Ed Driscoll

Paying The Cost To Short The Boss, Revisited

In August, we linked to an American Prowler article on Warren Buffett, who was gleefully shorting the dollar on the foreign exchange markets:

Warren Buffett is bearish on the United States, and he’s bullish on Europe. For the first time in his life, starting in 2002, Mr. Buffett entered the foreign exchange markets and shorted the dollar. This rare macro-economic bet was based on a belief that U.S. consumers and the U.S. government were spending beyond their means, and that the trade deficit was a sign of economic weakness.

While his short position was profitable in 2004, he has lost more than half a billion dollars so far in 2005. Some Wall Street sources suggest that his breakeven exchange rate is $1.22/euro, so with the euro trading near $1.21 in mid-June, his short position was seriously in the red.

Buffett’s anti-American investment sentiment has cost Berkshire Hathaway shareholders dearly. During the 12 months ending in mid-June, his stock price was down roughly 7 percent, while the S&P 500 was up 5 percent. The stock market voted “non” on this Berkshire investment strategy, just like the French and Dutch voted against the European constitution.

The result? Orrin Judd links to a quote in Human Events from Buffett’s latest annual letter to the shareholders in Berkshire Hathaway:

Warren Buffett acknowledged that his bet against U.S. currency had collectively cost them almost $1 billion. Buffet wrote, “My views on America