In a preview of his upcoming annual shareholders letter, Warren Buffett writes:
Investments that are denominated in a given currency include money-market funds, bonds, mortgages, bank deposits, and other instruments. Most of these currency-based investments are thought of as “safe.” In truth they are among the most dangerous of assets. Their beta may be zero, but their risk is huge.
This should sound familiar.
This is from Bloomberg last March:
I would recommend against buying long-term fixed-dollar investments,” Buffett, chairman and chief executive officer of Berkshire Hathaway Inc. (BRK/A), said today in New Delhi. “If you ask me if the U.S. dolla ris going to hold its purchasing power fully at the level of 2011, 5 years, 10 years or 20 years from now, I would tell you it will not.”
Buffett, 80, has shortened the duration of Omaha, Nebraska- based Berkshire’s bond holdings since 2009 as the U.S. Federal Reserve eased monetary policy to stimulate the economy. Over the same period, he has added to cash holdings and committed more than $35 billion to company takeovers.
Of course, if you’d listened to him then you would have gotten clocked.
While the stock market was flat last year, Treasuries had a monster year.
Here’s a look at 10-year yields since the time of that quote.
It’s the same deal with another legend. Jeremy Grantham says he’s running out of superlatives to describe how much he hates Treasuries.
Well, back in the Spring of 2010, he was calling them “grotesquely overvalued.”
At some point, the market will change. Just be aware that some of these legends have been banging this drum a long time.