 Good day, fellow investors. I cannot emphasize enough how much I love your comments. If I can add just a little bit of value to your financial life, then my life is rewarded. Today's topics are Buffett and options. Excellent comment there. Closing his put sales. YouTube channel that I would recommend. Normalized and primary earnings. And then yields dividends, defaults, interest rates and bonds. So let's start with Buffett. Quokcliffe found an interesting news on Buffett's action on options. What's my insight on it? So let's first discuss what's going on there. Between 2004 and 2010 Buffett wrote 4.8 billion of index put options on various indices around the world. So those options started expiring in June and will last, will expire till 2026. What's the deal there? So when you write an option, you sell insurance to someone else. So Buffett said, okay, if the index in 2018 that we are now till 2026, depending on the option, is below a certain level, let's say it was then 1400 and Buffett said, if it is below 1400, I'll buy it. I'll buy the SAP 500 from you. You're gonna pay me some money for that insurance over the long term. And Buffett collects the premiums. And then if the SAP is below that level, then he has to buy it. So what's his strategy there? If the SAP 500 in 2018, we are talking, he was thinking that 10 years ago, is below that level, I'm a happy buyer. So he will get at the discount and he will get his money upfront. Secondly, if those options, if the SAP 500 is much, much higher, then those options expire worthless. And he can keep the money that he has been compounding for the past 10 years. Similarly, the FTSE index is also higher than it was 2006, 2008, 2009. So Buffett really made a great deal on that. The estimation is that he made 4.2 billion then, which was the amount he received for those options. Let's say he compounded those 4.2 billions during 2008, 2009 and what he was buying at 10%. So he made about 10 million, 10 billion long term from selling those 4.8 billion in premiums for 47 contracts from 2006 till 2010, when he disclosed what he was doing. So why did Buffett sell put options? And is this something we could do or buy options for protections? Well, as with anything, it's the key component there is value. When those options are missed priced, as in 2008, 2009, everybody was crazy about insurance, protecting what they have. And Buffett had a long term view and he was willing to give them insurance and get the money. So he took advantage again, he did the opposite of what everybody else is doing. When everybody was looking for protection, he was a buyer, be it buying stocks, he bought Burlington Santa Fe, being selling put options, long term European put options. European put option is an option where you can do what the contract says, only at the expiration date and American option, you can do it constantly during that time until the expiration date. So Buffett was protecting himself. He said, okay, I'm giving you insurance, but you can use it only from 2018 till 2026 as the contracts expire. Not before. Big difference, always Buffett is doing things smartly. So the key with options is, okay, the only advantage I think we individuals investors can have is have a long term attitude as Buffett had then. So we can see, okay, long term options, you have to see what is the price there, but out of the money options for protections can be bought cheaper when the fix is very low. And you have to see how that fits your portfolio with the certain stocks. I'm currently researching the markets, researching what's there. So and starting to look slowly at options, learning, I will take another year to learn properly what and how to best use options. And only then I will start dealing with options testing. Because I think with the long term perspective, you can really do well with options. Just wait for that value to show on your screen. Do not chase yields, chase returns with options. Just wait for them to come to you. That's a low risk, high return investments in options. However, there is plenty of time in a year, two years, I will have so much knowledge about the markets and the options will still be there for me to make money if possible. CZ has a comment about what would be my favorite other YouTube channel. What would I recommend? And there is definitely one that I would recommend Ashwa to the modern. He has a little bit more subscribers than I do. So we have to do our best to reach him. But that would be a great thing if I can ever surpass him. So Ashwa Damodaran is a professor at the Stern School of Business at New York University. And he was my first inspiration to do YouTube videos. So thank you Ashwa. The only thing I can do, I can recommend his channel, a lot of financial analysis, his corporate finance professor. So everything that you hear there will be smart. I might not agree with his investments, his investment thesis, but he also doesn't tell investments. He just discusses analysis. So if you want to learn about investing, of course, don't stop looking at this channel. But there is so much to learn from Ashwa. Thank you Ashwa. A third comment, a great quote. The Danger Newt says, normalized earnings. The earnings we totally would have made if it didn't cost us money to do things by corporate management. So that's an amazing quote. It really makes me laugh. We discussed the adjusted earnings in a grand video, the Intelligent Investor. And then I went randomly. I picked, okay, let's see what Johnson and Johnson has to say about their first quarter results, earnings per share 160. Oh, but adjusted first quarter earnings per share is 2.8. So the difference of 46 cents, which is what almost 25%, is of course the earnings we totally would have made if it didn't cost us money to do things. It's crazy. It's really crazy, but we can just laugh at it and be careful with what kind of earnings we discuss. And we will conclude with the dividend yield bonds issue, interest rates issue that is really, really important. I don't want to scare people with interest. I want to scare people because it's important to be scared when investing. Better protect than do crazy things for little reward. So there has been an interesting discussion about my bond video and here it is. So first George tells great video and I think showing a graph of historic default rates versus bond trading would get your point across better. And here is the graph from Standard and Pours, but when does the graph start? Upper bottom corner, the graph starts in 1981 till 2012 and that's extremely important. Why did they pick 1921? Because the numbers are so much better. Another comment from Hazy, this is what media tells people that high yield are dangerous. Woo, be scared. No, high yield ratings do not mean a huge difference. It had been there for years, never has completely wiped out. These are businesses after all. And here I have to say I disagree because of this. This is the interest rate chart for the last since the 1950s. And you can see that since 1981, from when the Standard and Pours chart is, interest rates have been going down, down to zero and only lately have been rising. However, if we look at what was going on from the 1960s till 1981, interest rates have been going only up. And in the 1970s, especially bonds, 1960s, 1970s, bonds have been called certificates of confiscation because all the people that would invest in bonds, even with the high yields, would lose their money thanks to inflation and high interest rates and higher interest rates that would lower the value of those bonds constantly. So if you look at bonds from what happened in the last 35 years, you see, oh, bonds are so great, everything will be great. But if I look at what happened from 1960 to 1981, in a period of rising interest rates, arising inflation, then you would say, oh my God, don't even hold bonds, except for short-term bonds. So that's a different perspective. And the key when investing is not what can happen, but the key is, what will I do if the worst thing happens? And that's something you have to be ready because you never know what will happen. Just an example here. A country Croatia, where I come from, has a government bond yield, 10-year government bond yield in euros at 2. something percent. So that's ridiculous because the government has a junk bond rating, so PB+, positive stable outlook, but nevertheless a junk rating. And 60% of the money of Croatian citizens is forcibly invest in four pension funds that invest 60% of that money in these junk bonds. So if interest rates for Croatia go from 2% to 5% to 8%, which is a normal level for those junk bonds, the country can only get help from the IMF or go into default. So especially a country that loses 1-2% of the population due to immigration every year and except for tourism, has not much to show for. Oh, has one thing that will beat Tesla and that's the rematch car. But that's a different story. So that's my fear of, okay, people have really gotten used to declining and low interest rates and higher interest rates would really make a mess. I hope we don't see them. I hope Hazi is right. I hope we don't see because nobody can raise interest rates. But what if it happens then I want to be ready. That's my main message. What if the worst happens with whatever you own? Are you ready and can you handle it? Investing is first about risk management. Thank you for watching. Looking forward to your comments. As always on any video, love answering them. It's one of the most beautiful parts of my morning. Nice cup of coffee and your comments. I'll see you in the next video.