Bond Bubble Watch: Buffett Gets Bearish

Folksy billionaire Warren Buffett basically thinks anyone who buys bonds at today’s prices is foolish. Speaking at a conference sponsored by Fortune magazine today, Buffett said he “can’t imagine” the justification for buying the assets.

Buffett said that stocks are cheap relative to bonds, and that he predicts investors will regain confidence in the stock market — although he couldn’t say when. He also said that current government policy is leading America down a road to inflation. That means that getting a low fixed rate of return on bonds could wind up hurting investors.

Speaking of inflation risk, today’s speech puts Buffett at odds with one of the world’s biggest investors — the Federal Reserve. On Monday, Fed Chairman Ben Bernanke said on Monday that he saw Fed purchases of U.S. Treasuries and long-term mortgage bonds could prove stimulative to our slumping economy. Granted, the Fed has a different set of priorities. Buffett wants to make a profit, and the Fed is interested in reducing unemployment while keeping inflation down. Still, Federal Reserve or no Federal Reserve, it’s never a positive sign when you make an investment and Warren Buffett is on the other side of the trade.

Twitter: @mbrookstaylor