Posted on 08/14/2005 6:17:50 PM PDT by Uncle Joe Cannon
Dollar rebound delivers costly shock to investors
By Steve Johnson in London Sun Aug 14, 3:45 PM ET
Pension funds, trend-following hedge funds and private investors are all believed to have been hit this year because of the US dollar's unexpected strength. ADVERTISEMENT
But more nimble investors, including many hedge funds, are now believed to have recouped most of their losses.
The dollar fell by 38.7 per cent against the euro in the three years to 2004 as worries over the twin US external and budget deficits intensified. The sell-off was particularly acute in last year's fourth quarter, leading many in the markets to anticipate more losses this year and thus build big short-dollar positions.
But the dollar has proved robust, rallying from $1.356 against the euro to $1.188 in July, before slipping back recently to $1.243.
"The whole world expected the dollar to go down [in January], but there was no one left to sell the dollar," said James Binny, director of FX analytics and risk advisory at ABN Amro.
Berkshire Hathaway, the investment group run by Warren Buffett, has been a high-profile victim of the dollar's fightback.
Berkshire's $21.5bn of short-dollar forward contracts produced a pre-tax loss of $926m in the first half of 2005, eating into the $2bn gains made from shorting the dollar in the previous three years. Hedge funds also made sharp initial losses. BNP Paribas's FX Funds Index, which tracks the performance of hedge funds and commodity trading advisers, suggests the sector lost 4.4 per cent in January.
However, data from the US Commodity Futures Trading Commission indicates that short-term speculators swung to being long on dollars by the spring, although these positions are now being liquidated. Consequently, BNP's index indicates that by June hedge funds had cut year-to-date losses to 1.7 per cent.
Yet many funds still face significant losses. Dummy portfolios run by ABN's Mr Binny, designed to imitate popular hedge fund trading styles, suggest that trend-following hedge funds typically lost 7.4 per cent in the year to July, while short volatility funds which suffer when currencies break out of their trading ranges lost 6.4 per cent. Yield and value-seeking funds are likely to have made small gains.
Avinash Persaud has been another victim, with the currency hedge fund he managed for Global Asset Management closing in April after losses. He thinks this year's losers were "clever" investors who anticipated fresh dollar weakness, with "dumb" investors largely "non-profit maximisers" who stick with the dollar through thick and thin making the gains.
Less money for Buffoon to spend on the Dimwit Party. Hope Soros took it in the shorts too.
could the big boys be hearing thw whisper numbers that the Euro really is only a paper tiger.
Yes, Bush is pissing away money like a drunken sailor, but relative to other currencies the US dollar still looks pretty nice. It is not that our currency is being managed well so much as it is that foreign economies are being managed badly.
Rising interest rates mean a stregthening dollar.
That is all for today. Hope you took notes.
What hooey. The dollar went down because the FED lower rates to 1 percent, and they did so in part to lower the dollar's value to boost exports.
Only idiots in this market, believed the "twin deficit" scam put out by the MSM. I just flies in the face of the historical record. I am so tired of hearing this BS out of "experts" who should know better.
Eat it Warrren.
George Soros and Warren Buffet have been waging an active campaign against the US economy following the same game plan Soros used to "break the Bank of England" several years ago.
They have been leading the charge in speculating on currency and oil in a concerted effort to destroy us. They still plan to make a profit, as well as advance their neo-socialist agenda (socialism hell for the little people, so long as they stay on top themselves - you know, like Cuba and Venezuela).
Buy gun and gold stocks...
SWB
RGR
GG
USGL- pure spec...
I like what Ronald Reagan said, "We should make the dollar sound, respected again, not have it yo-yo in value as it has been for the last few years. The dollar should be worth a dollar today; it should be worth a dollar tomorrow."
If Warren Buffet kept his dollar short after that he is an idiot with a capital I. If he did and the dollar reverses and capsizes, he not only is the greatest genius trader of all time he is clairvoyant beyond anything any mortal can do.
It was a Friday afternoon when the dxy went above its 200 day and I didn't take the trade for that reason, figuring the overseas traders would drill me Sunday night and I could get in Monday. Stupid. It took off like a rocket.
Soros and Buffett made the mistake of betting on their political and ideological convictions.
Economics 101 for Dummies:
Rising interest rates mean a stregthening dollar.
That is all for today. Hope you took notes."
Exactly. That and the fact the EU is not smart money play after all.
Eat it Warrren.
Buffet is no fool and he is long time holder of whatever he buys or shorts. He's bought millions of ounces of silver and it has yet to go up significantly in price but it will. Don't misjudge his shorting the dollar, it's headed down. He'll make big bucks on that too.
Im buying gold coins and silver. You?
Precisely right. Such a simple and direct concept, so easily understood by folks on the street and in "fly-over country," but beyond the grasp of economists running the Fed.
As interest rates rise, dollars become more attractive than gold.
Buying now, absent some unforseen market shock that sends the dollar plummeting, seems like a fool's errand to me.
I hear you 3-4 % of the portfolio. Had a good run in SWB looks like it could continue. Rest per Bob Brinker.
This Ronald Reagan guy should get off his MSNBC but and run for President!
We need this kind of vision today.
Let the plastering begin!
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