Posted on 11/23/2005 5:46:13 PM PST by Daralundy
The world's two richest men have both lost a slice of their fortunes this year betting against the dollar.
Microsoft's Bill Gates said with fulminating certainty in Davos last January that it was time to "short" the greenback. "The ol' dollar is going down. It is a bit scary. We're in uncharted territory when the world's reserve currency has so much outstanding debt," he said.
His friend Warren Buffet kept pace, switching $22billion (£13billion) of Berkshire Hathaway funds into foreign currencies. He said it pained him as an American, and broke the habits of a life-time. But a country living so far beyond its means with a zero savings rate and a current account deficit nearing 6pc of GDP was about to pay the inevitable price.
Indeed, the world was "choking on the diet" of surplus dollars, he said.
Well, the mighty dollar has surged more than 16pc against both the euro and the Japanese yen since Davos. But is it possible that Mr Gates and Mr Buffet were just a year too early?
David Bloom, a currency expert at HSBC, says vindication may now be at hand for dollar perma-bears after Tuesday's release of the US Federal Reserve's November minutes. We learned that the Fed's dovish camp had cautioned against the "risks of going too far with the tightening process", even though US producer prices are still rising at 8.4pc a year.
In other words, the monetary squeeze may soon be coming to an end after 12 rate rises from 1pc to 4pc since June 2004, even if a December rate rise is still certain.
"We're at a key turning point in market psychology. People can see the peak in the dollar cycle," said Mr Bloom.
(Excerpt) Read more at telegraph.co.uk ...
Just because the dollar goes up for a year while the fed raises interest rates doesn't mean that when they are done raising it won't continue to fall.
Rule #1 - Never let politics get in the way of making money. The markets do not care if you are Republican or Democrat.
As a long-term holder of Berkshire Hathaway shares, I am pained by Warren Buffett's political leanings, stance on the dollar/taxes and partial ownership of the Washington Post. Yet, Mr. Buffett has many redeeming qualities.
However, BRK reported this month that it has reduced its foreign currency holdings to $16.5 billion, from $21.5 billion three months earlier. A recent visit to Europe makes me a staunch dollar bull.
Hmmm caught going the wrong direction both times....
too bad guys
It's always the Last Hurrah--I hope Soros lost a bundle, too.
Doesn't shorting the dollar mean being bullish on the Euro? The product of a collection of socialist countries mired in unemployment and mountains of red tape?
Warren Buffet knows his niche well. He is, however, not an economist - as he will freely admit.
Ya. China and India are not quite up to snuff yet. No matter what they way. Check back in a few years tho.
Maybe Gates and Buffet should spend a couple bucks on that online trading program offered on tv info-mercials. It's probably safer than trying to bet and hedge against their own country which has been nothing but good to them.
Traitors.
"even though US producer prices are still rising at 8.4pc a year."
Rising oil prices mainly due to Katrina have skewed the numbers in recent months. The core rate PPI is actually much lower. When the November/December numbers are factored in with lower oil prices, the average rate on an annual basis should be much lower then 8.4 pct.
The recent surge in the stock market signals a pick up in the economy for the first half of 2006.
I predict Q1 GDP of 4%+.
http://www.safehaven.com/article-4108.htm
I hear he's a good dancer for an old guy.
In the last month, the Feds have printed an additional $155 billion in new currency (with nothing to back it up - it is just paper). Amazing! It looks like the Feds are doing everything in their power to make the economy look OK for the elections next fall.
This is just my opinion, but it seems to be the height of recklessness to use extreme monetary measures, usually reserved to avoid a financial collapse, etc., just to make the economy look good for the upcoming presidential election.
However, maybe I am being too optimistic: perhaps there is a looming economic collapse and the Fed is acting responsibly, performing a last ditch effort to prevent a historic crash. (Hopefully, this is just politics!)
http://mark-watson.blogspot.com/2004/06/fed-has-increased-money-in-circulation.html
Between unfixable fiscal instability and the inevitable social instability as hundreds of millions of rural peasants flock to the cities and cannot find work, and China has one huge ticking bomb in its front pocket.
Comments such as yours miss the whole point of forex trading; in a world of fiat currencies, the position trader does not seek out the ''best'' currency, the soundest one -- for there is no such thing. The position trader seeks out and buys the least bad, the least UNsound currency.
Similarly, the trader sells the truly rotten; Rand, Bolivar, probably Real here shortly and New Sol for certain. Euro isn't in this class of rotten, but it's far and away the least structurally sound of the majors. Rupee is a dead flat buy/hold, Rupiah is likely a sell, and Ringgit's fate depends on the next government's (perceived) policies, so toss a coin there. Aussie SHOULD be strong, but isn't as strong as it should be. Kiwi is hopeless as a position trade until the Clark gov't goes away.
A decent longside spec is Kazakh; their enormous resources will begin to be developed for real here shortly -- but the trader will have to be patient, very patient.
Any time you want to use your political views as a basis for trading forex, just bring lots and lots of money. I'll send a cab for you, and you can save dealing fees. Fair enough?
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