Warren Buffett says he's sees ‘very substantial inflation’ and rising prices

[Hydrogen]

Warren Buffett is seeing inflation among Berkshire Hathaway’s collection of businesses as the economic recovery from the Covid pandemic kicks into high gear.

“We are seeing very substantial inflation,” the Berkshire chairman and CEO said at the conglomerate’s annual shareholder meeting Saturday. “It’s very interesting. We are raising prices. People are raising prices to us and it’s being accepted.”

“We’ve got nine homebuilders in addition to our manufacture housing and operation, which is the largest in the country. So we really do a lot of housing. The costs are just up, up, up. Steel costs, you know, just every day they’re going up,” the legendary investor added.

Berkshire Hathaway owns one of the nation’s largest homebuilders Clayton Homes, along with companies such as Benjamin Moore paints and Shaw flooring.

Inflation has begun to accelerate recently due to multiple factors, including increasing demand and struggles with some areas of the supply chain, as well as just easier comparisons with the pace of a year ago. The core personal consumption expenditures price index, which excludes volatile food and energy prices, rose 1.8% in March, the fastest pace since February 2020. The headline number increased 2.3%, the quickest pace for that measure since 2018.

Federal Reserve Chairman Jerome Powell reiterated last week that he expects inflation to show a temporary move higher then settle back to around the central bank’s 2% target. The Fed has resolved not to raise interest rates until the economy sees full, inclusive employment, so long as inflation doesn’t run too far above the goal.

Higher price pressures could weigh on stocks as inflation erodes the value of future company profits, and can cause a spike in Treasury yields.

https://www.cnbc.com/2021/05/03/warren-buffett-says-berkshire-hathaway-is-seeing-very-substantial-inflation-and-raising-prices.html

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This serves as a counterpoint to everyone who says the US economy is "booming" atm.

It is interesting how every potential cause of inflation is mentioned here. EXCEPT for Biden and the fed printing increasing piles of fiat to fund their aggressive stimulus plans and COVID lockdowns.

The timeline of events and the media's stance on it form 2020 leading to the present, speaks volumes on everything.

It appears that those concerned with US dollar devaluation and potential hyperinflation can expect no relief from the fed or official sources. All of whom are already laying the groundwork to deny their involvement in any hyperinflation/devaluation which occurs.

[sunsilk]

That makes sense that those who have wealth in USD should consider the statement of Buffett.

And with that having said, is he going to look for another way to protect their assets on his BH? will this give a point to him that he should take a look  how bitcoin performs while they are experiencing inflation?

[Darker45]

And in all cases of inflation, it is always the people at the bottom who feel the sharpest pang. The wealthy businessmen up there including Warren could easily accept it. They're "seeing very substantial inflation" and still find things "very interesting." They're not too worried about it. "People are raising prices." Therefore, they, too, are raising prices.

Who will, then, bear the heaviest of burdens of these rising prices? The ordinary mortals down here. Everyone's passing down the burden to the end consumer. Therefore, it is the ordinary people more than any other who should protect what little they have against inflation. I believe Bitcoin offers help.

[(o)(o)ilikeboobs(o)(o)]

When the world has more money because governments have printed it to save the economy. Inflation is bound to happen, and that is in the wealth of the asset holders. Because more and more money is available, the money holders are seeing their money lose value. That means that cash flow has been and will flow into limited assets such as real estate, stocks, gold, Bitcoin, food ...
The more money, the more material and goods will increase in price to offset other production costs. We are in a new supercycle that comes after every economic downturn.

[Poker Player]

Funny how he recognizes this but is unable to see that Bitcoin is the best protection for the coming hyperinflation, but hey, as I have said in other posts about him and Munger, he got rich in another era, he has one foot in the grave and Bitcoin is not needed for him to get rich, far from it.

It will remain to be seen if as inflation rises, the FED dares to raise rates. We are in a headlong rush forward in which we cannot have our cake and eat it too: if the FED keeps printing, there will be hyperinflation, thus bad for the economy; if, on the contrary, it raises interest rates it will probably affect negatively the stock market and economic growth.

[Kakmakr]

One of the reasons why some product prices are going up, is the fact that more and more companies are closing their doors due to bankruptcy. (A lot of the smaller companies are operating on a small budget and the Covid lockdowns wiped out their client base)

Now, the remaining companies and services have to fill the demand for those products and services and they know they can increase their prices, because they have less competition.   

[SaiyanSS3]

Warren Buffett: metal is up up up. Plebs: gold is up! Buy barrick gold plebs, gold is the real money! Gold miner make money during gold rush plebs!

[jseverson]

Funny how he recognizes this but is unable to see that Bitcoin is the best protection for the coming hyperinflation, but hey, as I have said in other posts about him and Munger, he got rich in another era, he has one foot in the grave and Bitcoin is not needed for him to get rich, far from it.

I would like to point out that the 'very substantial inflation' Warren Buffett is talking about is vastly different from literal hyperinflation -- see Venezuela. I can see why people would find the current state of affairs alarming, but I seriously doubt the US will experience anything remotely apocalyptic (in the foreseeable future at least), especially given their power and global influence.

It is interesting how every potential cause of inflation is mentioned here. EXCEPT for Biden and the fed printing increasing piles of fiat to fund their aggressive stimulus plans and COVID lockdowns.

That would be because printing massive amounts of money doesn't necessarily lead to massive inflation -- it didn't in 2008 (granted, the scale was smaller then, but it also sparked hyperinflation fears), and it likely won't now either. Here's a short read why that may be the case.

All that being said though, the system is rotten, and this is why we need Bitcoin.

[Lorence.xD]

Funny how he recognizes this but is unable to see that Bitcoin is the best protection for the coming hyperinflation, but hey, as I have said in other posts about him and Munger, he got rich in another era, he has one foot in the grave and Bitcoin is not needed for him to get rich, far from it.

It will remain to be seen if as inflation rises, the FED dares to raise rates. We are in a headlong rush forward in which we cannot have our cake and eat it too: if the FED keeps printing, there will be hyperinflation, thus bad for the economy; if, on the contrary, it raises interest rates it will probably affect negatively the stock market and economic growth.

Because if he voices his opinion that he supports bitcoin then it will not be on his interest plus I don't think that he is going to change his perspective about cryptocurrency in general since he is an old timer and you know that you can't teach old dog new tricks.

[davis196]

Consumer inflation in the US will increase,but it won't become hyperinflation.
Going from 1,8% to 2,3% is not a big deal.The real inflation will happen in the US financial markets.
Economists and businessmen in the US were expecting growing inflation over the last 10 years.Such big inflation never happened,but the people keep talking about the US dollar doing down,in terms of value.
Another interesting question is will the USA "export inflation" like they did back in 2011,when the increased levels of inflation in the middle east,combined with increased poverty and unemployment caused the revolutions in Egypt,Libya,Tunisia,Syria and other countries.

[The Sceptical Chymist]

This serves as a counterpoint to everyone who says the US economy is "booming" atm.

It is booming, in the way that a crack addict's mood is euphoric--everything is great for the moment, but the crash is coming soon and you know it.  And you don't have to be Warren Buffett to realize what he said in the interview is true: that we're in for some very rough times ahead.

What he might not have said explicitly is that our governments have dug us into these holes that we'll shortly be sinking into (though the average citizen does bear some responsibility for not saving enough and living beyond their means).  I'm just hoping the bad times to come aren't as bad as I think they're going to be.  I try not to worry, but the stock market never keeps increasing forever and prices of various asset classes (including crypto) don't stay elevated forever.

[Mauser]

Consumer inflation in the US will increase,but it won't become hyperinflation.
Going from 1,8% to 2,3% is not a big deal.The real inflation will happen in the US financial markets.
Economists and businessmen in the US were expecting growing inflation over the last 10 years.Such big inflation never happened,but the people keep talking about the US dollar doing down,in terms of value.
Another interesting question is will the USA "export inflation" like they did back in 2011,when the increased levels of inflation in the middle east,combined with increased poverty and unemployment caused the revolutions in Egypt,Libya,Tunisia,Syria and other countries.

The problem with these inflation number are they are just an average across many products. We consumer might feel it much differently than it is being reported. Especially rising food prices are already a big problem in today's time. On top of that we still don't get any interest on our savings account. The jump from 1.8 to 2.3 will hurt a lot the fiat savers. That is why owning crypto becomes so important.

[slapper]

That makes sense that those who have wealth in USD should consider the statement of Buffett.

And with that having said, is he going to look for another way to protect their assets on his BH? will this give a point to him that he should take a look  how bitcoin performs while they are experiencing inflation?

I doubt that. Buffet has a negative prejudice against bitcoin and he will never change his mind. He claims that bitcoin has not rudimentary value and therefore, the current price of bitcoin is fake. Even though he admits he was wrong by selling Apple stocks, there is no way to change his vision on bitcoin or any cryptocurrency. This old-fashioned man only in favor of traditional assets.

Despite his reputation and influence, his time is over. New investing advisors and legends will be created. Winklevoss Twins are even better than him

[Febo]

That makes sense that those who have wealth in USD should consider the statement of Buffett.

And with that having said, is he going to look for another way to protect their assets on his BH? will this give a point to him that he should take a look  how bitcoin performs while they are experiencing inflation?

He bought gold mines. Not just Gold but any mines. He was doing that fro years now. That is very good hedge against inflation. Much better then just buying Gold.

Also you need to understand him. H want to protect his wealth. Not earn new wealth. Bitcoin is a speculative investment that can get you x100 profits. Ha dont need x100 profit. Maybe one day Bitcoin will be store of value. He will buy it if he will be still alive then. Bitcoin will not be store of value in this decade if ever.

[Lucius]

And you don't have to be Warren Buffett to realize what he said in the interview is true: that we're in for some very rough times ahead.

I’ve been reading about it for at least a month now, commodity prices have been rising steadily and analysts say something like this hasn’t happened in the last 10 years. Demand for iron and copper has literally exploded, and all producers are struggling to meet market needs - while at the same time China is trying to reduce production of these same materials while importing huge amounts of grain - causing a shortage in the world market due to very poor production in important agricultural countries.

All this is, of course, part of the game of how to earn more at a time when the world's economies are beginning to recover strongly, and countries that hold the key to development (raw materials) want to sell them at the highest possible price. I will list some interesting facts from one of the articles I found on this topic.

The prices of raw materials used to make almost everything are skyrocketing, and the upward trajectory looks set to continue as the world economy roars back to life.
From steel and copper to corn and lumber, commodities started 2021 with a bang, surging to levels not seen for years. The rally threatens to raise the cost of goods from the lunchtime sandwich to gleaming skyscrapers. 

China, a crucial source of supply and demand for raw materials, is playing a big role, particularly as the government tries to reduce production of key metals like steel and aluminum. It’s also buying up massive amounts of grains. Food prices are also being affected as poor weather in key growing nations like Brazil and France hits harvests.

Meanwhile, countries looking to rebuild infrastructure may find their budgets buy less than they used to. President Joe Biden’s $2.3 trillion plan is one such case. Electricity grids, railways and refurbishing buildings are among the items on the shopping list that will use large amounts of metal. Consultancy CRU Group estimates the program will add 5 million tons of steel to the 80 million the US uses each year, with similar boosts to aluminum and copper demand.

Costs for corn fed to livestock have doubled in the past year, and soybean meal is more than 40% higher. While there’s a delay before that hits the burger chain or steakhouse, there are already signs of prices creeping higher.

Steel producers in Europe and America have suffered for years from low prices caused by global overcapacity. Plants struggled to make money and job security became a growing worry. Over 85,000 steel jobs were lost in the European Union between 2008 and 2019, according to industry association Eurofer. That’s all changed dramatically thanks to booming steel prices. Futures in China, by far the biggest producer, have smashed records — even outpacing gains in key ingredient iron ore — as the government took measures to curb output. That’s supercharged rallies of benchmark prices in Europe and America, where mills were already running at maximum capacity as they try to meet unexpectedly high demand.

Whether you prefer latte or espresso, sweetened or plain, the key ingredients of a cup of coffee have surged. Arabica coffee futures have risen about 33% in the past year, while raw sugar has also advanced. Fancy a slice of toast? Benchmark wheat prices have hit the highest since 2013.

[oHnK]

This is a little strange indeed, they are very wise in saying the economic conditions to be faced.  But it's a little strange if they don't see what the US government is doing, but what they say is all about politics because what I see is, if Warren's classmates and his team take the issue of government policy then market conditions will be bearish and he could suffer a loss of their opinion, because he is a big investor in every bank.  If the market is bearish because of this opinion it becomes a blunder for themselves then they are very careful in their opinion.

[dothebeats]

It should have been pretty obvious that supply chains aren't as they were before COVID. Many companies and manufacturing sites are still down and not up to 100% capacity due to restrictions and health measures. It still takes a toll on different facets of the economy which, in turn, affects everything as a whole. It is only in stocks wherein economists are seeing this 'economic boom,' but for the rest of the economy, they are blind on what's really happening.

[el kaka22]

The idea that US economy was "booming" was simply saying that "everyone is making more money" and they were idiots. People are not making a lot of money, they are basically getting more fiat for the same work because of high inflation and they didn't see that coming.

If you used to sell a cookie for 1$ and now it is $2 suddenly, that doesn't mean that you are making more money, that means inflation went up and now everything costs more and you sell the cookie for more, just because numbers in your bank account became more doesn't mean you are richer, if you still live the same life and if your income still can pay for the same things that means you are not doing anything shocking at all. This is why I believe we should not be really believing all these business people who boost shareholder morale by lying, just look at the real facts and you will see the truth.

[Fortify]

This serves as a counterpoint to everyone who says the US economy is "booming" atm.

It is interesting how every potential cause of inflation is mentioned here. EXCEPT for Biden and the fed printing increasing piles of fiat to fund their aggressive stimulus plans and COVID lockdowns.

The timeline of events and the media's stance on it form 2020 leading to the present, speaks volumes on everything.

It appears that those concerned with US dollar devaluation and potential hyperinflation can expect no relief from the fed or official sources. All of whom are already laying the groundwork to deny their involvement in any hyperinflation/devaluation which occurs.

It's always interesting to read the words of Warren, as he is one of the best investors ever. More inflation could actually be a bad thing and lead to a recession a bit further down the line, when people go to remortgage their home and interest rates have risen - it could force them to sell. It looks like there will be a good few years ahead, where people have fixed rates locked in, then those home builders in Berkshire will join the rest of the economy going into the tank for a while. Inflation has a small chance of hitting cryptocurrencies as well, because people need their money to perform at a reliable rate and volatility would work against you in this environment. It seems like a paradox, you need to be invested in the right companies to beat inflation, but inflation will be eating away at the future earnings of those companies too. One of the best tips he gives is to make sure you always look for that "margin of safety" when investing your money, but it's hard to decipher unless you've hard your money at risk for a while.

[Ryker1]

Well, it is obvious that United State’s economy is not in good status. As economists said, --it would take 10 - 15 years before the United States can recover from the economic decline caused by the pandemic for Covid 19 virus. It is not just Warren Buffet who can attest to the inflation but honestly, it must be all of us who had to feel it. Maybe it is only because we are spending and buying stuff in low volumes that is why don’t feel it. But try to buy things in bulk or wholesale, even rentals are becoming more and more expensive. Everyone is affected and no now will escape from it.