According to Jim Paulsen, the chief investment strategist at the Leuthold Group:
Prices of gold, inflation-linked bonds, and some commodities have surged since March on fears that global central banks’ more than $9 trillion of stimulus to combat the pandemic will spark higher inflation. The Federal Reserve indicated last week it will be slower to move to curtail inflation should it run above its 2% target. At the same time, lower valuations and a continued decline in the U.S. dollar, now near a two-year low, could make Japan and other international markets more attractive for U.S. investors.
It looks like the Oracle of Omaha is preparing for higher inflation as the dollar declines.
Ray Dalio Follows Buffett’s Lead
Ray Dalio, the founder of hedge fund giant Bridgewater Associates, echoes Buffett’s sentiments.
It was reported earlier this month that Bridgewater Associates no longer considers conventional bonds a hedge against inflation.
Bridgewater has tweaked its all-weather portfolio by dumping bonds and moving into gold.
Meanwhile, billionaire Stanley Druckenmiller has also come forward to voice his concerns about inflation:
While these legendary investors brace themselves for an inflationary scenario, the general populace can as well. Gold and silver are the most famous hedges against inflation, but owning property can pay off in the long term.
If you consider recent events, rapidly rising prices aren’t very far away. For example, the U.S. government was forced to bail out the entire population as the pandemic-induced shutdown caused massive job losses and bankruptcies.
The Coronavirus Aid, Relief and Economic Security (CARES) Act alone adds $1.8 trillion to the deficit. In truth, this money was created out of thin air. The Federal Reserve funded this bill by buying government-issued bonds. Once again, the Fed had to resort to printing money, which it did recklessly.
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