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Billionaire trader Paul Tudor Jones sounds the inflation alarm, touts bitcoin over gold, and warns stocks could fall in a new interview. Here are the 8 best quotes.

Paul Tudor Jones
Paul Tudor Jones.
  • Paul Tudor Jones rang the inflation alarm in an interview this week.
  • The billionaire trader touted crypto as a better hedge against rising prices than gold.
  • Jones cautioned that stocks could fall if the Fed tightens its monetary policy.

Paul Tudor Jones urged the Federal Reserve to tackle rising prices, trumpeted cryptocurrency as a better inflation hedge than gold, and suggested the Chinese government's recent crackdowns are hurting its economy in a CNBC interview this week.

The billionaire trader and founder of Tudor Investment Corporation also warned inflation is the greatest danger to investors right now, and cautioned stocks could fall if the Fed cools the economy.

Here are the 8 best quotes from the interview, lightly edited and condensed for clarity:

1. "The number one issue facing the man on the street, as well as investors, is inflation. It's probably the single biggest threat to financial markets and society in general."

2. "There is $3.5 trillion just sitting in liquid deposits that could go into stocks, or crypto, or real estate, or be consumed. That's a huge amount of dry powder, which is why inflation's not going to be transitory."

3. "We have a Federal Reserve board that are inflation creators, not inflation fighters. That is a huge, huge deal."

4. "We have maybe the most inappropriate monetary policy that we've seen in my lifetime. We are adding stimulus, we are still quantitative easing when we should be doing the exact opposite. We're treating inflation with this cavalier attitude when we shouldn't be. We're ignoring it because we haven't seen it in four decades."

5. "The inflation genie is out of the bottle. If we don't immediately shift to attack it, we run the risk of getting back into the '70s, where it was the single most important issue for multiple presidents, multiple Fed chairmen. It was pernicious and persistent."

6. "If we actually begin to address the most important and most pressing problem we have, the dual mandate, we're going to get a P/E compression. The stock market's not gonna go up as fast, and may go down." - advising investors to be careful if the Fed moves to reduce inflation, as it would lower equity valuations.

7. "We're moving into an increasingly digitized world. Clearly there's a place for crypto, and it's winning the race against gold. Crypto would be my preferred inflation hedge over gold at the moment." - Jones noted that a single-digit percentage of his portfolio is in crypto, and his fund has a small trading position.

8. "The USA is the most dominant economic power in the world because we unleash our individual entrepreneurialism and creativity. You're seeing China doing the exact opposite. That place is, economically, on a slow boat to the South Pole."

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‘Big Short’ investor Michael Burry discussed his iconic bet against the housing bubble and foreshadowed his GameStop bet in a 2010 interview. Here are the 14 best quotes.

Michael Burry against a promotional backdrop for the movie "The Big Short."
Michael Burry.
  • Michael Burry has been warning of mass speculation, excessive stimulus, and a looming crash.
  • "The Big Short" investor expressed many of the same concerns in a 2010 interview.
  • Burry also reflected on the start of his career and his bet against the housing bubble.

Michael Burry has been sounding the alarm on rampant speculation in markets, runaway government spending, and investors' failure to learn from past bubbles and crashes. He raised similar concerns in a Bloomberg interview in 2010.

The Scion Asset Management boss also discussed his iconic bet against the mid-2000s housing bubble, which was immortalized in the book and the movie "The Big Short." Moreover, he explained what drew him to investing, touched on Warren Buffett's influence on his career, and foreshadowed the GameStop investment that sparked the meme-stock craze this year.

Here are Burry's 14 best quotes from the interview, lightly edited and condensed for clarity:

1. "I had some social challenges when I was younger. I was very attracted to being a rock star, an athlete, or something like a money manager. The reason being that they're performance-based. Sports, it doesn't matter how nice a guy you are. It doesn't matter how you groom your hair. If you perform, that's all you need to do. From a young age, I was pretty interested in the whole idea of meritocracy, and people being ranked according to their effort and talents. Running money was something where I could put the effort in and do it."

2. "I've had these interests that have been very intense in my life. The two interests that are really intense being music and the markets. And every once in a while there's something else that will catch my fancy for a little bit, but it always comes back to those two things."

3. "My natural state is an outsider, and no matter what group I'm in or where I am, I've always felt like I'm outside the group, and I've always been analyzing the group." - reflecting on his diagnosis of the dot-com and housing bubbles.

4. "I'm in this book, 'The Big Short,' but I'm not a big short. I don't go out looking for good shorts. I'm spending my time looking for good longs. I shorted mortgages because I had to. Every bit of logic I had led me to this trade, and I had to do it."

5. "Home-price appreciation was built into the mortgage market. Once home prices were no longer going up, the credit would start to be pulled away, and home prices would start to fall. That's what I saw in 2005, and that's why I made it the largest investment of my life."

6. "My number one concern is there's been a total abdication of personal responsibility throughout our entire society. I don't think that anyone anywhere is taking blame themselves for what they did to contribute to the crisis. The most damaging thing we can do as a country is to blame a narrow set of people, and not look within ourselves for what each of us did or didn't do that led to this mess."

7. "I'm 100% sure that the economic policies and theories that got us into this mess won't prevent the next mess from happening. By not learning the lessons we needed to learn, we're essentially dooming ourselves to making the same mistakes. It's that simple."

8. "All those bailouts, all the stimulus, all this money we're printing - this isn't hitting us yet. It's like we're a teenager and we've got depression, and our parents have given us a credit card and said, 'Go cure your depression.' It's not being made clear that we have to pay this back at some point."

9. "It's a giant gamble to leverage our future and our kids' future and their kids' futures to try to get out of this. It's very difficult to predict exactly which way it's going to go, but I don't think it's a good gamble."

10. "We've become a nation of bubbleheads. We've just had this huge bubble burst, and now everybody has got their ideas on what the next bubble is and what's going to blow up next. It's not hard to say there's a bubble; the tough part is predicting when it will burst."

11."I want an investment thesis that I haven't heard about or seen. I'm looking for an original thesis." - Burry eventually found that original thesis in GameStop. He invested in the video-game retailer in 2019, and wrote several letters to its directors urging them to buy back more than 80% of GameStop's outstanding shares.

12. "I'm very interested in smaller tech companies. I'm interested in companies with a secular growth profile, or a secular history that is generally not dependent on what the government does. I'm looking for good products, good management, good market position, competitive dynamics."

13. "There's only one Warren Buffett. There's no point in even trying to be like Buffett." - Burry said the Berkshire Hathaway chief inspired him to become a money manager, and that he patterned his early career after Buffett.

14. "Wall Street always thinks stocks are cheap. I'd hate to live in New York and hear that 10 times a day."

Read more: The founder of a Michael Burry subreddit explains 'The Big Short' investor's unique appeal - and reveals the stocks hidden in his tweets

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Warren Buffett’s Berkshire Hathaway plowed $2.1 billion into Bank of America stock in 12 days last year. It has nearly doubled its money already.

warren buffett
Warren Buffett.
  • Warren Buffett's Berkshire Hathaway bet $2.1 billion on Bank of America stock in the summer of 2020.
  • The investor's company has nearly doubled its money thanks to the stock surging since then.
  • Berkshire spent less than $15 billion for a stake in the bank worth over $45 billion today.

After Warren Buffett failed to scoop up bargains during the pandemic crash last year, critics accused him of losing a step. The famed investor showcased his agility a few months later by plowing about $2.1 billion into Bank of America stock in the space of 12 trading days - and has almost doubled his money on the bet already.

Buffett's Berkshire Hathaway conglomerate pounced on the bank's shares in late July and early August last year, when they were trading in the $23-to-$25 range, SEC filings show. The stock has surged more than 80% since then to close above $45 on Thursday, marking its highest level since the financial crisis.

As a result, the roughly 85 million Bank of America shares that Berkshire bought last year are now worth $3.8 billion, representing a $1.7 billion gain in 14 months.

Berkshire's purchases boosted its Bank of America holding to just over 1 billion shares, giving it a 12% stake worth more than $45 billion at the current stock price. The conglomerate's latest annual report shows it spent less than $15 billion building the position, indicating it's made an unrealized gain of about $30 billion on the wager.

Buffett's company has counted Bank of America as one of its biggest holdings for years, so its aggressive buying of the stock last summer might not seem surprising. However, it contrasts sharply with Berkshire's sale of JPMorgan, Goldman Sachs, and other financial stocks over the past 18 months.

Bank of America stock climbed 4.5% on Thursday after the lender's third-quarter earnings beat Wall Street's expectations. The outperformance was fueled by the investment-banking division and record advisory fees in the period.

Read more: Warren Buffett expert Robert Hagstrom breaks down the 3 key elements of the investor's 'ultimate money mind' - and explains why he won't rush to make another elephant-sized acquisition

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Warren Buffett compared aggressive borrowing and reckless trading to playing Russian roulette – and urged people not to risk everything for money they don’t need

warren buffett
Warren Buffett.
  • Warren Buffett compared reckless borrowing and trading to playing Russian roulette.
  • The Berkshire Hathaway CEO said he would never gamble his company for a shot at more money.
  • People shouldn't risk their wealth and reputation for cash they don't need, Buffett said.
  • See more stories on Insider's business page.

Warren Buffett famously says the first rule of investing is "don't lose money." The billionaire investor and Berkshire Hathaway CEO has embraced that principle throughout his career, even comparing aggressive borrowing and reckless trading to gambling with one's life.

"It is madness to risk losing what you need in pursuing what you simply desire," Buffett said in his 2014 letter to shareholders. "We will never play financial Russian roulette with the funds you've entrusted to us, even if the metaphorical gun has 100 chambers and only one bullet."

Buffett takes a conservative approach to Berkshire's finances so that he's always ready when disaster strikes, he continued. Minimizing borrowing means leaving money on the table, but it also prevents his company from getting into trouble in periods when "credit vanishes and debt becomes financially fatal," he said.

"A Russian-roulette equation - usually win, occasionally die - may make financial sense for someone who gets a piece of a company's upside but does not share in its downside," he said in his 2018 letter. "But that strategy would be madness for Berkshire."

Buffett deployed the same analogy during Berkshire's annual shareholder meeting in 1999. He was discussing Long-Term Capital Management, a top hedge fund that had just collapsed under a mountain of debt and derivatives.

"It's like playing Russian roulette," Buffett said about individuals risking their wealth and reputation for a chance at making money they don't need. "If you hand me a revolver with six chambers and one bullet, and you say, 'Pull it once for a million dollars,' and I say, 'No.' And then you say, 'What is your price?' The answer is there is no price."

Buffett asserted that people, especially the rich, shouldn't risk failure and embarrassment for any sum. They shouldn't bet the farm even with a 99% chance of success, he continued, noting that the percentage probability of surviving a round of Russian roulette with a six-chamber revolver and a single bullet is a solid 83.3%.

"Neither 83.3% or 99% is good enough when there is no gain to offset the risk of loss," he said.

Buffett underlined his views during a CNBC interview in 2018. People only make leveraged wagers because they're in a hurry to get rich, and they risk going broke and devastating their families, he said.

The investor also shared his reaction when someone tells him they staged a comeback and became wealthy again: "I'm not impressed, because why the hell did they lose their first fortune?"

Read more: 'Richer, Wiser, Happier' author William Green breaks down the 3 key traits that have fueled Warren Buffett's success, and explains why they're so important for investors

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‘The Big Short’ investor Michael Burry dismisses shiba inu coin as ‘pointless’ – noting the dogecoin spinoff’s supply exceeds 1 quadrillion coins

Michael Burry
Michael Burry.
  • Michael Burry tweeted about shiba inu, the dogecoin-inspired cryptocurrency.
  • "The Big Short" investor dismissed the meme token, noting its supply exceeds 1 quadrillion coins.
  • Burry has warned against buying crypto, labeling bitcoin a speculative, debt-fueled bubble.

Michael Burry, the investor of "The Big Short" fame, isn't a fan of shiba inu. He dismissed the dogecoin-inspired cryptocurrency, which has more than tripled in price over the past week, because there are too many of the coins in circulation.

The Scion Asset Management boss shared Coinbase's description of the meme token in a now-deleted tweet, highlighting that its supply exceeds a quadrillion coins.

"Just saying, one quadrillion seconds is about 32 million years," he tweeted. "One quadrillion days is 2.7 trillion years, or ALL of TIME, from the beginning of the universe, multiplied by 71,000. In other words, pointless."

Burry's tweet suggests he doesn't view shiba inu as a compelling investment because the vast amount of coins in existence limits its possible price appreciation.

The hedge fund manager has been ringing the alarm on crypto this year. He described bitcoin as a "speculative bubble" fueled by huge amounts of leverage.

In addition, Burry questioned its long-term prospects, given the threat of government intervention. He also ridiculed dogecoin's surge to a record-high price, labeling it "a doge's breakfast."

Moreover, Burry has compared the hype around bitcoin, meme stocks, and other popular assets to previous bubbles in housing and internet companies. He warned they've been "driven by speculative fervor to insane heights from which the fall will be dramatic and painful."

Burry is best known for his lucrative bet against the mid-2000s housing bubble, which was immortalized in the book and movie "The Big Short."

He also inadvertently paved the way for the meme-stock boom this year by investing in GameStop in 2019, and his latest portfolio update showed he was betting against Elon Musk's Tesla and Cathie Wood's Ark Invest.

Read the original article on Business Insider

Top economist David Rosenberg warns against buying US stocks, calls out the Fed, and predicts an economic slowdown in a new interview. Here are the 10 best quotes.

David Rosenberg
David Rosenberg.
  • David Rosenberg expects US stocks to underperform in 2021 as they've climbed too high.
  • The veteran economist warned the end of fiscal stimulus will erode economic growth.
  • Rosenberg said the Federal Reserve can't prevent the next market correction.
  • See more stories on Insider's business page.

David Rosenberg sounded the alarm on US stocks, predicted an economic slowdown next year, and warned the Federal Reserve won't be able to stop the next market slump in a recent RealVision interview.

The chief economist and strategist of Rosenberg Research & Associates also called out the Fed for shoring up asset prices, trumpeted Japanese stocks, and asserted the Evergrande fiasco could dampen global growth.

Here are Rosenberg's best 10 quotes from the interview, lightly edited and condensed for clarity:

1. "At this point in the stock market, you're chasing nickels in front of the steamroller. We've harvested all these returns, there's not much left."

2. "The US stock market is trading at multiples that we've only seen one other time in the past century. And that was in 1999 to 2000, during the dot-com bubble."

3. "If I was a long-only equity investor and I had to be fully invested in equities, I would not be in the S&P 500 right now. I would be in Japan, their valuations are just much more compelling. The earnings stream that you're paying for in Japan is so much more compelling than in the US stock market right now."

4. "It's going to be a challenging year for equities. Not everything is going to go down, but if you're a passive investor, chances are you'd be better off just being in cash than being in equity market indices."

5. "We're in a tremendous bog of uncertainty in so many different respects - financial, political, economic."

6. "I shudder to think what the next recession is going to bring. Global debt is $300 trillion, it's 350% of GDP. Be careful what you wish for as rates go into the next rate cycle, because it's probably going to be enough to tip the balance towards a recession - maybe not next year, but probably the year after that."

7. "Your taper did nothing for the labor market, your quantitative easing just boosted risk appetite and animal spirits and had nothing to do with the labor market. Why don't you come out and just say, 'We're doing QE because we think we're in an asset bubble, and we're trying to defuse it?'" - criticizing the Federal Reserve.

8. "We're going to have the mother of all fiscal-stimulus withdrawals next year. It's equivalent to almost 3 percentage points of GDP. The fiscal squeeze next year is going to be equivalent to 250 basis points of Fed rate hikes."

9. "The Fed is not going to be able to control the market that much. They will come in guns blazing, but they will not prevent the correction. But they'll be there to pick up the pieces."

10. "The Evergrande situation is really emblematic of what happened in terms of China's debt and property bubble. It may well be contained within China from a financial standpoint since they basically own all the bonds. But China is almost 20% of global GDP, so it's certainly going to have a global economic effect."

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Warren Buffett used the ‘Mona Lisa’ to explain why art is a terrible investment – but then compared Berkshire Hathaway to an art museum

Warren Buffett
Warren Buffett.
  • Warren Buffett dismissed art as a bad investment nearly 60 years ago.
  • France could have made $1 quadrillion if it had invested instead of buying the Mona Lisa, he said.
  • Buffett described investing, valuing and building businesses, and Berkshire Hathaway as art.
  • See more stories on Insider's business page.

Warren Buffett invoked one of the most famous paintings in history to explain why art is a poor investment.

The billionaire investor tackled the topic in his 1963 letter to clients of his Buffett Partnership, the investment fund he ran before turning his attention to Berkshire Hathaway. He wanted to convey the power of compound interest in building wealth over time.

Buffett noted that Francis I, the former king of France, bought Leonardo Da Vinci's "Mona Lisa" in 1540 for 4,000 gold crowns, or the equivalent of $20,000. If the monarch had plowed that money into an investment generating a modest after-tax return of 6% a year, the country's coffers would be overflowing with more than $1 quadrillion by 1963, or 3,000 times its national debt, the investor pointed out.

Meanwhile, the "Mona Lisa" was insured at a value of $100 million in 1962, or over $900 million in today's dollars.

"I trust this will end all discussion in our household about any purchase of paintings qualifying as an investment," Buffett quipped. His comments resurfaced this month courtesy of Dividend Growth Investor, a Twitter user who tweets about investing.

The famed boss of Berkshire Hathaway might not view art as a worthwhile holding, but he considers his job to be something of an art form.

"Investing is the art of laying out cash now to get a whole lot more cash later on," he said at Berkshire's annual shareholder meeting in 1998. He also described valuing businesses as an "art" during the next year's meeting.

Moreover, Buffett has compared building a business to crafting a painting. He deployed that analogy to persuade the cofounder of National Indemnity, Jack Ringwalt, to sell his insurance company to Berkshire in 1967, he recalled at the annual meeting in 2000.

The investor asked Ringwalt if he would be happy to have a trust officer dispose of his life's work the day after he died. He reassured the entrepreneur that Berkshire would respect and not resell his business, and also allow him to continue "painting" it.

"We won't come in and tell you to use reds instead of yellows or anything like that," Buffett recalled telling Ringwalt. "So even though it's a masterpiece now, you can keep adding to it."

The Berkshire chief took the metaphor even further, framing his conglomerate as a collector of fine art.

"We like to think we're the Metropolitan Museum of businesses and that we can get really outstanding creations to reside in our museum," he said.

Buffett has also described Berkshire - which owns scores of subsidiaries including Geico and See's Candies as well as multibillion-dollar stakes in Apple, Coca-Cola, and other public companies - as his magnum opus.

"I regard Berkshire Hathaway sort of like a painter regards a painting, the difference being the canvas is unlimited," Buffett said in 2016.

Read more: 'Richer, Wiser, Happier' author William Green interviewed dozens of the world's best investors. He breaks down the 6 key traits they share, and gives examples of them in action.

Read the original article on Business Insider

‘The Big Short’ investor Michael Burry warns the stock-market boom reminds him of the dot-com bubble – and rings the alarm on options mania

Michael Burry big short
Michael Burry.
  • Michael Burry said the recent surge in stocks reminded him of the dot-com bubble.
  • "The Big Short" investor compared the options-trading boom to debt-fueled speculation in the 1920s.
  • Burry has warned several times that a historic market crash is coming.
  • See more stories on Insider's business page.

Michael Burry said the current market boom reminds him of the dot-com bubble, and compared the current options-trading frenzy to the rampant speculation that precipitated the Great Depression, in a flurry of recent tweets that have since been deleted.

The Scion Asset Management chief tweeted a screenshot of Financialweb.com's stock chart. The defunct company behind Stock Detective and other financial-information websites saw its share price nosedive from a high of $28 to a fraction of a cent following the dot-com crash.

"A very common chart back in the day," Burry said. "Looks vaguely familiar."

Moreover, the hedge fund manager compared the bull market during the 15 years to 2000 to the run up in stocks over the past 15 years. He highlighted a 94% correlation between the Nasdaq 100's performance in each of those periods, and a 95% correlation for the S&P 500 index.

The Scion chief also drew a parallel between the surge in people trading options on meme stocks such as AMC Entertainment, and the mass speculation that preceded the Wall Street Crash of 1929. He juxtaposed an article about the options mania with a quote by a statistician named Leroy Peavey in November 1929. Peavey blamed the market crash that year on a wave of leveraged speculation that pulled in "elevator boys, typewriter girls, and even schoolchildren."

Burry is best known for predicting the collapse of the US housing bubble in the mid-2000s, and making a fortune by betting on a spike in subprime-mortgage defaults. His massive wager was chronicled in the book and the movie "The Big Short."

The investor also bought a stake in GameStop and wrote several letters to the video-game retailer's board in 2019, laying the groundwork for the short squeeze on the stock this year and the broader meme-stock trend. He recently tweeted a picture of a subpoena he received from the Securities and Exchange Commission, ordering him to cooperate with the regulator's investigation into the GameStop saga.

Burry has been sounding the alarm over Twitter for several months. He's warned dangerous levels of speculation in meme stocks, cryptocurrencies, and other assets will lead to the "mother of all crashes." Scion was betting against Elon Musk's Tesla and Cathie Wood's Ark Invest as of June 30.

Read more: Veteran professor Erik Gordon outlines why he doesn't expect a stock-market crash, calls Cathie Wood a dot-com 'throwback' for her grand claims, and warns against owning meme stocks

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‘Big Short’ investor Michael Burry offers an inside look at how his iconic bet against the housing bubble began

Michael Burry
Michael Burry.
  • Michael Burry offered an inside look at how his signature bet against the housing bubble began.
  • "The Big Short" investor directed a colleague in 2005 to identify shaky mortgage-backed securities.
  • Burry called out two subprime mortgage lenders who later ran into serious trouble.
  • See more stories on Insider's business page.

Michael Burry, of "The Big Short" fame, reflected on the origins of his iconic bet against the US housing bubble, and praised a late colleague who helped him research the wager, in a tweet on Sunday.

"When it all began...and RIP Joe," the Scion Asset Management boss said. "A more brilliant one, I never met."

The investor shared a screenshot of an email he sent to one of his employees, Joe Sipley, on May 19, 2005. The email directed Sipley to analyze a list of mortgage-backed securities and pinpoint the riskiest ones - those linked to mortgages at high risk of default, but not priced to reflect that danger.

"I'd like you to comb through these ... and identify the best 2005 shorts," Burry said. He noted that Scion could bet against the questionable securities by purchasing credit-default swaps, an insurance-like derivative that would pay out handsomely if enough people defaulted on their mortgages.

Burry advised Sipley to pay close attention to the mortgage companies behind the bundled loans, highlighting New Century and Novastar in particular as their "documentation stinks." New Century, one of the nation's largest issuers of subprime mortgages, was forced into bankruptcy by the housing downturn in 2007. Novastar, another major subprime lender with a slew of internal issues, was also burnt badly when the bubble burst.

Sipley worked as an analyst at Burry's hedge fund between 2003 and 2006, and returned to serve as Scion's director of equities in 2013, his LinkedIn shows. He fought an aggressive form of brain cancer for eight years and died in 2019, according to his obituary.

Burry's billion-dollar wager against the housing market was chronicled in the book and the movie "The Big Short." More recently, the investor has sounded the alarm on the speculative craze around meme stocks and cryptocurrencies, predicted a historic market crash, and placed bets against Elon Musk's Tesla and Cathie Wood's Ark Invest.

Read more: 'It's begging to be destroyed': A stock trader who says he made more than $100,000 shorting the market during the 2008 crash just bet against the S&P 500 - and warns there's a 'fair chance' stocks are about to drop 25%

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Warren Buffett’s Berkshire Hathaway took a $2.4 billion hit from the 9/11 attacks. The investor warned a nuclear assault could have bankrupted his company.

warren buffett
Warren Buffett.

  • Warren Buffett's Berkshire Hathaway took a major financial hit from the September 11 attacks.
  • The investor's company stomached $2.4 billion in underwriting losses from the disaster.
  • Berkshire sold a bunch of terrorism insurance after 9/11, but was careful to limit its exposure.
  • See more stories on Insider's business page.

Warren Buffett's Berkshire Hathaway recorded a hefty $2.4 billion of underwriting losses from the terrorist attacks on September 11, 2001. However, a nuclear assault could have put the investor's company out of business entirely, along with its insurance peers.

"Had a nuclear device been available to Osama bin Laden, the loss could have bankrupted most of the industry, Berkshire very much included," Buffett wrote in a Washington Post editorial in November 2001. He added that the total insured losses could have surpassed $1 trillion, exceeding the combined value of the world's property-casualty insurers at the time.

Berkshire counts Geico, National Indemnity, and General Reinsurance among its subsidiaries, making it one of the largest insurers in the world. Its underwriting losses from 9/11 dealt a $1.5 billion blow to its net earnings, fueling a sharp decline from $3.3 billion in 2000 to less than $800 million in 2001. Berkshire stomached an estimated 3% to 5% of the global insurance industry's losses from the incident.

Buffett kicked himself in his letter to Berkshire shareholders in 2001. He knew a major terrorist attack could occur, and was aware of the devastating impact it might have on Berkshire. Yet he failed to adjust the insurance policies his company was writing, which would have softened the blow to its bottom line.

"I violated the Noah rule: Predicting rain doesn't count; building arks 
does," he said. The investor added that Berkshire was perfectly willing to pay out upwards of $2 billion following a catastrophe, but in the case of 9/11, it hadn't charged enough for assuming the risk that led to a loss of that scale.

Berkshire wasn't cowed by the episode, however. In the months after 9/11, it was one of the few insurers to actively cover terrorism losses. For example, it wrote policies for multiple international airlines, Chicago's Sears Tower, and a North Sea oil platform, Buffett disclosed in his letter.

"Whatever the world's problems, our checks will clear," he proclaimed. Buffett is known for prizing financial security and ensuring Berkshire has ample cash to weather difficult periods.

While Berkshire sold a significant amount of terrorism insurance after 9/11, it limited its coverage of nuclear, chemical, and biological attacks, Buffett noted during his company's annual shareholder meeting in 2002.

A major nuclear explosion would pose an existential threat to Berkshire, he explained, while a biological attack in a major factory or office building would result in workers' compensation losses that could "make the World Trade Center loss look like nothing."

Buffett emphasized that the human cost of a terrorist attack far exceeds the insurance costs, but asserted that Berkshire has to consider whether it can cover claims. If the company collapsed into bankruptcy, it wouldn't be able to compensate those involved in the disaster, not to mention others who suffered injuries years ago but rely on insurance payouts to live, he said.

Charlie Munger, Buffett's business partner and Berkshire's vice-chairman, underscored the tragedy of 9/11, but framed it as an important lesson for the company.

"To the extent that September 11th has caused us to be less weak, foolish, and sloppy, as we plainly were in facing some plain reality, it's a plus," he said at the meeting in 2002.

Berkshire's fallout from 9/11 pales in comparison to the deaths, injuries, and national trauma caused by the attack. But it showed that even careful insurers can be caught off-guard by catastrophes, and taught Buffett and Munger some important lessons.

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