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
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.
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