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Realistbear

Buffett: Sell The Euro

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http://www.bloomberg.com/news/2010-10-13/buffett-says-euro-faces-real-challenge-after-currency-stages-comeback.html

Buffett Says Euro Faces `Real Challenge' After Currency's Rally
By Andrew "Andy" Frye and Catarina "Kat" Saraiva - Oct 13, 2010 5:05 AM GMT+0100
Billionaire Warren Buffett, who last month called himself “a huge bull” on the U.S., said the euro faces “a real challenge” after the currency posted its biggest quarterly gain in eight years.
“This is a test, and I would say the test has not yet been passed,” Buffett said in previously recorded remarks presented yesterday at a conference outside Tel Aviv. “I’d rather watch it from afar than nearby.”
The euro gained 11 percent in the three months ended Sept. 30 as the European Union addressed the region’s fiscal crisis with a 750 billion euro ($1.04 trillion) rescue fund. That bailout may not resolve the problems posed by differences among the 16-nation currency bloc, said Buffett, Berkshire Hathaway Inc.’s chief executive officer.
“There’s a real challenge when you try to get a large group of countries with different cultures, different attitudes toward fiscal policy, to share a common currency,” Buffett, 80, said. “I think it’s going to be an interesting one to watch.”
.../
Dollar Dividends
Berkshire, which Buffett built through four decades of stock picks and takeovers, generates revenue in dollars from units including Fruit of the Loom, Clayton Homes and Geico Corp. The company also gets dollar-denominated dividends from its U.S. equity portfolio of more than $40 billion. Buffett made what he called an “all-in wager” on the U.S. with the $27 billion purchase of railroad Burlington Northern Santa Fe in February.
In 2005 and 2006, Buffett unwound bets against the dollar that he had called a “very long-term” position. Berkshire’s so-called foreign-currency forward contracts fell to $1.1 billion at the end of the September 2006 from $21.5 billion in June 2005. The contracts allowed for the purchase of foreign currencies on a future date at a preset price.
We might see him doing currencies again,” said Gerald Martin, a finance professor at American University’s Kogod School of Business in Washington. “He may think that the euro’s gotten too strong and there’s more than likely only one way to go.”

Warren may be taking the LT view that the US was first in (as Brown said--it began there) and will be first out. The lag may be around 18 months so the pain they are feeling today will hit here later.

So far, there has been no visible repercussions in the UK as a result of the meltdown and the collapse of Brown's miracle economy. House prices are still overpriced albeit falling a bit faster. No jobs have been lost as a direct result of the collapse. The banksters are awarding themselves even bigger bonuses on even bigger money deals. And the pound is at the high end of its LT range vs. the $.

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Betting against the Euro is a good bet. It is far too high considering what a mess the PIIGS are. However I would not peg the drop against Sterling or the US$. Maybe against the Indian Rouble or Chinesse Yen!

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  • 150 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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