More Currency Speculation from Warren Buffett

Warren Buffett is back making currency bets, although this time is saving himself the embarrassment of revealing what they are:

Warren Buffett, perhaps the world’s most influential investor, sent the foreign exchange markets scrambling this week after revealing that he had made a “surprising” new bet on the currency markets.

Mr Buffett added to the intrigue by indicating he was only actively buying one currency. “We will tell you about it next year,” he said.

At first glance, the Sage of Omaha is not taking his own advice.  “The cemetery for seers has a huge section set aside for macro-forecasters,” he once said…

Mr Buffett’s Berkshire Hathaway did make more than $2bn overall on a $20bn-plus bet against the dollar that began in 2002, even after the market moved against him to the tune of $1bn in 2005. But he has phased out most of the direct bet – which had started to cost money to hold – in favour of investments in companies with sales in other currencies…

Perhaps the most surprising call for him would be to reverse his bearish stance on the dollar.

Paul Mackel, currency strategist at HSBC, says it is possible that Mr Buffett thinks that US economic growth could accelerate, and has bought the currency.

Ultimately, though, Mr Mackel says that Mr Buffett’s views on currencies are unlikely to carry as much weight as his views on companies.

“His currency calls do generate a lot of headlines, but I’m not sure quite how seriously people take it,” adds Mr Mackel.

posted on 19 May 2007 by skirchner in Economics, Financial Markets

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