Warren Buffett (NYSE:BRKB) gave an interview on CNBC this morning about his views on the economy. The topics discussed included everything from debt ceiling and taxes to corporate jets. One of the more interesting sound bites came from Buffett’s view on the U.S. Dollar (NYSE:UUP).
Warren Buffett exclaimed, ” The dollar’s a different thing, we printed up dollars and did a lot of things to them. We’re going long America, but the dollar is going to get worth less over time.” A declining U.S. dollar is nothing new to those not living under a rock, but rarely do you see it brought up by an investor as well known as Warren Buffett. Even though Buffett recognizes the decline in the dollar, he doesn’t necessarily recommend commodities (NYSE:RJN).
In the past, Buffett has said, ” The problem with commodities is that you are betting on what someone else would pay for them in six months. The commodity itself isn’t going to do anything for you….it is an entirely different game to buy a lump of something and hope that somebody else pays you more for that lump two years from now than it is to buy something that you expect to produce income for you over time.”
On gold (NYSE:GLD), Buffett has explained, ” If you took all the gold in the world, it would roughly make a cube 67 feet on a side…Now for that same cube of gold, it would be worth at today’s market prices about $7 trillion dollars – that’s probably about a third of the value of all the stocks in the United States…For $7 trillion dollars…you could have all the farmland in the United States, you could have about seven Exxon Mobils (NYSE:XOM), and you could have a trillion dollars of walking-around money…And if you offered me the choice of looking at some 67 foot cube of gold and looking at it all day, and you know me touching it and fondling it occasionally…Call me crazy, but I’ll take the farmland (NYSE:DBA) and the Exxon Mobils (NYSE:XOM).”
Although Buffett doesn’t advise holding actual commodities , he does have large equity positions in American companies such as Johnson & Johnson (NYSE:JNJ) and Coca-Cola (NYSE:KO). Coca-Cola is his largest equity position, and perhaps his largest commodity investment. We classify Coca-Cola has a drinkable commodity in our Commodities Premium Newsletter , because it is easily recognized and valued across the world, not to mention the sugar (NYSE:SGG) content. Investors have been enjoying capital gains from Coca-Cola as shares recently hit a new 52-week high, as well as a current dividend of nearly 3%.
If the U.S. Dollar continues to decline as Buffett believes, then investors should do their homework and consider taking advantage of rising prices on commodities such as gold (NYSE:GLD), silver (NYSE:SLV), or oil (NYSE:USO). If you rather hold income producing companies, then take Buffett’s example and research companies such as Coca-Cola (NYSE:KO).
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Disclosure: No positions.