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Friday, June 19, 2009
John Rosevear :: Townhall.com Columnist
Forget About That Buffett Guy
by John Rosevear
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Wait! You can't say that on The Motley Fool!

What do you mean? I can't say what?

You can't tell readers to forget about Warren Buffett! He's the king of value investing! The money he's made with Berkshire Hathaway (NYSE: BRK-A) is more than even Han Solo can imagine! Who are you to be saying --

Hang on, hang on. Bear with me. I've got nothing against value investing or Warren Buffett. It's just that, with so much changing in the world right now, I'm thinking that there's a lot of money to be made if people also learn to invest like George Soros.

Soros? I saw that guy on the TV. He's the one who says he sells his investments when his back hurts. Guy's got a billion-dollar back, maybe, but me, I stick with the Doan's Pills. I don't need that.

Look, just shut up and listen. Soros is a guy who has made billions with investments that anticipate big changes -- sector swings, currency swings, economic changes -- on a global scale.

Wait a minute. He's the guy who shorted the British pound and freaked out the Bank of England, right?

Yeah, back in 1992. He --

Look, my IRA's done well and everything, but forget the Bank of England, my IRA's not even big enough to freak out Bank of America (NYSE: BAC). I could short all the shares I could borrow -- if I could short with an IRA, which I can't, which is another thing -- and it'd be like a fly landing on a horse's butt to them. Not even. Are you kidding me?

You're missing my point. Let me try again. Buffett, and most other good investors, invest from the "bottom up," right? They may look at trends, but then they look at specific companies, at their financials and management and prospects.

Guys like Soros stay at the level of the trends -- big global trends, things like interest-rate shifts, commodity price movements, exchange rates, government monetary policies, stuff like that. If you learn to understand the relationships between these things, you can anticipate shifts in the trends and make big money -- even when the U.S. stock market is stinking it up.

I can't do that. I'm a Peter Lynch guy. I buy what I know, you know? I know this Pepsi Throwback soda with the real sugar instead of the corn syrup is really tasty, so I took a look at PepsiCo (NYSE: PEP) stock and bought some. It's got a nice dividend and people aren't going to give up buying soda just because the economy stinks. Isn't that what you've been telling me to do?

Sure, and that's totally fine. But what if the global price of sugar goes way up? Or what if the U.S. dollar tanks and the prices of sugar and lots of other commodities go way up in dollar terms?

Then I'll go back to drinking iced tea.

Or you could buy an ETF that makes money if the dollar declines, like PowerShares U.S. Dollar Bearish (NYSE: UDN).  Or if you think the whole consumer goods sector is going to get whacked, you could buy a double-short sector ETF like ProShares UltraShort Consumer Goods, which is designed to go up $2 for every $1 the Dow Jones U.S. Consumer Goods Index goes down. Continued...

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About The Author

John Rosevear is a Motley Fool contributor.

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