Warren Buffet once called financial derivatives “financial weapons of mass destruction.” He also said he did not invest in them because he never invested in anything he did not understand and he didn’t think that ANYONE fully understood derivatives.
Former Fed Chairman Alan Greenspan also admitted that he did not fully understand the derivatives markets.
Derivatives are thought by many to have played a key role in the subprime mortgage debacle which helped usher in a severe financial crisis and deep recession in the US.
The problem stems from the fact that there is very little transparency and disclosure in the derivatives markets.
Imagine coupling that lack of transparency and disclosure with the black box popularly referred to as “islamic finance” but more accurately called Shariah-Compliant Finance.
Well, that is exactly what is about to happen and, in our view, it has all the characteristics of other ill-fated ventures, such as the voyage of the Titanic and the flight of the Hindenburg.