HenryTo
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Joined: 06 Aug 2004
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 Posted: Tue May 24, 2005 12:05 pm Post subject: Warren Buffett Says He's a `Bull' on British Pound |
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From Bloomberg - Warren Buffett is taking the opposite side of the BCA:
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Warren Buffett Says He's a `Bull' on British Pound
May 24 (Bloomberg) -- Berkshire Hathaway Inc. Chairman Warren Buffett said he is a bull on the British pound against the dollar even as the U.K. currency heads for a second consecutive monthly decline.
``I am a bull on sterling versus the U.S. dollar,'' he said on a teleconference with reporters in London after MidAmerican Energy Holdings Co., a company controlled by Berkshire, agreed to buy PacifiCorp for $5.1 billion in cash. ``This may well continue despite the movements of the last few weeks.''
The pound is down 4 percent against the U.S. currency so far this month as the Bank of England cut its growth forecasts, an industry report showed retail sales fell the most in a decade and a gauge of house prices dropped for a second month.
Against the dollar, the pound traded at $1.8286 at 4:20 p.m. in London from $1.8303 late yesterday in New York. The U.K. currency advanced for three years through 2004 as the Bank of England raised interest rates and the dollar fell against the currencies of its major trading partners.
MidAmerican is buying PacifiCorp from Glasgow-based Scottish Power Plc. Buffett said on April 30 he's maintaining his bet against the dollar after Berkshire had about $310 million in first-quarter losses from foreign currency investments.
The company has ``a little more than'' $21 billion in foreign currency forward contracts, about the same as it did at year-end, Buffett said at Berkshire's annual meeting of shareholders in Omaha, Nebraska. He declined to say which currencies he is using to wager against the dollar.
Interest Rates
``I probably side with Buffett and declare myself a pound bull,'' said Mario Kelly, one of the two founders of Wallwood Consultants Ltd., the second most accurate forecaster of the pound against the dollar in the first quarter of this year in a Bloomberg survey. ``Interest rates are higher than Japan, the U.S. and Europe, so that attracts investors.''
Bank of England policy makers have held their benchmark rate at 4.75 percent since August, after raising the rate from 3.5 percent, in five quarter-point moves from November 2003. The Federal Reserve raised its target rate for overnight loans between banks by a quarter point to 3 percent on May 3.
London-based Wallwood, founded by Kelly and Daryl Swain in 1998 after losing their jobs as currency traders when their employer cut costs, said the pound may gain to $1.88 by year-end.
Trade Deficit
Buffett and Bill Gates, chairman of Microsoft Corp., are among investors who have bet against the dollar. Buffett's firm made $1.63 billion on foreign currencies in the fourth quarter, when the dollar fell to a record $1.3666 per euro. He began betting against the dollar in 2002 on concern widening U.S. trade and budget deficits would erode its value.
``Our view is actually a little bearish on the pound,'' said Adrian Schmidt, head of currency strategy in London at Royal Bank of Scotland Group Plc, Britain's second-largest bank by assets. ``Buffett has a short dollar position so one assumes he has to justify that to his shareholders, so he's saying he still likes the position.''
Schmidt predicts the pound will weaken to $1.81 in six months. |
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