What does Warren Buffett Say to Hedge Against Inflation?
Before we get his answer, he says this about inflation…it hurts almost everybody, it hurts stock, bond, and cash-under-the-mattress investors.
Warren Buffett is chairman of Berkshire Hathaway and the most successful investor of all time. How successful has he been? He has built his quasi vestment holding company Berkshire Hathaway into the 7th largest company (measured by market cap) in the United States.
Over the years, Buffett has done this by acquiring entire companies and folding them into Berkshire Hathaway, some of these include such names as See’s Candy, GEICO insurance, Burlington Northern Santa Fe railroad, General Re Insurance, and dozens of other companies.
In addition to this, Buffett also buys stock in public companies, currently his 10 largest stock holdings are:
In terms of inflation, he’s recently said, “It’s extraordinary how much [inflation] we’ve seen,” as he talked about soaring prices at his Nebraska Furniture Mart and many other Berkshire subsidiaries.
“Inflation swindles almost everybody,” Buffett said.
Probably one of the most important things that he has recently, the very best defense against inflation is to be great at what you do, producing a great product/service that is in demand and offering a product/service that people will pay for. Specifically, he said: “The best protection against inflation is your own personal earning power…No one can take your talent away from you,” Buffett said. “If you do something valuable and good for society, it doesn’t matter what the U.S. dollar does.”
When asked to predict inflation, Buffett said that predicting future inflation is a fool’s game, and that no matter what someone might suggest, the truth is that no one can really know how much inflation there will be over the next 10 years, or for that matter in the coming year.
-Paul R. Rossi, CFA
Paul R. Rossi, CFA