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Warren Buffett Is Right: The Fed Will Have A Tough Time Raising Rates In 2015

The oracle of Omaha has been making rounds lately saying that "it will be very tough for (the Fed) to raise rates." To make the case, Buffett has argued that because economies in Europe and Asia are struggling, a hike in interest rates would further strengthen the dollar versus other world currencies. Furthermore, because central banks around the world are aggressively easing, the Fed raising U.S. interest rates could have: "a lot of international repercussions."

Because the United States is very dependent on exports, and nearly half of the S&P 500's (SPY) revenues come from outside the U.S., a stronger dollar could put significant pressure on many companies. Indeed, the dollar has been appreciating relentlessly and is now up 18% against a basket of foreign currencies since May 2014 (Figure 1).

Figure 1: AMEX Dollar Index Since May 2014 (click to enlarge)

It is interesting to consider the possible reasons… Read More …