Does Buffett ever trade, rather than acquire?
From time to time, Buffett has made changes in his portfolio – including divesting assets such as Union Pacific when he no longer felt that the value was there. However, for the most part, no one has ever accused Buffett of speculative trading – he has the reputation of being the ultimate value investor.Except, perhaps, when it comes to currencies.
Buffett and the foreign currency market
Back in 2002, Buffett did something he never did before – he started to take positions in the foreign currency market. This was because he became increasingly concerned about the growing trade deficit in the United States. He was aware of the issue before hand, but by 2002 felt that global appetite for continued US trade deficits was starting to falter badly.Buffett grew the positions that he took in 2002 further in 2003 as his view of the US dollar became increasingly bearish. In fact, the dollar did start to slide at the end of 2002, leaving Berkshire Hathaway in the relatively enviable position of owning about $12 billion of foreign currency contracts, spread across a number of different currencies. At the same time, Buffett also held about $1 billion in euro-denominated bonds with high yields.
So, despite having built his empire based on buying into high-value, well-run businesses, the Sage of Omaha has shown that he is definitely not above betting on currencies to hedge risk and drive profits. Clearly, this is a lesson that we can all benefit from – Buffett did not become one of the richest men in the world by ignoring opportunities or failing to manage downside. In fact, Buffett’s moves in the currency markets clearly show that trading – not investing – in the currency market is a perfectly valid strategy, even for hard-core value investors.
Editors’ Picks
AUD/USD surges above 0.6600 on soft US jobless claims
The Australian Dollar rallied against the US Dollar on Thursday, printed gains of more than 0.60%, due to the Greenback remained offered following a softer than expected US jobs report. The AUD/USD trades back above the 0.6600 threshold as Friday’s Asian session begins.
EUR/USD climbs over 1.0780 on broad-market risk appetite recovery
EUR/USD gained ground on Thursday, finding upside on the week after the US Dollar broadly fell back after rising US Initial Jobless Claims sparked renewed hope of rate cuts from the Federal Reserve.
Gold marches higher as weak jobless claims, increase Fed rate cut speculation
Gold price resumed its uptrend on Thursday and climbed more than 1% as US Treasury yields dropped, undermining the Greenback's appetite. Labor market data from the United States was softer, increasing the chances for a rate cut by the Federal Reserve despite dealing with inflationary pressure.
Ethereum waiting on a bullish trigger, Consensys CEO takes a jab at the SEC
Ethereum co-founder alleges that the SEC aims to stifle innovation through its enforcement actions against Ethereum-related companies. Grayscale CEO says he's optimistic the SEC would approve its spot ETH ETF application.
Dow Jones Industrial Average gains 330 points as investors celebrate rising unemployment claims
The Dow Jones Industrial Average (DJIA) found further gains on Thursday as investors bet on Fed rate cuts to come after US Initial Jobless Claims rose to a multi-month high.
RECOMMENDED LESSONS
Making money in forex is easy if you know how the bankers trade!
Discover how to make money in forex is easy if you know how the bankers trade!
5 Forex News Events You Need To Know
In the fast moving world of currency markets, it is extremely important for new traders to know the list of important forex news...
Top 10 Chart Patterns Every Trader Should Know
Chart patterns are one of the most effective trading tools for a trader. They are pure price-action, and form on the basis of underlying buying and...
7 Ways to Avoid Forex Scams
The forex industry is recently seeing more and more scams. Here are 7 ways to avoid losing your money in such scams: Forex scams are becoming frequent. Michael Greenberg reports on luxurious expenses, including a submarine bought from the money taken from forex traders. Here’s another report of a forex fraud. So, how can we avoid falling in such forex scams?
What Are the 10 Fatal Mistakes Traders Make
Trading is exciting. Trading is hard. Trading is extremely hard. Some say that it takes more than 10,000 hours to master. Others believe that trading is the way to quick riches. They might be both wrong. What is important to know that no matter how experienced you are, mistakes will be part of the trading process.