Buffett worried on inflation, Greek "high drama"

By Svea Herbst-Bayliss and Jonathan Stempel

OMAHA, Nebraska (BestGrowthStock) – Warren Buffett said on Saturday he is worried about the prospect for “significant inflation” in the United States and elsewhere, and that the Greek debt crisis has the potential for “high drama.”

Buffett also said his Berkshire Hathaway Inc (BRKa.N: ) (BRKb.N: ) has only limited exposure to currency fluctuations, mainly through investments in businesses such as reinsurers and marketable securities.

Speaking at Berkshire’s annual shareholders meeting, Buffett said the company has a large share of its fortunes tied to the euro, largely from investments in European companies.

Unlike other prominent investors like hedge fund manager George Soros, Buffett has steered clear of large currency bets in recent years, and has said that while he looks worldwide for investments, he would be happy making investment bets mainly in the United States.

However, after many central banks worldwide drove interest rates to record or near-record lows and funneled trillions of dollars of stimuli into economies worldwide as the 2008 financial crisis set in, Buffett said he sees a chance for inflation to rear its head.

“The prospects for significant inflation have increased, not only here but around the world,” Buffett told roughly 40,000 shareholders at the meeting. “Weaning ourselves from the medicine” may be more difficult than enacting the stimuli in the first place, he said.

Buffett said Berkshire has substantial exposure to the euro through investments in reinsurance companies in Germany, such as Cologne Re.

“We seldom develop a strong view on one currency versus another,” Buffett said. “Events in past years would make me more bearish in terms of currencies holding their value over time.”

GREECE COULD TURN INTO BAD MOVIE

Buffett and Berkshire Vice Chairman Charlie Munger said Greece’s current financial problems pose a unique challenge because the country’s government is a sovereign state, but its fiscal problems prevent it from printing its own money to resolve its economic crisis.

“We may be seeing a test case play out here with a country not using its own currency,” Buffett said.

Debt problems in Europe have caused the euro’s value to fall to $1.33 as of Friday, from about $1.432 at year end.

Berkshire once had a $21 billion bet against the dollar, but unwound most of that bet three years ago.

Known for his simple language and homespun humor, Buffett likened the crisis to a movie with a depressing ending.

“It will be high drama,” he said. “I really don’t know how this movie ends, and I try not to go to movies like that.”

Greece expects to conclude talks with European Union and IMF officials on a multi-billion euro aid package on Saturday, a government official said. Thousands of people demonstrated in Athens against government cutbacks.

French Economy Minister Christine Lagarde earlier Saturday said he was expecting an aid package of around 100-120 billion euros ($133-$160 billion), and had “good hopes” an agreement could be reached by the end of this weekend.

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Buffett worried on inflation, Greek “high drama”