Billionaire Buffet advice: avoid long term fixed-income investment in US dollars
Billionaire Warren Buffet who urged United States in 2009 to guard against inflation, said investors should avoid long-term fixed-income bets in US dollars because the currency’s purchasing power will decline.
“I would recommend against buying long-term fixed-dollar investments,” Buffett, chairman and chief executive officer of Berkshire Hathaway Inc said in New Delhi.
“If you ask me if the US dollar is going to hold its purchasing power fully at the level of 2011, 5 years, 10 years or 20 years from now, I would tell you it will not.”
Buffett, 80, has shortened the duration of Omaha, Nebraska- based Berkshire’s bond holdings since 2009 as the US Federal Reserve eased monetary policy to stimulate the economy. Over the same period, he has added to cash holdings and committed more than 35 billion US dollars to company takeovers.
“I would much rather own businesses,” he said. “It’s very easy to take away the value of fixed-dollar investments”.
The Federal Reserve and the US Treasury Department have pumped money into the US economy since the financial crisis through bank bailouts, government stimulus and near-zero interest rates.
Buffett said in an August 2009 op-ed in the New York Times that the US government must address this “monetary medicine.”
Buffett, travelling in India took questions at a meeting with insurance customers and spoke on topics from the economy to investments. Buffett, who built his Berkshire through stock picks and takeovers, advised investors to be wary of valuations for social-networking websites as some of the industry’s biggest companies prepare to sell shares.
“Most of them will be overpriced,” Buffett said. “It’s extremely difficult to value social-networking-site companies,” he said, without naming firms. “Some will be huge winners, which will make up for the rest.”
Buffett has shunned technology investments in favour of industrial, financial and consumer-goods holdings in his four decades at Berkshire. As of Dec. 31, the company owned about 61.5 billion USD of stocks, 34.9bn of fixed-maturity securities and 23bn of “other investments.”
Berkshire’s securities maturing in more than 10 years fell 31% to 2.72bn in the 18 months ended Dec. 31, according to regulatory filings. In that span, the company’s cash holdings surged 56% to 38.2bn.