“Derivatives are financial weapons of mass destruction.”

— Warren Buffett

Warren Buffett’s ice-cream-to-insurance conglomerate Berkshire Hathaway (BRK-A) reported a smaller profit for the second quarter on Friday as losses on derivatives dragged down results, though operating income set the new records Buffett predicted.

Buffett eschews derivatives for the most part, but he does have one outstanding - and large - derivative bet tied to stock market performance. While he has said repeatedly he expects that position to be profitable over time, it generated nearly $700 million in losses in the last quarter.

Berkshire earned $3.11 billion, or $1,882 per Class A share, compared with a profit of $3.42 billion, or $2,072 per Class A share a year earlier.

Book value, Buffett’s preferred measure of Berkshire’s worth, rose to $107,377 per Class A share. The company’s ongoing share buyback is capped at prices no higher than 110 percent of that book value.

Berkshire’s cash pile as of the end of the quarter ballooned to $40.66 billion, up more than $3 billion since the year began.

Source: Yahoo Finance News