warren averages down

Quote from SethArb:

how come this works for him and not for me :p

from bloomberg wires

-Billionaire investor Warren Buffett said he increased his bet against the U.S. dollar on concern that the country's trade deficit will weaken the currency.

``We think that over time that the dollar is likely to decline in value against some of the major currencies,'' said Buffett, 73, in an interview before Berkshire Hathaway Inc.'s annual shareholder meeting in Omaha, Nebraska. In the last few months, Berkshire has added ``more than a little bit'' to its foreign currency holdings, he said-
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I always find these statements hilarious.

Buffet has positions in so many things, people have no idea why he is shorting the dollar. For example, if he _only_ owned KO, a hedge against the dollar rising would make sense.

I have read Buffets papers. People think this guy is a bufoon and just gets lucky buying big and holding. He is _waaaaaaaay_ sharper than that and uses many strategies to balance a portfolio.

Given that he has a sizeable position in several issues, it is plain silly to take what he is saying about betting against the dollar on face value - in fact, the rest of his positions may be a huge bet for the dollar and the dollar position is a hedge.

nitro
 
He has said repeatedly that he feels that the debt load being generated (right or wrong) by Bush is going 2 cripple this "Recovery" that is going on ........ Further, if when any #'s come out that give a hint of doubt 2 the continuing bullish trend of the numbers Ur going 2 have a continuation of the bullish Euro move (which is now starting 2 happen) consumer sentiment the latest "light" # ......If we continue on this trend its going 2 b 1.5000 Euro by the End of the Year.......
 
Quote from SethArb:

how come this works for him and not for me :p

from bloomberg wires

-Billionaire investor Warren Buffett said he increased his bet against the U.S. dollar on concern that the country's trade deficit will weaken the currency.

``We think that over time that the dollar is likely to decline in value against some of the major currencies,'' said Buffett, 73, in an interview before Berkshire Hathaway Inc.'s annual shareholder meeting in Omaha, Nebraska. In the last few months, Berkshire has added ``more than a little bit'' to its foreign currency holdings, he said-
More...

Because he can .......

Give me a few billion and look out baby.... :p
 
Quote from just21:

But on the other hand he is saying that inflation is increasing which will lead to higher interest rates and a stronger dollar. His message is not consistent.
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That is incorrect. Inflation initially leads to a rapid depreciation of a currency. If inflation is in check and real interest rates remain the same or higher, then one can say that the dollar will get stronger. That is very rarely the case because inflation LEADS interest rates, hence if inflation rises, dollars weaken because real interest rates fall. If you get runaway inflation, interest rates never get to reach inflation rate levels, hence the faith in the currency is diminished. Don't buy a currency just because nominal interest rates are going up. That is a major mistake.
 
I think it is more about the perceived future of inflation. If the feeling is that the Fed will combat any "over target" inflation with sufficiently higher rates to reign it back in, then the currency should rise.

Target inflation rates may be higher than most think, however. The Fed may decide to reduce real national debt and Federal debt with slightly higher inflation than some believe.

I think that fact that we are almost 3 months off the bottom in the Dollar shows this line of thinking is probably valid.

Quote from swoop[TR]:

That is incorrect. Inflation initially leads to a rapid depreciation of a currency. If inflation is in check and real interest rates remain the same or higher, then one can say that the dollar will get stronger. That is very rarely the case because inflation LEADS interest rates, hence if inflation rises, dollars weaken because real interest rates fall. If you get runaway inflation, interest rates never get to reach inflation rate levels, hence the faith in the currency is diminished. Don't buy a currency just because nominal interest rates are going up. That is a major mistake.
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Quote from just21:

But on the other hand he is saying that inflation is increasing which will lead to higher interest rates and a stronger dollar. His message is not consistent.
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You are exactly right!

I still hold that no one, including Warren, can accurately predict long term trends in currencies.

If he is short the USD assuming it will weaken then it means he is long other currencies, we can presume he is long EUR, CAD, GBP, AUD, CHF, perhaps even JPY.

Who is to say these currencies will strengthen against the USD in the long term? And, what does Warren equate "long term" to be??

I think he is happy getting interest these currencies pay. At his level of investment the interest alone must be in the millions of dollars.

I think this fish is out of his pond of expertise, though, trading fx, and is going to get hooked.

I just hope I am the one who hooks eem. :)

to
 
Quote from TradeOff:

You are exactly right!

I still hold that no one, including Warren, can accurately predict long term trends in currencies.

If he is short the USD assuming it will weaken then it means he is long other currencies, we can presume he is long EUR, CAD, GBP, AUD, CHF, perhaps even JPY.

Who is to say these currencies will strengthen against the USD in the long term? And, what does Warren equate "long term" to be??

I think he is happy getting interest these currencies pay. At his level of investment the interest alone must be in the millions of dollars.

I think this fish is out of his pond of expertise, though, trading fx, and is going to get hooked.

I just hope I am the one who hooks eem. :)

to
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You are definitely a luminary, no doubt about it. Ever heard of the fisher effect? You must earn the same amount of interest abroad on a risk free asset as you earn at home. Otherwise, you would get what we call arbitrage. Hence, when Buffet buys Euros, he doesn't see an arbitrage opportunity, he just thinks that his principal is going to grow vs dollars. Has nothing to do with interests. If real interest rates go up in Euroland, so does the currency. Why is that do you think?
 
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