When Warren Buffett speaks about the stock market, I listen.
He made his fortune by buying shares of great businesses. And right now, he thinks they’re cheap.
But in a rare television appearance yesterday, Buffett explained a simple way Americans can bet against the dollar… that has absolutely nothing to do with stocks.
He called it, “as attractive an investment as you can make.” And yet, you don’t need a brokerage account or any real prior investing experience to take advantage of this opportunity…
Here’s what the greatest investor in history had to say… and why you should seriously consider if this investment is right for you
Warren Buffett became the world’s richest man simply from his investment ideas. Now in his 80s, he’s fallen a few slots on the list. He’s the world’s third-richest man.
And he loves stocks. So I was surprised by the answer he gave on CNBC when asked whether he’d recommend people buy stocks or houses right now… If I knew where I was going to live for the next five years or 10 years, I’d buy a home and I’d finance it with a 30-year mortgage. It’s a terrific deal…
If I had a way of buying a couple hundred thousand single-family homes… I would load up on them. And I would take mortgages out on them at very low rates…
It’s a way in effect to [bet against] the dollar.
What did he mean by that?
The Average Joe doesn’t associate buying a house with betting against the dollar. But that is exactly what is happening. Think about this with me…
You’re borrowing paper dollars and putting them into a real asset… at a dirt-cheap price. Buffett pointed out that, if interest rates go down, you can refinance and get an even lower rate. But if interest rates go up thanks to inflation or money-printing, the bank is stuck holding your low-rate loan.
Buffett loves it… With “a 30-year mortgage… it’s a leveraged way of owning a very cheap asset now. That’s as attractive an investment as you can make.”
As the dollar loses value, the number of dollars it takes to buy a house goes up. So if the value of the dollar goes down, the value of your house goes up, all things being equal.
The government is sacrificing the value of the dollar today to get the economy back in gear. Borrowing dollars for 30 years at less than 4% interest to invest in a cheap, safe asset is a simple and effective way to hedge the dollar’s decline.
In his latest letter to shareholders, Buffett admits the timing he gave last year on the housing recovery was wrong… Last year, I told you that “a housing recovery will probably begin within a year or so.” I was dead wrong.
But Buffett is confident. It’s a simple case of economics… and biology: Housing will come back – you can be sure of that… Every day, we are creating more households than housing units. People may postpone hitching up during uncertain times, but eventually hormones take over… Fortunately, demographics and our market system will restore the needed balance…
The world’s greatest investor – who made his fortune in stocks – is saying he’d “load up on single-family homes if he could.” And he’d do so with a mortgage at a low rate.
You can do the same. You may not have thought of it this way before… but it is an excellent way for non-stock investors to bet against the U.S. dollar.
Today’s “terrific deal” will not last forever. So take the advice of the greatest investor in history…
Go buy a house, and get a low-rate mortgage on it. It is “as attractive an investment as you can make.”
Good investing,
Steve