Just days after the fifth anniversary of George W. Bush's landing on an aircraft carrier in front of a "Mission Accomplished" banner, the Weapons of Mass Destruction (WMDs) have finally been located. But not in Iraq or Iran or Syria.
These WMDs are of the financial variety. The ones against which Berkshire Hathaway Inc.'s (NYSE: BRK.A) CEO Warren Buffett railed in his 2003 annual report. There he called derivatives "financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal." And Reuters reports that these are the very financial WMDs that cost Berkshire $1.7 billion in charges in the first quarter of 2008.
This proves that George W. Bush was right and so was Warren Buffett. But Berkshire shareholders are also smarting due to a 64% drop in its net income and a 24% tumble in its revenues.
Berkshire's financial WMDs cost it $1.7 billion. Its pretax derivatives losses included a $1.2 billion loss on put options it wrote on the Standard & Poor's 500 and three foreign stock indexes and a $490 million loss on contracts that require payouts if some high-yield bonds default between now and 2013.
Worst of all, Berkshire's cash fell almost $9 billion to $35.57 billion -- down from $44.33 billion at year end.
Times must be tough indeed if George W. Bush is finally proved right about WMDs -- although the wrong kind in the wrong place -- and Warren Buffett is hoisted on his own petard.