Re: Buffet Bets $19 Billion Against Dollar
Buffett Maintains Dollar Bet After $310 Mln in Losses
April 30 (Bloomberg) -- Berkshire Hathaway Inc. Chairman Warren Buffett said he maintained a more than $21 billion bet against the U.S. dollar even after it cost the insurance and investment company about $310 million the first quarter.
Berkshire also plans to announce an insurance acquisition of ``a little less than $1 billion'' in the next few weeks and increased first-quarter profit from operations by about $400 million before taxes, Buffett said today at the company's annual meeting of shareholders in Omaha, Nebraska. The increase suggests profit rose 24 percent from a year earlier.
Buffett, who's been betting against the dollar since 2002, said the company kept slightly more than $21 billion in forward currency forward contracts through the first quarter even as the dollar rose 4 percent against foreign currencies. Buffett said he'd buy more foreign currency forward contracts if it weren't for the skepticism of Vice Chairman Charles Munger.
``Charlie is less enthusiastic about our foreign currency position than I am,'' Buffett told thousands of shareholders and admirers in an arena more frequently used for rock concerts. ``I might have somewhat more if I didn't know I'd have him sitting next to me here next year.''
Buffett, 74, is making the dollar wager on concern that widening U.S. trade and budget deficits will erode its value. The New York Board of Trade's Dollar Index, which measures the dollar against six other currencies, fell 7.5 percent in the fourth quarter, leading to a $1.63 billion gain for Berkshire. Forward contracts are agreements to purchase foreign currencies on a future date at the current price.
Greenberg Praise
Buffett and Munger, 81, also today praised Maurice ``Hank'' Greenberg, who was forced to step down as chairman and chief executive of American International Group Inc. in March amid a regulatory investigation into a four-year-old reinsurance transaction with Berkshire's General Re Corp. unit. AIG, the world's largest insurer, has since admitted to improperly booking the transaction to manipulate its financial picture.
``He developed an extraordinary company in his lifetime,'' Buffett told the crowd of Greenberg, 79. He ``was the number one man in insurance.''
``Whatever comes along, people are going to find a lot was done right at AIG over the years,'' Munger said.
New York Attorney General Eliot Spitzer and the Securities and Exchange are investigating instances where a type of reinsurance known as ``finite'' really amounts to loans, allowing companies to mask losses even though little or no risk is transferred.
`Knowing Participation'
Berkshire's liability for clients' accounting of finite reinsurance depends on ``whether there is knowing participation,'' Buffett said today. ``They could be doing anything with their accounting and it probably wouldn't be limited to what they are doing with us.''
Berkshire and Buffett haven't been accused of wrongdoing in the AIG transaction, and Spitzer, who had investigators interview Buffett on April 11, said then that Buffett was a ``cooperative witness'' rather than a target.
Insurance regulators in Virginia and Tennessee have sued General Re for contracts with a failed medical malpractice insurer, and the liquidator of a collapsed Australian insurer said it may assert claims against General Re. General Re said last month that it was cooperating with probes in Australia and denied the allegations in the Virginia and Tennessee suits.
Buffett, renowned for investing out-of-favor companies, is searching for ways to deploy the $43.4 billion of cash Berkshire had at yearend. Today he said there is limited opportunity to make acquisitions other than the insurance purchase he will disclose soon.
`Positioned Very Badly'
``Right now we are positioned very badly in terms of buying businesses,'' he said. ``Your Berkshire stock will not do as well under these conditions as it did five years ago or 20 years ago. And I don't have the magic solution for it.''
Berkshire reported about $1.66 billion in pretax operating profit in the first quarter of 2004, making a $400 million increase about a 24 percent gain. Underwriting profit from insurance rose by about $200 million to $500 million, Buffett said.
Operating profit excludes gains and losses on currencies and other investments. The company's $310 million in currency losses, along with gains on other investments, resulted in about $120 million in overall investment losses in the first quarter, Buffett said.
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