Is Smart Money Betting on Inflation?

 |  Includes: BRK.A, BRK.B
by: The Manual of Ideas

One no longer needs to turn to well-known Fed critics such as Jim Rogers or Marc Faber to hear warnings about the risk of accelerating inflation. Concerns have been expressed recently by some of the investors we respect most, including Bill Ackman, Warren Buffett, David Einhorn, Tom Gayner, Julian Robertson, Paul Singer, and David Swensen.

Said Warren Buffett, chairman of Berkshire Hathaway (NYSE:BRK.A) in a Fox Business interview on June 24th:

What we're doing raises the probability significantly of very significant inflation down the road -- not this year, next year, maybe the year after. But we have taken actions -- and they were appropriate actions -- to fight the war we were in that started with a vengeance last September. In taking those actions we've applied medicine dosages to a patient that's never been done before, except in wartime. It will have consequences, and nobody knows exactly what they will be and nobody knows how effective we will be in draining a system that we've been flooding. But the probability of significant inflation has really gone up."

The rationale is as obvious as it is simple: Inflation is first and foremost a monetary phenomenon, and recent Fed policies have been unprecedented in size and scope. As a result, the purchasing power of the U.S. dollar may erode at an accelerating pace over the next decade. As investors, the time to prepare is now.

Read notable recent statements on inflation.

Disclosure: No positions.