Wednesday, June 08, 2005

It couldn't have happened to a nicer liberal billionaire

I caught this story on Man Without Qualities. With the recent sharp drop of the Euro against the dollar, after a longer and larger run up, one story that hasn't really been covered much is the role of currency speculators in this. Well, when things were going well they made money, but there should be some interesting numbers at the end of the next couple of quarters. From Forbes:

Warren Buffett's vote of no confidence in U.S. fiscal policies is up to $20 billion. The dollar has fallen savagely against the euro for the past three years, and the trade deficit is running $55 billion a month. Is the currency rout over? Can the trade deficit be fixed with a rise in interest rates or an upward revaluation of the Chinese currency? Warren Buffett, the world's most visible dollar bear, says the answer to both these questions is no. His bet against the dollar, reported at $12 billion in his last annual report (for Dec. 31, 2003), has gotten all the bigger.

Now his Berkshire Hathaway has a $20 billion bet in favor of the euro, the pound and six other foreign currencies. Buffett has for a long time been lecturing fellow Americans about their bad habit of borrowing from abroad to live well today. He made a big stink about his currency trades in his March 2004 letter to shareholders. FORBES phoned him recently for an update, hoping for the news that the Scold of Omaha had softened his views on the decline of the dollar. What we got was more doom and gloom, more than we have ever heard from the man. In other words, he is not about to cover his short position on the dollar.

Right now the Euro is right above the $1.20 mark that Buffett said he stopped buying at, but if recent trends continue, well, Paul Allen might regain his position as the world's second richest man.