Buffett sorry for his $1.6bn winning bet against dollar
London Independent | March 7, 2005
By Katherine Griffiths
Warren Buffett, the US investment guru, warned that the dollar was set for a fresh slump as he revealed that Berkshire Hathaway, the company he chairs, made $1.6bn (£830m) after predicting its drop in the final four months of last year.
In his highly popular annual letter to shareholders, America's second-richest man expressed regret that his bet against the dollar had been so profitable, and urged the US administration to take action to deal with its widening trade gap and budget deficit.
Mr Buffett, 74, one of America's most successful businessmen for the past half century, said: "In no way does our thinking about currencies rest on doubts about America."
But the so-called Sage of Omaha, whose company is based in the Nebraskan city, added that policymakers' hopes for a soft landing were wide of the mark. "The evidence grows that our trade policies will put unremitting pressure on the dollar for many years to come," he said.
In his famously folksy style, Mr Buffett turned to one of America's most famous comedians to sum up the situation, saying: "As WC Fields once said when asked for a handout, 'Sorry, son, all my money's tied up in currency'."
Fourth-quarter net income at Berkshire Hathaway rose 40 per cent to $3.34bn, boosted by its position on the dollar. Annual profit fell 10 per cent to $7.3bn. Mr Buffett said he "struck out" by not managing to spend any of the $43.3bn of cash Berkshire has on its books.
"My hope was to make several multibillion-dollar acquisitions that would add new and significant streams of earnings," he said, adding that the company would renew its efforts this year to find businesses to buy, including an acquisition of at least $5bn.
Mr Buffett, an outspoken critic of poor management in US boardrooms, found himself on the receiving end of shareholder lobby groups last year. Some institutions questioned whether he was able to act as an independent director on the Coca-Cola board. Berkshire Hathaway is Coke's largest shareholder and at the same time its subsidiaries do business with the soft drink maker.
"I'm puzzled how anyone could conclude that our Coke purchases would control my decision-making when the counterweight is the well-being of $8bn of Coke stock held by Berkshire," Mr Buffett said. "Assuming I'm even marginally rational, elementary arithmetic should make it clear that my heart and mind belong to the owners of Coke, not its management."
He added that some institutional investors missed the point in their attitude to corporate governance. "Usually, they've focused on minutiae and ignored the three questions that truly count. First, does the company have the right CEO? Second, is he/she overreaching in terms of compensation? Third, are proposed acquisitions more likely to create or destroy per-share value?" he said.
Some 19,000 shareholders attended Berkshire Hathaway's annual meeting last year to see Mr Buffett in person, for a performance which usually includes views on the state of the world's economy and jovial banter with his friend and vice-chairman, 81-year-old Charles Munger. This year's annual meeting is on 30 April.
Over the past four decades Mr Buffett has transformed Berkshire Hathaway from a failing textile manufacturer into a $137bn company by acquiring shares in sound businesses whose stock is out of favour with investors. In his letter, sent on Saturday, he said new "whistleblower lines" that some companies set up to try to improve internal governance were a good thing.
Buffett deepens dollar worries
Financial Times | March 5 2005
By Dan Roberts
Warren Buffett has warned that the US trade deficit risks creating a “sharecropper’s society” as his letter to shareholders sounded an increasingly bearish tone about the value of the dollar.
The billionaire fund manager said his own performance as chairman of Berkshire Hathaway was “lacklustre” because he struck out in his quest for new investments. Annual results showed the book value of Berkshire shares underperformed the stock market for the second year in a row while full-year profits fell 10 per cent.