Lessons from Omaha

Every year, The Oracle of Omaha, launch some stress on market watchers. This year, Warren Buffett main topic was "The 'investment income' account of our country—positive in every previous year since 1915—turned negative in 2006. Foreigners now earn more on their U.S. investments than we do on our investments abroad. In effect, we've used up our bank account and turned to our credit card".

The "twin deficits" is making America poorer, because America is living according to the credit card rules!

Two more issues from Berkshire Hathaway: 1) Buffett announced that Yahoo's chief financial officer, Susan Decker, will join Berkshire's board in May; 2) the U.S. dollar will continue its gradual weakening—and he continues to hold that position, basing his view on the country's large trade imbalances.

Dollar hits 20-month low...

The US dollar is exceeding even what we might think of this phase of the Iraq War, the crude oil price (above US$63/barrel) and twin deficits: 1 Euro = 1.337 USD... Similar, but not quite, as the crisis of the Vietnam War and oil price spikes, the dollar depreciation continues: a known strategy of softening the economic and financial effects of war and oil price increase.

Crude oil prices - 1947-2006

Euro - US Dollar exchange rates prices - 1999-2006

There can be no hope of short-term inversion of this scenario until the pull out of american troops from Iraq occur and competitive forms of automotive energy becomes viable. Even that doesn't seem to solve the problem. With US army out, Iraq War, then with its neighbours (Syria and Iran and Saudi Arabia) involved, will claim huge sums of money and this very III World War with the islamic fundamentalism, that we suffer, will continue. The world is dangerous and so the markets will maintain its present turbulence and risk.

Dollar: the way to the moon?

Dollar devaluation is a "no news" issue. Secretary Paulson is a Wall Street guy and possibly a good manager, but what about the strength of the greenback?

Dollar versus Euro is near 1,35, just a way long from the previous 0,85 from some years ago.

The renminbi will not explain everything.

Is it a way to export devaluation to the Asia? Or is it a "twin deficits" problem?

Because, we don't believe the reason is about the Iraq issue!