WARREN BUFFET 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.
By Brian S. Wesbury