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Warren Buffett is Worried

Written By Brian Hicks

Posted June 27, 2008





With the market sell off now in officially in bear market territory, let’s check in with what Warren Buffett is thinking these days.

The Dow, by the way, is now 20% off of its highs.

Buffett’s worry?  It’s stagflation—That nasty combination of slow growth and high inflation

From Bloomberg by Josh P. Hamilton and Erik Holm entitled: Buffett Says He’s Concerned About U.S. ‘Stagflation’

Billionaire investor Warren Buffett says he’s concerned about “stagflation,” or slowing in the U.S. economy while inflation accelerates.

“We’re right in the middle of it right now,” said Buffett, chairman of Omaha, Nebraska-based Berkshire Hathaway Inc., in an interview on Bloomberg Television today. “I think the `flation’ part will heat up and I think the `stag’ part will get worse.”

Buffett, the world’s richest person, runs a company with a $72 billion stock portfolio and businesses ranging from candy to corporate jet leasing and insurance. He’s said the U.S. housing slump has been a drag on Berkshire’s earnings, adding today he’s unsure when the economy will recover.

“It’s not going to be tomorrow, it’s not going to be next month, and may not even be next year,” said Buffett, 77.

The U.S. economy will expand 1.4 percent in 2008, the weakest performance since 2001, according to a survey by Bloomberg. The Federal Reserve today left its benchmark interest rate at 2 percent, saying “uncertainty about the inflation outlook remains high.” Consumer prices rose 4.2 percent in the 12 months ended in May, the fastest pace since”


Of course, the last time we struggled with stagflation was in the 70’s

So break out the bell bottoms, the black lights, and the Jiffy Pop. Climb into the magic bus and crank up the Doors. Chef Bernanke is driving. 

He says we’re just detouring the 30’s but I don’t believe him. The truth is he’s got the wrong map.

This bus is headed back to the 70’s.

Buckle your seat belts though… it could be a wild ride.