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Buffet has been warning about inflation for two decades. He has said repeatedly over the years that one of the best ways to combat inflation is to buy companies
by trikonasana 6y ago
Buffet has been warning about inflation for two decades. He has said repeatedly over the years that one of the best ways to combat inflation is to buy companies that make their money in foreign currency. This would be a big hedge against dollar inflation in that case, which makes sense given how much the US Gov has spent already this year.
A second reason might simply be that he got an amazing deal. An interesting takeaway I got from reading University of Berkshire Hathaway is that people call him to buy their companies, usually not the other way around. It's possible that he got a call from struggling companies and decided it was a good deal.
- mxschumacher 6y agoThe calls come from businesses that want to be taken over in full, not public firms where berkshire takes a 10% stake. The equity investment made with proceeds from yen denominated bonds, so it doesn't imply a bet on a weaker dollar (the debt would be more expensive to repay if the yen were to strengthen)
- xibalba 6y agoThis isn't strictly true. Berkshire has made large investments in companies (outside their insurance float capital) where they weren't buying 100% ownership. See their investments in Goldman Sachs, BofA, Pilot Flying J, Nebraska Furniture Mart, and others. Buffett and Berkshire are attractive as an investor because they send a strong confidence signal and because they are known to be extremely hands off.
- csomar 6y ago> This would be a big hedge against dollar inflation in that case, which makes sense given how much the US Gov has spent already this year. The irony, though, is that Japan is the leader in printing money. They have been doing it for many years and their interest rate has been 0 or negative for two decades. Source: https://tradingeconomics.com/japan/interest-rate https://tradingeconomics.com/japan/interest-rate
- Ma8ee 6y agoSo considering that Japan both has been printing money and have had very low inflation for a long time, there is apparently at least some circumstances where printing money doesn't lead to inflation. Krugman has been shouting about this for at least more than a decade.
- dgellow 6y agoKrugman on Japan: http://web.mit.edu/krugman/www/jpage.html http://web.mit.edu/krugman/www/jpage.html Unfortunately there is no publication date but the meta tags in the sources and the dates of linked documents hint to ~1999. Also, for people who don't have the context, check out the "Lost Decade": https://en.wikipedia.org/wiki/Lost_Decade_(Japan) https://en.wikipedia.org/wiki/Lost_Decade_(Japan). > The Lost Decade or the Lost 10 Years (失われた十年, Ushinawareta Jūnen) was a period of economic stagnation in Japan from about 1991 to 2001, caused by the Japanese asset price bubble's collapse in late 1991. From 1991 to 2003, the Japanese economy, as measured by GDP, grew only 1.14% annually, well below that of other industrialized nations.
- stainforth 6y agoDoes this support the parents thesis or are you adding this to counter?
- ffggvv 6y agoit’s because their economy is heavily deflationary with lack of growth. so the printing just works to cancel the deflation
- kgc 6y agoI believe the term you're looking for may be "stagflation"
- CPLX 6y agoNope. Stagflation means high inflation and low growth with high unemployment. A situation with low inflation is not that.