Wednesday, August 19, 2009

NYT: Warren Buffett's 'Greenback Effect' Warning: A Call to Buy Stocks

The Greenback Effect

Warren Buffett is back with a new piece in the New York Times, but today he's not using the high-profile platform to explicitly urge us all to buy stocks as he did last October. But there's still a big "buy" recommendation implicit in the dollar doomsday scenario he lays out in his latest op-ed. Click here for full article.


musicwhiz said...

He's being more subtle now. Hinting about massive inflation and that being invested in equities means you can use your returns to beat inflation ! Haha....

Berkshire said...

Hi Musicwhiz,

Over time, equity will beat inflation.

He's also worried on the value of the greenback if the ratio of national debt to GDP keeps increasing. It may not be an easy thing for US to reverse the trend as much is dependent on the resolve of the administration which most times can be politically driven and considering the game and balancing act the administration have to play in order to win the next round of election in 3.5 years time.

Every year the country runs on deficit, the debt widens. Unless, the country output or GDP grows at a similar rate, I think one is courting for much danger sooner or later. U.S. spending along on healthcare is already $2.2 trillion which they are trying to do something on, this along makes up for 16% of their GDP. The world GDP is about $60 trillion, and just funding the healthcare of the people of U.S is 3.7% of world output. That's quite amazing.

Anonymous said...

Hi Berkshire
This too is a concern for me. Wondering what the US$ will be like if US keeps printing money. If US debts keeps growing and printing money to generate growth, this to me is artificial growth and is doom for trouble in years to come.


Berkshire said...

Hi Jojo,

Actually, for us, we got nothing much to worry about unless you are exposed to investments in the dollar, which I am.

If you buy US stocks, one way may be to buy companies that generates a substantial portion of its income from overseas, say, JNJ, KO.

Singapore seems rather smart to position itself towards the next area for growth. You can see how the government is focusing on the C-factors when looking for talents to work with the Chinese. Jim Rogers said if you are smart, you'd be in London in the 19th century, and you'd be in US in the 20th century, and for the 21st century, you'd be in China.

Penny Stocks said...

Interesting post on the green back.