Skip to comments.Buffett's Billion-Dollar Boo-Boo
Posted on 03/14/2006 1:48:55 PM PST by LM_Guy
In his annual letter to the shareholders of Berkshire Hathaway, Warren Buffett acknowledged that his bet against U.S. currency had collectively cost them almost $1 billion. Buffet wrote, "My views on Americas long-term problem in respect to trade imbalances, which I have laid out in previous reports, remain unchanged. My conviction, however, cost Berkshire $955 million pre-tax in 2005. ..."
In recent years, Buffett has increasingly used his platform as an extraordinarily skillful mutual fund manger to criticize the economic performance of the country under President Bush. In last year's letter he announced that he had been significantly increasing his position against the dollar, citing a growing trade deficit as the reason. Buffett's statement that America was moving from being an ownership society to a "sharecroppers society" and other criticisms received quite a bit of media attention.
As the chart shows, rising trade deficits cannot be presumed to cause a falling dollar. The data show the dollar strengthening against the euro at a time when trade deficits are rising. This also happened during the Reagan Administration. It is consistent with supply side economics, which sees the value of the dollar determined by the tightness or looseness of our central bank. A free flow of goods, services and capital across borders does not seem to have had any negative impact on the value of the dollar.
In the long run (and we don't know how long that is), Buffet is right.
That's gotta hurt bigtime!!
But then Buffett is playing politics to f' Bush and crash the US Economy and the US Dollar.
So I'd say he should have lost $2 Billion instead; that'd teach him a lesson or two!
I'll bet this has something to do with the Wil Ferrel thing going around.
I agree with his concern that we are moving from an ownership society to a sharecropper society.
Ya Gotta Learn how to Zig when everybody Zags.
FReepers knew this was a Losing Bet
So is Will deceased?
IT'S A HOAX
Everybody loves the Zags (unless you're a U of Washington fan):
Pessimist are always right ...either that, or they are dead
|Squanderville versus Thriftville (Warren Buffet) ^
|Posted by dennisw
On News/Activism ^ 01/07/2004 11:35:03 PM EST with 15 comments
fortune ^ | oct 2003 | Warren Buffet
By Warren E. Buffett, FORTUNE I'm about to deliver a warning regarding the U.S. trade deficit and also suggest a remedy for the problem. But first I need to mention two reasons you might want to be skeptical about what I say. To begin, my forecasting record with respect to macroeconomics is far from inspiring. For example, over the past two decades I was excessively fearful of inflation. More to the point at hand, I started way back in 1987 to publicly worry about our mounting trade deficits -- and, as you know, we've not only survived but also thrived....
I know! Buffet needs more cowbell!!
"My views on Americas long-term problem in respect to trade imbalances, which I have laid out in previous reports, remain unchanged. My conviction, however, cost Berkshire $955 million pre-tax in 2005. ..."
Pre-tax, huh? Which means, that after write offs, capital losses, and so forth... he'll end up making a 100 million or so off the government probably.
I mean, would the Buffett of old have bragged about purchasing companies willy-nilly, three days after they fax him a purchase proposal?
There is no direct or necessary tie between a trade "deficit" and a rising or falling dollar.The value of the dollar is directly related only to the number of dollars in circulation as opposed to the market demand for dollars(for stable prices). The value of the dollar as denominated in other currencies depends on changes in that number of dollars relative to the changes in the amount of those other currencies. Buffett's bet against the dollar, if actually made for the reasons stated betrays a basic lack of understanding of economics. Or the move could have been an attempt at a self-fulfilling prophecy- a "talking down" fo the dollar, or was made on a guess that the Fed would be increasing the money supply at a faster rate and/or the euro and yen would be supplied at a decreasing rate.
The smart freepers did, but there're still many who'll say "Buffet is right." (re post 2 ) no matter how much money he costs his dupes. Buffet's a looney liberal. You can read about his endorsement of Kerry from other socialists here.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.