Buffett Hedges His Bet Against the U.S. Dollar

Billionaire investor Warren E. Buffett said Saturday he increased his bet against the U.S. dollar out of concern that the country’s trade deficit would weaken the currency.

“We think that over time that the dollar is likely to decline in value against some of the major currencies,” said Buffett, 73, in an interview before Berkshire Hathaway Inc.’s annual shareholder meeting in Omaha. In the last few months, Berkshire has added “more than a little bit” to its foreign currency holdings, he said. They were last disclosed at $12 billion as of year-end.

Foreign currencies represent Buffett’s biggest purchase in the last two years. The Berkshire chairman has built a fortune buying undervalued assets and today sees little opportunity in stocks. He bought currencies as the dollar began a 25% slump over 24 months and the U.S. current-account deficit ballooned to a record quarterly average of $137.7 billion in the first nine months of 2003.

Buffett, the world’s second-richest man, started the meeting, which drew more than 15,000 guests, with a video of jokes and skits featuring Gov. Arnold Schwarzenegger and Microsoft Corp. Chairman Bill Gates. Vice Chairman Charles Munger and Buffett fielded questions from the crowd for about six hours about their investment philosophy, succession plans and reaction to criticism to Buffett’s board seat on Coca-Cola Co.

Thousands of shareholders flock to Omaha each year to hear Buffett’s views on the economy and investing.

He said the economy was growing and that the Federal Reserve might be keeping interest rates too low as inflation picks up. “They’ve perhaps been a little slow in terms of moving up because the economy has heated up considerably,” he said. “Our underlying premise is that this country will do very well and in particular it will do very well for business.”

On last week’s announcement that Google Inc. plans to raise as much $2.72 billion in an initial public offering, Buffett said he won’t buy stock in the world’s most-used Internet search engine.

“It’s a fabulous business but my guess is that it comes at a fabulous price,” Buffett said.

Responding to one shareholder’s question about hedge funds, Berkshire’s chairman said the funds were “in the midst of a fad” and charge fees that on average are four times higher than other money managers.

“It is not going to be a great experience in aggregate for investors,” Buffett said.

He also criticized the California Public Employees’ Retirement System, the largest U.S. pension fund, and Institutional Shareholder Services, who recommended Coca-Cola Co. shareholders vote against his reelection to the Coca-Cola board because Berkshire does business with the soft-drinks maker. He said he would not step down from Coca-Cola’s audit committee.

Berkshire owns Coca-Cola stock valued at more than $10 billion.

Buffett said he had become an advisor to presidential candidate Sen. John F. Kerry (D-Mass.). He said President Bush’s tax cuts were “tilted toward the rich.

“I’ve got way more money in my pocket because of the tax change and I don’t think it’s a good idea,” he said.