InvestED: The Rule #1 Investing Podcast

Phil Town is a hedge fund manager and author of 3 New York Times best-selling investment books, Invested, Rule #1, and Payback Time. On the InvestED podcast, Phil and his daughter Danielle shine a light on the successful investing strategies that gurus like Warren Buffett have used for 80 years. Listen in for a great stock market education on basics, learn how to invest on your own, and follow along with real-time examples and investing tips from week to week. Subscribe and leave a review. Questions? Email questions@investedpodcast.com.

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Warren Buffett's Inflation Principles


In today’s episode, we discuss some words of wisdom shared from the letters of Warren Buffett. There is one concept in particular that we can take from these letters that still applies today, and that is inflation.


First, we focus on Warren Buffett’s 1979 letter, where inflation rose to 11.2% in the United States. Buffett decided to write about this in the letter along with larger financial issues in the macro-economic world. He starts by telling other investors that we do not know what will happen with the stock market or the underlying currency. Long-term fixed interest bonds may not continue to serve as a financial instrument and may even become obsolete. 


Warren Buffett also points out that there’s no corporate solution to the problem of growing inflation. As currency becomes more worthless, companies do not have a solution to this problem - they just have to do their best. As we fast forward to the early 1980s, Warren Buffett writes some solutions to these types of problems. 


First, choose an investment that is adaptable to inflation. This means that earnings will increase consistently with its raised prices without adding in additional capital.


The second solution is to choose an investment with very little bad debt, which could sink the company. And lastly, shift your measure of success from earnings, which no longer mean anything on their own, to gains and purchasing power.


Danielle leaves us with a final thought on how the pace of economic change has become breathtaking and we need to be ready to adapt.


If you want to learn more about what type of companies to look for that can withstand inflation and this uncertain market, register for my NEW investing webinar: https://bit.ly/3mQCVlh

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 2021-09-01  25m