Warren Buffett Reduces Berkshire's Bet Against Dollar (Update1)
*LOL, this script is being written like a movie in Hollywood by the globalist controllers... next comes the "bull-trap" in the USD Index, of course, you'd know that if you've been following along the script...
Warren Buffett Reduces Berkshire's Bet Against Dollar (Update1)
Nov. 7 (Bloomberg) -- Warren Buffett's Berkshire Hathaway Inc. reduced a bet against the U.S. dollar after losing more than $900 million from foreign-currency investments this year.
Buffett, who has said the U.S. trade deficit would weaken the dollar, cut his foreign-currency forward contracts to $16.5 billion in September from $21.5 billion in June, Berkshire said in a Nov. 4 statement. The dollar in July reached a 13-month high against a basket of six major currencies.
``To his credit, he reduced his exposure before the recent run-up of the dollar cost him more,'' said Tom Russo, a partner at Gardner Russo & Gardner in Lancaster, Pennsylvania, which owned about $250 million of Berkshire stock as of June. The Omaha, Nebraska-based company had $2.96 billion of foreign- exchange gains from 2002 to 2004.
Berkshire, which relies on insurance units including General Re and Geico for more than half of annual earnings, reported its smallest quarterly profit since 2001 after Hurricanes Katrina and Rita led to almost $3 billion in claims. Third-quarter net income fell 48 percent to $586 million, or $381 a share, from $1.14 billion, or $739 a share, a year earlier.
Buffett, 75, who called his bet against the dollar a ``very long-term'' position as recently as June, may have changed Berkshire's mix of currency investments as he reduced the bet. After $926 million in pretax currency losses in the first half, the company posted $29 million in gains in the third quarter, even as the dollar strengthened against the euro, yen and British pound.
Canadian Dollar
``I don't know exactly how he did it,'' said Chris Melendez, president of Tempest Asset Management, a currency hedge fund in Laguna Beach, California. ``The Canadian dollar has been having a lot of strength. He could have gotten into Canadian dollars.''
The Canadian dollar rose 5.3 percent against the U.S. currency in the three months ended Sept. 30, the third-best performer of 61 major currencies tracked by Bloomberg. The Chilean peso climbed 9.1 percent and the Iceland krona gained 6.4 percent.
The dollar traded at $1.1814 per euro by 7:02 a.m. in London, according to electronic foreign-exchange dealing system EBS, its highest in 26 months. Against the yen, the dollar climbed as high as 118.38 yen today, the strongest since Aug. 20, 2003.
Buffett, whose estimated $40 billion ranks him as the world's second-richest man after Microsoft Corp. founder Bill Gates, said in his 2004 annual report that the company had spread its forward contracts, or agreements to purchase a foreign currency in the future at a preset price, among 12 currencies.
`Function of Timing'
``It's possible he may have closed out positions when there were periods of time when the dollar was weaker,'' Russo said. ``It's a function of the timing.''
Buffett hasn't reported a smaller foreign currency position since the end of 2003, when it stood at $11 billion. Berkshire Chief Financial Officer Marc Hamburg didn't return a phone call seeking comment.
``He is a big name and it may give the dollar a bit of a lift,'' said Kamal Sharma, a currency strategist at Bank of America Corp. in London.
Berkshire hasn't reported lower earnings since the fourth quarter of 2001, just after the Sept. 11 terrorist attacks in the U.S. Buffett may benefit in future quarters as Katrina's damage allows insurers to raise their rates, said Kevin Callahan, an analyst at Century Capital Management.
Hurricane Loss
``There's obviously a huge loss from the hurricanes,'' said Callahan, whose Boston-based firm owned about $14 million of Berkshire shares as of June. ``But pricing should improve, and he'll be able to take advantage of it.''
Since Katrina flooded New Orleans on Aug. 29, shares of Berkshire have risen 6.5 percent, outpacing the 1.3 percent advance of the Standard & Poor's 500 Index. The stock closed unchanged at $88,300 on Nov. 4 in New York Stock Exchange composite trading before the company reported profit.
Berkshire earned about $69 a share before investment gains in the third quarter, less than the $180 expected by Fox-Pitt Kelton Inc. analyst Gary Ransom. The company's insurance underwriting loss widened to $1.17 billion from $215 million as Katrina and Rita cost more than twice as much as four hurricanes in Florida last year.
`Time to Diversify'
``It's time for Buffett to diversify,'' said Joseph Parnes, president of Technomart Investment Advisors in Baltimore. Technomart, which publishes Shortex Market Letter, includes Berkshire among companies whose stocks are likely to decline.
Katrina and Rita probably cost insurers $60 billion to $70 billion, Berkshire estimated. Katrina alone is the industry's most expensive U.S. disaster, according to storm modeler Risk Management Solutions Inc.
Buffett has spent the past four decades transforming Berkshire from a failing textile manufacturer into a $135 billion holding company by acquiring out-of-favor securities and businesses. In that time, the company's book value per share has risen to more than $58,000 from $19.
Berkshire reported that General Re received a new subpoena from federal prosecutors in Virginia investigating its role in the collapse of Reciprocal of America, a failed medical malpractice insurer that bought reinsurance from General Re.
State and federal regulators are also probing General Re's role in accounting errors at American International Group Inc., the world's largest insurer. Berkshire said it's cooperating with the investigations.
To contact the reporter on this story: Jesse Westbrook in Washington at jwestbrook1@bloomberg.net.
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