A Bloomberg story today asks whether Warren Buffett is worried about inflation. His company, Berkshire Hathaway, has reported a growing appetite for shorter-term securities recently, a potential sign that Buffett is anticipating income-eroding inflation and interest rate hikes in the future.

In absolute terms, over the past 12 months Berkshire added US$1.3bn to its holdings of fixed-income securities due in less than a year. At the end of June, these short-term securities accounted for 21% of the group’s bond portfolio, up from 16% the previous year.

Following soft growth figures and weak employment data, a majority of economists now believe that deflation presents a greater immediate threat to US economy than inflation. The “Oracle of Omaha”, as is often the case, appears to defy the conventional wisdom.

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