Buffet sees economic shambles, still optimistic

This article is only interesting insofar as Buffet is THE investment household name.

I’m going on a limb here and I will offer this prediction. Buffet and his reputation really got going at the beginning of the latest inflationary cycle; if memory serves, the late 70s. That is significant to the extent that the majority of his holdings are investments that do well in an inflationary environment. If I am right and we have entered a deflationary cycle, Buffet is looking at decreased earnings and decreased asset values (nominally) for at least the next five years.  Mark your calendars and let’s check back then.

Of course. Between now and then, Buffet may decide to gear his portfolio to perform in a deflationary environment. If that should be the case, then he’s going to have to sell a whole bunch of his holdings thus creating a negative feedback loop for the companies concerned like Coca Cola for example. This should be interesting to watch.

http://news.yahoo.com/s/ap/20090228/ap_on_bi_ge/buffett_letter

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