Is the economy really on the road to recovery?

Warren Buffet in the article that is linked below, says that inflation is on the way and he said that he would rather have more stocks at a DOW at 9000 than long on bonds. That doesn't mean that Buffet is for buying more stocks but likes them better than owning bonds with looming inflation.

We have been talking for some time that inflation has to happen with the amount of money that the Fed is printing. Every program that the current administration has gotten passed costs money and money that our country does not have. When a person lives beyond his or her means, it catches up to the person and their credit is cut off. Our country has far out spent its ability to repay and some of our creditors are beginning to say NO to buying more of our debt. The dollar has to fall in value. Stocks on the other hand, are going up in value based on earning reports being better than expected. However, these earnings are improved on a net basis mostly due to cost cutting not improved sales!

We also have a country that is very good at saving into 401(k)s. Most people who are investing in a 401(k) have not changed their investment allocation since they enrolled. So, as money from monthly savings pours into these stock mutual funds, the manager has to buy stocks! This in itself causes markets to move up. More dollars chasing a stock that has not moved due to additional profits will however increase in price because more firms are buying it.

Our stance remains the same. Lets stay well diversified in a assets that will perform well in a poor or stagnate economy and stay out of the US stock market on a long only basis. I am very excited that our hedge fund long short managers have done well in this short rise in the market but mark my words....there is going to be profit taking a ride back down.


http://finance.yahoo.com/news/Buffett-to-CNBC-Invest-in-cnbc-2854963522.html?x=0&sec=topStories&pos=1&asset=&ccode=