In reading Buffett's nearly 30 year old letter, we can't help but be stunned by the hypocrisy in the statement made by the man whose multi-billion derivative bet on perpetual ponzi expansion almost caused a liquidity crunch at none other than Berkshire Hathaway in early 2009: "We do not need more people gambling in non-essential instruments identified with the stock market in this country, nor brokers who encourage them to do so. What we need are investors and advisors who look at the long-term prospects for an enterprise and invest accordingly. We need the intelligent commitment of investment capital, not leveraged market wagers. The propensity to operate in the intelligent, pro-social sector of capital markets is deterred, not enhanced, by an active and exciting casino operating in somewhat the same arena, utilizing somewhat similar language and serviced by the same work force. In addition, low-margined activity in stock-equivalents is inconsistent with expressed public policy as embodied in margin requirements. Although index futures have slight benefits to the investment professionals wishing to "hedge out" the market, the net effect of high-volume futures markets in stock indices is likely to be overwhelmingly detrimental to the security-buying public and, therefore, in the long run to capital markets generally." We also find it ironic that everything that Buffett warned against happening as a worst-case scenario, is precisely where the US capital markets find themselves right now. In the meantime, a month ago the NYSE introduced liquidity rebates for the 15 most actively traded contracts.
Full letter can be found at Forbes: