At his annual shareholders meeting, Warren Buffett was very anti-hedge funds and warned that there would be a derivative implosion within 10 years. He also increased his anti-dollar position due to the ever-deteriorating deficit. He also sees inflation continuing to rise due to low interest rates. From here until the end of the year we expect the FED to do exactly what they did in 1994. Raise interest rates and increase aggregates at double-digit rates. Stocks will rally and eventually take a major hit in 2005. The bond correction has already begun. The Dow should fall from 14,000 to 7,264 and bonds will get hammered. Needless to say, real estate will enter the great dark pit.
Thus far, this year eggs are up 5.2%, butter is up 62% and this month milk may increase $.50 a gallon. Gasoline is up $.30 since January or about 20%. Only the mentally retarded are unaware that inflation is booming along at 9-10%. The government now admits to 5.3% inflation. Unfortunately, we have had over 5% inflation for the past four years. Inflation has been coming out of China as they feast on commodities and those increases are being passed on to the consumer. Clothing prices from China are up about 8% this spring. Get ready; it is going to get worse.
Paul Volcker who humbled the markets in the early 1980