Quote from Maxprofit$:
Out of a $20BILLION position! Big deal!!!
True. To a point.
Plus (from the same article):
"The 2005 rise in the dollar follows a significant plunge in the dollar over the previous three years against the euro. That decline helped Buffett make a bundle - $2.7 billion through March, which is why he probably is not worrying about the first-quarter loss."
So he made some money.
But the market has a nasty habit of taking away gains. Then taking all the rest.
One thing Buffett has going for him, foreign currency
interest rates.
If he owns AUD or NZD for example, whatever he has exposed to market is drawing massive interest payments. Even if he owns GBP he's still drawing interest.
Of course, on euro he's
paying interest against the USD, but this just happened more recently with the USD rate hikes.
Now the question is, how much of his cash is actually IN play, the whole $20 billion?
I wouldn't know, but it was said, unlike Soros, Buffett's margin is 1:1 meaning he uses none.
So he just swapped out dollars for foreign currency, at a later date to swap back into USD and (as the plan is) make a king's ransom?
On the contrary hand, going from low to high since he sold USD, what, 2 or 3 years ago? when the dollar really started its fall is one thing.
Now he's in drawdown, staring at mounting losses.
That does things to traders' mentality and psychology.
Buffett's only human. He can crumble like everyone else: Feel fear, be motivated by greed, be blinded by panic and doubt.
Winds blow
hard in the forex.
He is subject to all of these.
When's he going to call it a "bad trade"?
When IS it a "bad trade?"
When does he go from being an "investor" to becoming a bullheaded fool destined to blow up his account?
Munger's already begging him to stop!
He can simply change his mind once the market rates tumbles under 1.2400.
What happens if the USD does rally into the 1.2200s? Will he simply kick in his Stop Loss, take the multi-billion dollar hit, then change trade direction, going LONG the USD?
Long term in one thing - making long term profits is quite another.
In the forex it doesn't always go the way you think it should.
That's market law.
And if he DOES join the USD-long fray, ah... now he's a full-fledged gambler/daytrader/market timer, because the next move for the USD
may be back up past the 1.3000s.
What's his Stop Loss then?
Or does he not use a Stop Loss?
He can be chopped to pieces just like everyone else who plays the Stop Loss game.
He's
risking a downward market rate setting in, and mounting RISK is something his trading past doesn't seem to have long-term experience handling OR coping with.
As a forex trader you have to be a
trader. All he's ever been is an investor, and that, in stocks.
After all,
foreign currencies are
foreign to him.
In his "value investing" scheme he's not played the Speculator in times past.
We'll see how it plays out... no use
speculating.
Sam
