Buffett and Munger share wit, wisdom with shareholders

CREDIT DEFAULT

Buffett said he doesn't think the roughly $60 trillion market for credit default swap derivatives will implode like subprime mortgage funds, although the number of defaults is likely to increase.

Those credit default derivatives are essentially an insurance policy on the chance that a company will go bankrupt.

Munger said that there could be problems with those derivatives, but that it likely won't be nearly as bad as the subprime mortgage mess.

"I think the stupidity while it's extreme is not quite as bad as sweeping bums off skid row to give them a house," Munger said.

The Federal Reserve's bailout of Bear Stearns reduced the chances of widespread problems with the credit derivatives, Buffett said.

Berkshire has written some of those credit-default derivatives and accepted $2.9 billion in premiums.

"I think we're going to make significant money, although we can lose money, too," Buffett said.

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