion.fool.com. Shrewd'm is not affiliated with the comprehensive and excellent investment website, The Motley Fool (TMF), in any way. The Shrewd commmunity here has owed, and continues to owe, gratitude to The Motley Fool for nurturing a culture of jovial irreverence towards Wall St, and that tradition will continue here.