Warren Buffett on inflation and how the Berkshire Hathaway CEO is fighting rising rates

Both the UK and US alike have seen soaring rates of inflation in recent months, and while price rises slowed in the US in April, the annual inflation rate remained close to a 40-year high. In April, the US saw the rate slow to 8.3 percent, down from 8.5 percent in March.

Ramping up stock purchases, this year, Berkshire Hathaway has spent $41.5billion (around £33.8billion), Fidelity International reports.

Already a shareholder in the oil and gas multi-national Chevron, in the first quarter of 2022, Berkshire Hathaway grew its stake from $4.5billion to $26billion

The company has also boosted its already substantial holding in Apple this year – buying $600million (around £481million) of additional shares.

It’s also purchased shares in the Hewlett-Packard Company (HPQ) – taking an 11.4 percent stake in the company in April.

Buffett has also addressed Bitcoin.

He said: “Whether it goes up or down in the next year, or five or 10 years, I don’t know.

“But the one thing I’m pretty sure of is that it doesn’t produce anything… It’s got a magic to it and people have attached magic to lots of things.”

He also compared Bitcoin to assets offering a tangible product for people who own it.

Buffett said: “If you said … for a one percent interest in all the farmland in the United States, pay our group $25billion, I’ll write you a check this afternoon.”

“For $25billion I now own one percent of the farmland. If you offer me one percent of all the apartment houses in the country and you want another $25billion, I’ll write you a check, it’s very simple.

“Now if you told me you own all of the Bitcoin in the world and you offered it to me for $25 I wouldn’t take it because what would I do with it? I’d have to sell it back to you one way or another.

“It isn’t going to do anything. The apartments are going to produce rent and the farms are going to produce food.”

In March, research by Fidelity International found two-fifths of UK investors (39 percent) are worried about inflation.

Maike Currie, Investment Director for Personal Investing at Fidelity International, comments: “As the economist Milton Friedman put it, ‘inflation is taxation without legislation.’ With prices rising at a rate not seen for decades, investors are understandably worried about the impact it may have upon their portfolio.

“Rising prices are detrimental to investment returns, as they eat into the real value of your money.

“Inflation at four percent halves the purchasing power of your savings and income in less than 20 years. So, an eight percent rate of inflation will have devastating consequences, not least for those nearing retirement and thinking about drawing an income from their pension savings.

“But there are steps you can take to mitigate the impact of inflation upon your portfolio – diversification remains the cornerstone of any successful investment portfolio. As the storm clouds gather around the outlook for both inflation and interest rates, look to investments than can inject some much-needed diversification into your portfolio.”

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