Right, there are derivatives and then there are derivatives. They're not by any stretch of the imagination all equally risky. I think he is taking some of Buff

Right, there are derivatives and then there are derivatives. They're not by any stretch of the imagination all equally risky. I think he is taking some of Buffet's words out of context. It seems impossible that Buffet would say he doesn't understand derivatives. I understand them, and unlike him, I don't own companies that pretty much have to use them. For instance he owns Burlington Northern, a railroad (which he's had a stake in for a long time). Companies whose profits are reliant on fuel costs (railroads, trucking, airlines, retailers with their own distribution system, etc.) almost always use derivatives to hedge against rising oil prices. I'm guessing Buffet was speaking only about derivatives based on asset-backed securities in the consumer credit sector, which were relatively new and poorly understood and, as he pointed out, incredibly dangerous.