The US inflation rate is currently 6.8%, its highest for 39 years, but in 1982 it was coming down not going up. High inflation rates in the country have become a serious concern on Wall Street.
But fortunately for everyday investors, Berkshire Hathaway chief Warren Buffett has plenty of experience in navigating such an environment.
Buffett managed a stock portfolio through periods of double-digit inflation rates in the 1970s and has plenty of advice on what to own when consumer prices spike.
In a 1981 letter to Berkshire shareholders, Buffett highlighted two characteristics that make a business well adapted to an inflationary environment: 1) an ability to increase prices easily, and 2) an ability to take on more business without having to spend too much in order to do it. Warren Buffett says this is the best type of business to own when inflation spikes.
In other words, aim to invest in asset-light businesses with pricing power.
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Warren Buffett: Warning on Inflation & How to Invest during High Inflation.
Table of Contents
00:00 Introduction
00:38 Inflation rose 6.8%
01:32 Warren Buffett on Inflation
03:33 Best Business to own through high inflation
04:20 The Importance of a good brand
04:48 The best protection against High Inflation
05:48 What are you doing
06:05 A slice of Charlie Munger’s wit.
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Disclaimer: I’m not a financial advisor. The information contained in this video is for educational and entertainment purposes only. Any recommendations shown during the video should not be considered financial advice and you should consult a licensed financial advisor before making any investment decisions. Books I have read and highly recommend, if you are just starting out on your investing journey I recommend starting at the top of your list and working your way down….(read more)
LEARN ABOUT: Investing During Inflation
REVEALED: Best Investment During Inflation
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HOW TO INVEST IN SILVER: Silver IRA Investing
Warren Buffett: Warning on Inflation & How to Invest during High Inflation
Warren Buffett, the multi-billionaire investor and chairman of Berkshire Hathaway, recently issued a warning about the potential effects of inflation on the global economy. In his annual letter to shareholders, Buffett expressed concerns about the potential for rising prices and provided insights into how investors can navigate high inflation environments.
With the unprecedented fiscal and monetary stimulus measures taken by governments around the world to mitigate the economic impact of the COVID-19 pandemic, fears of inflation have been growing. Buffet cautioned that these actions, combined with pent-up consumer demand, could lead to a significant increase in prices.
Buffett’s warning holds weight due to his reputation as one of the most successful investors in history. His ability to consistently generate exceptional returns has made him a legendary figure in the financial world.
So, how should investors react to the risk of high inflation? Buffett’s advice is to focus on businesses that possess pricing power. These are companies that can continue to raise their prices without losing customers, even in inflationary periods. Examples of such companies include businesses in sectors like consumer staples, healthcare, and technology. These sectors tend to have products and services with relatively inelastic demand, allowing them to weather inflationary storms more easily.
Investing in strong companies with durable competitive advantages is another strategy Buffett suggests. Such businesses are able to maintain profitability and generate significant cash flows in inflationary environments. By holding onto these types of stocks, investors can benefit from their ability to adapt and thrive during times of rising prices.
In addition to investing in companies with pricing power and staying with strong businesses, Buffett also emphasizes the importance of maintaining a long-term investment horizon. While short-term market fluctuations may be influenced by inflation fears, Buffett remains confident in the resiliency of the American economy over the long run. He encourages investors to focus on the underlying fundamentals of the businesses they invest in rather than getting swayed by short-term market noise.
Lastly, Buffett advises against holding large amounts of cash as a protection against inflation. Historically, cash tends to depreciate in value during times of high inflation. Instead, he suggests diversifying investments across a range of assets, including stocks, bonds, and real estate. By diversifying, investors can potentially mitigate the risks associated with inflation and benefit from the growth and income potential of different asset classes.
While no one can predict the future with certainty, Warren Buffett’s insights on inflation and investing during high inflationary periods carry significant weight. By considering his advice and incorporating it into their investment strategies, investors may be better prepared to navigate potential inflationary challenges and position themselves for long-term financial success.
FACTS!!!!
Love the video mate, nice bit of tension building at the beginning! Clear if Jerome Powell is retiring the word "transitory" then it looks like they got this badly wrong, which is what us outsiders have suspected for a while! Could be a very interest year to come. ..
What's your take on inflation do you agree with Buffett?
Bought Bitcoin and locked in low 5 year interest rates on a new build. Don't know if it's a good play but developers who didn't lock in their materials are going to have a hard time in 2022. Some mates are already getting forced to draw down more cash for new builds. Massive labour shortages and rising interest rates will cause even more problems in the construction industry. My guess is that there will be a huge shortage in housing in a few years.