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Buffett warms to gold; warns against the dollar

In his annual address to Berkshire Hathaway shareholders, famed investor Warren Buffett warned of the dangers of holding dollar-denominated investments. Buffett’s concerns about the dollar stem from the world’s governments “solutions” to the ongoing financial crisis:  The dollar is headed south, and “You can bet on inflation,” he told shareholders during a six-hour question and answer marathon.

Although having dabbled in gold and silver in the 1960s and having made his now legendary 130 million-ounce purchase in 1998, Buffett cannot be labeled a goldbug. He has always favored income producing investments. However, his strident attacks on the dollar and criticism of the handling of the financial crisis are certain to be viewed as backdoor recommendations to invest in gold. Where else does one go to protect against inflation and the destruction of the dollar?

Actually, Buffett did have recommendations for his shareholders: be good at what you do and increase your earning power, and (2nd recommendation) own a “wonderful business that does not need capital.”

While these recommendations may sound great, they do not answer this question: How do you protect accumulated wealth against inflation if you no longer choose to work. Buffett can be excused for overlooking this. He’s still working at age 78, along with his partner Charlie Munger who is 85.

Other Buffett observations spewed at the Berkshire Hathaway meeting:

The world is in uncharted waters, and nobody knows the exact impact of unprecedented bailout and stimulation packages.

US Government Bonds are among the poorest choices for investors today, especially non-Americans.

The US is following policies that are bound to have inflationary consequences.

The people who are really going to pay (for the bailouts) are those who are buying fixed-interest US government bonds that will be worth less when they redeem them.

While Buffett may not have let the words buy gold bullion or consider investing in silver come out of his mouth, he said them anyway. has an article on the meeting, as do other financial websites.

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