Thats right. Berkshire Hathaway has had its debt rating cut by Fitch. Are you kidding! I predicate that there is hardly an institution more culpable for the “economic crisis” than the rating companies. They essentially gave the green light for the whole thing to take place by rating sub-prime mortgages as “AAA.”  Only companies with strong balance sheets and solid cash flow deserve such a rank, not pieces of junk sliced up and repackaged. Now I’ve gotten myself sidetracked. Berkshire had $25 billion in cash at the end of the quarter. Buffett has stated multiple times that he would feel uncomfortable with less than $10 billion incase of any ‘acts of god’ (it is an insurance and reinsurance company after all). Does this sound like a company in trouble? The largest concerns about Berkshire relate to its use of derivatives. As I will explain, while they do add a bit of risk, there is always a trade off between risk and reward and Buffett has found a win-win for Berkshire over the long term. 

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For the sake of brevity, I will not go into great detail to explain why inflation is a real risk in the medium to long-term. Very astute and renowned investors have commented on inflation and I will let their words convey the point.  (more…)