Buffet and Dollar short

J

jasonjm

http://money.cnn.com/2005/05/06/news/fortune500/berkshire_earnings.reut/index.htm?cnn=yes

OK, I am not even 1/50th the investor/trader that Buffet is, but I remember saying that he basically hates macroenonomics

so then why is he making a heavy one way bet against the USD? in a long term macroeconomic play?

he also says that it never pays to bet against the USA?

just seems like a lot of contradictions?

how do you "Value invest" currencies? they aren't companies, there are whole lots of politics, and other irrational things factored into what country people want to park their money in?

I don't know if anyone can say with certainty what the dollar will do.... both the AUD and NZD have bigger trade deficits than USA at 7% GDP (someone correct me if I am wrong) and they are very strong currencies
 
it's payback time

SEC may sue executive at Berkshire's General Re unit

Gen Re exec gets Wells notice from SEC, Berkshire says By Alistair Barr
SAN FRANCISCO (MarketWatch) -- Berkshire Hathaway said late Friday that a senior vice president at its General Re unit got a "Wells" notice from the Securities and Exchange Commission on May 2 as part of the agency's investigations into so-called finite reinsurance. The notice stated that the SEC is considering filing civil lawsuits against the person for violating, or helping others violate, securities laws, Berkshire said in an SEC filing. Berkshire (BRKA) (BRKB) didn't identify the executive.
 
I'd say the fundamental case in favour of shorting the US Dollar is so strong that Buffett is willing to (1) ignore the 'don't bet against the USA' mantra and (2) invest based on macroeconomics, rather than individual companies.

Value investing in countries is possible, assuming that one invests for 5+ years. I agree that over weeks and months, currencies can go all over the place, but since 2002, the US Dollar index has been in a strong downtrend.

You're spot on about the strength of the AUD and NZD, however those countries have significantly higher yields (5.50% plus) compared to 3.00% for the USD.

Quote from jasonjm:

http://money.cnn.com/2005/05/06/news/fortune500/berkshire_earnings.reut/index.htm?cnn=yes

OK, I am not even 1/50th the investor/trader that Buffet is, but I remember saying that he basically hates macroenonomics

so then why is he making a heavy one way bet against the USD? in a long term macroeconomic play?

he also says that it never pays to bet against the USA?

just seems like a lot of contradictions?

how do you "Value invest" currencies? they aren't companies, there are whole lots of politics, and other irrational things factored into what country people want to park their money in?

I don't know if anyone can say with certainty what the dollar will do.... both the AUD and NZD have bigger trade deficits than USA at 7% GDP (someone correct me if I am wrong) and they are very strong currencies
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I am an admirer of Buffet, but have found that you have to take what he says with a grain of salt. There are many instances where his actions and words dont mesh.

Regarding macro bets - he has traded zero coupon bonds, silver and currencies in the last several years. All of them are macro bets.

IMO, he is a long term macro trader with a good market feel but pretends that he is not. His past experience was as a hedge fund manager.

Anyhoo, I have found that if I read between the lines when he speaks I can learn a lot and most of it is quite deep and fundamental.
 
He said he's "hedging" against the slide in value given the current economic environment in the US, hence dollars.

All multinationals do this.
 
I think Buffett has proven to be a very smart man. You would have to read between the lines because everything else he does seems to be part of his pyschological operations. Sometimes you get truth but you freqently get misdirection.
 
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