The Five Dumbest Things on Wall Street: March 7

1. Patriots Lose to a Giant

Remember during the dollar's big rally back in 2005, when the usual parade of nitwits took to the airwaves to criticize Warren Buffett's bet against the greenback as anti-American?

Honesty has never been well received on Wall Street, and no great business leader has been more candid and outspoken than the head of Berkshire Hathaway BRK.A about the not-so-long-term challenges facing the U.S. economy and its currency.

"Americans like buying products made elsewhere more than the rest of the world likes buying products made in the U.S.," said Buffett in his latest annual letter to Berkshire shareholders, reprising an argument that he has made consistently for over a decade. "Inevitably, that causes America to ship about $2 billion of IOUs and assets daily to the rest of the world. And over time, that puts pressure on the dollar."

Unlike many pontificators, the world's most successful capitalist has put his money where his mouth is, starting in 2002. Three years later, his wager that the dollar would decline in value had swelled to $21 billion amid a greenback rally that inspired a chorus of pundits to declare him wrong and even attack his character. In doing so, they started down a well-worn path littered with the carcasses of their countless, misguided, Buffett-doubting predecessors.

Buffett's "contempt for U.S. economic freedoms" led him into macroeconomic forecasting, a place where the legendary stock-picker had no business being, shouted Wall Street's right-wing patriot patrol. He's mixing politics and money, they said, citing his contention that the fiscal policies of the Bush administration have led to unsustainable twin deficits in the federal budget and international trade. Then they all donned flight suits and pranced around the deck of an aircraft carrier under the banner "Mission Accomplished."

The Wall Street Journal editorial page -- noting in May of 2005 that Berkshire's dollar bet resulted in first-quarter investment losses of $310 million -- said smugly that "Mr. Buffett is playing with his own company's money, and as a billionaire he can afford to lose it."

Uh huh, or the Oracle of Omaha could do what he has done for the last half-century and deliver outstanding returns for shareholders. The dollar rally of 2005, needless to say, proved short-lived, and its cheerleaders are now choking on cold freedom fries. The greenback is trading at new record lows while the Federal Reserve pumps more liquidity into the economy to head off recession and the federal deficit continues to balloon. The Associated Press reported Tuesday that Japan's economic minister described the dollar's recent declines as "abnormally rapid."

For his part, Buffett reports that Berkshire's direct currency positions have yielded $2.3 billion in pretax profits over the past five years. And unlike all his detractors who defend the failed status quo by insulting him in order to avoid a real debate that they would surely lose, Buffett actually offers a solution to the U.S. trade problem. He advocates the use of import certificates to subsidize U.S. exporters while driving up the cost of imported goods.

"Perhaps there are other solutions that make more sense than mine," Buffett said. "However, wishful thinking -- and its usual companion, thumb-sucking -- is not among them."

Dumb-o-meter score: 95. Patriotism 101 class for thumb-suckers dismissed. Again.