Warren Buffett

About a year and a half ago Warren Buffett, the so-called "Sage of Omaha," published a column in which he announced that he was increasingly bearish on the dollar due to ongoing massive trade deficits. Indeed, he believes so strongly in this that he is putting his money where his mouth is:

Berkshire owned about $21.4 billion of foreign exchange contracts at yearend, spread among 12 currencies. As I mentioned last year, holdings of this kind are a decided change for us. Before March 2002, neither Berkshire nor I had ever traded in currencies. But the evidence grows that our trade policies will put unremitting pressure on the dollar for many years to come -- so since 2002 we’ve heeded that warning in setting our investment course.

Trade deficits have never particularly concerned me and so I didn't really understand Buffett's logic. This article in today's Wall Street Journal makes me think that perhaps my skepticism is warranted:

After a long stint as the 98-pound weakling of major currencies, the dollar has put on some muscle in recent months, forcing currency traders to revamp their outlooks and giving a break to Americans traveling abroad.

:
The U.S. currency jumped Friday to its highest level against the euro in nearly seven months, against the Canadian dollar in seven and a half months, and against the British pound in nearly six months. The euro, which was trading as high as $1.36 in January, was at $1.26 Friday; it has fallen about 7% this year against the dollar.

After reading this I decided to see how Buffett's currency bet was going. Looks like he's having a rough year:

Berkshire Hathaway, the insurance and investment company run by billionaire Warren Buffett, said first-quarter profit fell 12 percent as it lost money on a $21.8 billion bet against the U.S. dollar.
:
Net income fell to $1.36 billion, or $886 a share, from $1.55 billion, or $1,008, a year earlier, the company said in a statement. Excluding the currency wager and other changes in the value of investments, profit rose 27 percent to $936 a share.
:
Buffett, who has bet on a slumping dollar since 2002 on concerns about the U.S. trade deficit, increased his position in the quarter even as the currency's gain resulted in a $307 million pretax loss.

Who knows, this could still prove a good bet on his part, and given his record he has certainly earned the benefit of the doubt. But then again, maybe he should have stuck to picking stocks.