By David Plumb and Brett Cole — May 1, 2004 18:21 EDT

May 1 (Bloomberg) — Billionaire investor Warren Buffett said he increased his bet against the U.S. dollar on concern that the countrys trade deficit will weaken the currency.

«We think that over time that the dollar is likely to decline in value against some of the major currencies, said Buffett, 73, in an interview before Berkshire Hathaway Inc.s annual shareholder meeting in Omaha, Nebraska. In the last few months, Berkshire has added «more than a little bit to its foreign currency holdings, he said. They were last disclosed at $12 billion as of yearend.

Foreign currencies represent Buffetts biggest purchase in the last two years. The Berkshire chairman has built a fortune buying undervalued assets and today sees little opportunity in stocks. He bought currencies as the dollar began a 25 percent slump over 24 months and the U.S. current-account deficit ballooned to a record quarterly average of $137.7 billion in the first nine months of 2003.

Buffett, the worlds second-wealthiest man, started the meeting, which drew more than 15,000 guests, with a video of jokes and skits featuring California Governor Arnold Schwarzenegger and Microsoft Corp. Chairman Bill Gates.

Vice Chairman Charles Munger and Buffett fielded questions from the crowd for about six hours about their investment philosophy, succession plans and reaction to criticism to Buffetts board seat on Coca-Cola Co.

Buffetts Family

One shareholder questioned the presence of Buffetts wife, Susan, and son, Howard, on the board and suggested that shareholders instead nominate managers of Berkshires subsidiaries, who may have more business experience and ability to challenge Buffett.

Munger dismissed the suggestion, which comes as the board studies succession plans.

«I have known for some time the members of Buffetts family who would take over, Munger said. «Dont worry about it. You should be so lucky.

Buffett said he has no intention of retiring. His succession strategy is to split his job, with a chief executive officer running the overall company and a chief investment officer managing its portfolio of securities.

Succession Plans

«There will be somebody in charge of investments. There will be one CEO of Berkshire, he said. His son, Howard, is slated to take over as chairman.

Thousands of shareholders flock to Omaha each year to hear Buffetts views on the economy and investing. The weekend includes cocktail parties, barbecues and shopping trips at Berkshires jewelry and furniture stores.

Buffett said the economy was growing and that the U.S. Federal Reserve may be keeping interest rates too low as inflation picks up.

«Theyve perhaps been a little slow in terms of moving up because the economy has heated up considerably, he said. «Our underlying premise is that this country will do very well and in particular it will do very well for business.

Buffett said he is having difficulty investing Berkshires cash, which stood at $36 billion at the end of last year. «Our hope is we can deploy the money in businesses that are just as good as the ones we have, he said.

On last weeks announcement that Google Inc. plans to raise as much $2.72 billion in an initial public offering, Buffett said he wont buy stock in the worlds most-used Internet search engine.

`Fabulous Price

«Its a fabulous business but my guess is that it comes at a fabulous price, Buffett said. «Wed never buy a public offering. The chances of buying something undervalued in a public offering, its not our game.

Buffett said he was impressed by the letter Google founders wrote in their registration filing. Googles Sergey Brin and Larry Page quoted Buffett in the letter saying they dont intend to «smooth earnings to satisfy Wall Street analysts.

Responding to one shareholders question about hedge funds, Berkshires chairman said the funds are «in the midst of a fad and charge fees that on average are four times higher than other money managers.

«It is not going to be a great experience in aggregate for investors, Buffett said.

He also criticized the California Public Employees Retirement System, the largest U.S. pension fund, and Institutional Shareholder Services, who recommended Coca-Cola Co. shareholders vote against his re-election to the Coca-Cola board because Berkshire does business with the soft-drinks maker. He said he wont step down from Coca-Colas audit committee.

Kerry Adviser

«They are doing it by checklists and I dont believe in checklists, said Buffett. Berkshire owns Coca-Cola stock valued at more than $10 billion.

Buffett said he has become an economic adviser to Democratic presidential candidate John Kerry. He said President George W. Bushs tax cuts are «tilted toward the rich.

«Ive got way more money in my pocket because of the tax change and I dont think its a good idea, he said.

Shares of Berkshire, which owns energy, aviation, paint and carpet companies, have increased 28 percent in the past year compared with a 19 percent gain for the Standard & Poors 500 Index. The shares fell $110 to $93,390 in New York Stock Exchange composite trading on Friday.

To contact the reporters on this story: David Plumb in Omaha at dplumb@bloomberg.net. Brett Cole in Omaha at 3058 or at coleb@bloomberg.net.

To contact the editor of this story: James Greiff at jgreiff@bloomberg.net.