Berkshire Profit Climbs on Buffett’s Bet Against Dollar

Berkshire Hathaway Inc. Chairman Warren E. Buffett increased his bet against the U.S. dollar as the currency weakened during the fourth quarter, leading to a $1.63-billion gain and a 40% jump in the company’s profit.

Buffett’s wager rose 7% to $21.4 billion of forward contracts, or agreements to purchase foreign currencies on a future date at the current price. Net income climbed to $3.34 billion, or $2,171 a share, from $2.39 billion, or $1,553, a year earlier, the Omaha-based company reported on its website.

Buffett, 74, said he expected the U.S.’ widening trade and budget deficits to erode the value of the dollar for the next few years. The currency position may make it easier for him to buy companies outside the U.S. as he looks for acquisitions, said Keith Trauner, a fund manager at Fairholme Capital Management in Short Hills, N.J.

“Our country’s trade practices are weighing down the dollar,” Buffett, who has been running Berkshire for four decades, said in the company’s annual report. “The decline in its value has already been substantial, but is nevertheless likely to continue.”

The New York Board of Trade’s dollar index, which measures the dollar against six other currencies, fell 7.5% in the last three months of 2004. Buffett said the trade gap meant the U.S. transferred a portion of its wealth to foreigners every year to support its spending, creating a type of “sharecropper society.”

Excluding Buffett’s currency bet and other investment gains and losses, Berkshire’s fourth-quarter profit rose 19% to $1.84 billion.

Berkshire’s Class A shares rose $800 to $90,100 on the New York Stock Exchange. They have fallen 4.2% in the last year, compared with a 10% gain in the NYSE composite index.

Berkshire’s full-year net income fell 10% to $7.31 billion amid losses from U.S. hurricanes.

Revenue rose 0.9% in the fourth quarter to $20 billion. Investment income in insurance businesses, including interest and dividends, dropped 8% to $774 million as the cash earned “paltry returns,” Buffett said.