What does Warren Buffett say about hedging 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 investment holding company, Berkshire Hathaway, into the seventh-largest company in the United States by market capitalization.
Over the years, Buffett has done this by acquiring entire companies and folding them into Berkshire Hathaway. Some include See’s Candy, GEICO insurance, Burlington Northern Santa Fe railroad, General Re Insurance, and dozens of other companies.
In addition, Buffett also buys stock in public companies. At the time of the post, his ten largest stock holdings were:
- Apple
- Bank of America
- Coca-Cola
- Kraft Heinz
- Verizon
- American Express
- U.S. Bancorp
- Nu Holdings
- Bank of New York Mellon
- Kroger
In terms of inflation, he recently said it was extraordinary how much inflation we had seen as he discussed soaring prices at Nebraska Furniture Mart and many other Berkshire subsidiaries. Buffett said inflation “swindles almost everybody.”
Probably one of the most important things he has said is that the very best defense against inflation is to be great at what you do: produce a great product or service that is in demand and that people will pay for. Specifically, he said the best protection is your own personal earning power. No one can take your talent away from you. If you do something valuable and good for society, it does not 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 ten years—or even in the coming year.
-Paul R. Rossi, CFA