Warren Buffett's official biographer has a "fair warning" for investors: The Oracle of Omaha isn't as bullish as he sounds.
After spending hundreds of hours with Buffett researching The Snowball, Alice Schroeder points out there are two sides to Buffett's psychology, a "buoyant optimism tempered by extreme caution... In temperament, he could be the son of Woody Allen and Doris Day."
She urges us all to listen to both sides, because they both make him a great forecaster.
Today she writes in a Bloomberg commentary that Buffett looks to America's long history of past recoveries as he confidently predicts that its "best days lie ahead" and living conditions in the U.S. will continue to improve over the decades. "Be greedy when others are fearful." That's why was buying U.S. stocks for his personal account as early as last October.
That's the Doris Day in him. But don't ignore the Woody Allen side.
She cites evidence that "Buffett is awake to America's problems" such as his statement the economy has "fallen off a cliff" and won't be rebounding anytime soon.
"I believe Buffett’s optimism about the country is genuine. It’s a big-picture sort of optimism, though. Economists who are debating whether there will be a recovery in 2010 are living in a different world than Buffett, whose comparisons to periods as traumatic as World War II and the Civil War should sober anyone who thinks we are going to turn the economy on a dime."
Schroeder also notes that Buffett has an "ace in the hole." Future inflation should favor stocks over bonds, because "even if the nominal profits from a business are gouged by inflation, a good business provides some real return over time."
Her bottom line: "Buffett is bullish, but not as bullish as he sounds. His optimism is long-term in nature, and inflation is his hedge."
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