World economic forum
Bill Gates tells Davos the dollar is going down and his money is elsewhere
February 1, 2005
By James Hertling and Simon Clark
Davos - Bill Gates and Warren Buffett, the two richest men, are partners in business, bridge and travel. Now they are both predicting the dollar will weaken.
Gates, the chairman of Microsoft, said he expected the dollar to extend its three-year fall because of widening US trade and budget deficits.
"I'm short the dollar," Gates said in a television interview this weekend at the World Economic Forum in Davos, Switzerland. "The ol' dollar, it's gonna go down."
Buffett, whose personal fortune of more than $42.9 billion (R255 billion) is topped only by Gates's $46.6 billion, has been buying foreign currencies since 2002, citing the US deficits.
Their concerns were echoed in Davos by policy makers including European Central Bank (ECB) president Jean-Claude Trichet and investors such as George Soros.
The dollar has fallen 26 percent against a basket of six major currencies since the start of 2002.
The trade deficit swelled to a record $609 billion last year, and the Bush administration expects the budget shortfall to reach an all-time high of $427 billion in the year to September.
"It is a bit scary," Gates said of the US's $7.62 trillion in debt.
"We're in uncharted territory when the world's reserve currency has so much outstanding debt."
Buffett, who is the chairman of US-based investment company Berkshire Hathaway, bought $1 billion in foreign currency contracts in the third quarter, bringing his total to $20 billion of forward contracts in eight currencies on September 30, according to Berkshire.
The currency position gave Berkshire a $412 million pretax gain in the quarter as the value of the dollar fell.
Buffett said in an August interview: "That's a long-term position. I have no idea what currencies are going to do next week or next month or even next year. I think I know over time."
Gates topped Forbes magazine's list of the richest people in 2004, with Buffett second. Almost all of Buffett's wealth is in Berkshire stock.
Karl Albrecht, an owner of the Aldi supermarkets in Germany, is third with $23 billion.
The shared view of Gates and Buffett on the dollar is not the billionaires' only joint interest. Gates revealed a $319 million stake in Berkshire Hathaway on December 21, a week after he joined the company as a director.
The two play bridge and have travelled together, taking a 1995 train trip through China.
Buffett made his first investment in China in 2003, buying a stake in PetroChina.
In Davos, Gates described China as a potential "change agent" for the next two decades.
"It's phenomenal," Gates said. "It's a brand new form of capitalism."
In September Gates's $27 billion foundation received approval from China's foreign currency regulator to invest as much as $100 million in the nation's yuan shares and bonds.
The comments by Gates about the dollar came a week before Group of Seven officials meet to discuss currency policy and were echoed by officials from Europe and Asia.
Trichet said in a Davos panel discussion: "The governing council of the ECB has repeated a very, very short sentence, namely that the sharp moves upward of the euro [against the dollar] were unwelcome and that we thought they were counterproductive from the economic growth perspective."
US growth hit a five-year high of 4.4 percent in 2004, outpacing Europe for the 12th time in 13 years. The euro region probably grew 2.1 percent.
German deputy finance minister Caio Koch-Weser said in an
interview in Davos the US budget shortfall was "the number one risk, disregarding geopolitical risks" to the global economy.
He urged US President George W Bush to present a "credible" plan for getting the deficit under control.
Chinese central bank adviser Yu Yongding said in Davos that Washington should do more to tackle its record current account deficit and ease pressure on China to loosen its currency's peg to the dollar. - Bloomberg
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