how to profit from high inflation?

**zhiyuzh** Tue Oct 02, 2007 12:40 am

how to profit from high inflation?
As Warren Buffet said:
"the purchasing power of the dollar will go down over time."
Greenspan also see high inflation coming.
http://news.bbc.co.uk/1/hi/business/7022117.stm

My question is IF there is high inflation (Don't want to argue whether there will be high inflation or not), how can we profit from that, buy commodity related stocks?

Thanks!

**goog** Tue Oct 02, 2007 1:10 pm

Buffet's strategy is well known for this: buy companies that will increase (after discount inflation) intrinsic value year over year. CHK is a good example of this.

**lzhang** Tue Oct 02, 2007 1:52 pm

In 2007 annual meeting of BRKa, Mr. Buffett answered a question about inflation:

Q: Have you considered investing in metals to protect the company against inflation?

WB:
We would not necessarily view metals investing as protection against inflation. The best protection is your own earnings power, whether the currency is in seashells or paper money. A first-class surgeon or teacher will do alright in terms of commanding the earning power of other people. The second best protection is owning a wonderful business, not metals or raw materials or minerals.

The truth is, if you own Coca-Cola or Snickers bars or anything that people are going to want to give a portion of their current income to keep getting, and it has low capital-investment requirements, that’s the best investment you can possibly have in an inflationary world.

But an inflationary world is not a good thing. We try to own good businesses. I think Berkshire wouldn’t do as well in real terms during periods of high rates of inflation vs. low rates, but we’d probably do better than most businesses.

http://www.tilsonfunds.com/Berkshire_Hathaway_07_annual%20meeting_notes.pdf

**blast_investor** Tue Oct 02, 2007 2:58 pm

Here is my opinion.

If you mean "high inflation", high end of normal inflation.

In general, inflation is inherent inside the economy of US and most other countries.

The best inflation protection in the long run is business, or business like asset such as real estate business.

It has been documented that overall, well run business, particularly the business Warren Buffett likes, can rise faster than inflation in the long run.