Notable Statements On Inflation, 2009

Notable Recent Statements on Inflation “In poker terms, the Treasury and the Fed have gone “all in.” Economic medicine that was previously meted out by the cupful has recently been dispensed by the barrel. These once-unthinkable dosages will almost certainly bring on unwelcome aftereffects. Their precise nature is anyone’s guess, though one likely consequence is an onslaught of inflation.” —Warren Buffett, letter to Berkshire Hathaway shareholders, February 27, 2009 “Our current chairman of the Federal Reserve, Ben Bernanke, is an ‘inflationist.’ When times were good, he supported an easy money policy. Even when the Fed raised rates, Bernanke took great pains to give the markets many warnings to insure that the higher rates wouldn’t break up the credit party, i.e., bubble formation. Now that the cycle has turned, the Fed has promised to resort to ‘all means necessary’ to head off the effects of the collapsed bubble. Rates have effectively been lowered to zero. The Fed is making loans collateralized by toxic waste and has now begun a policy called ‘quantitative easing’ – a fancy term for ‘printing money.’ The size of the Fed’s balance sheet is exploding and the currency is being debased. Combined with an aggressive fiscal policy, it is clear that the authorities are going ‘all in’ to try to mitigate the near-term effects of the economic collapse. Our guess is that if the chairman of the Fed is determined to debase the currency, he will succeed. Our instinct is that gold will do well either way: deflation will lead to further steps to debase the currency, while inflation speaks for itself.” —David Einhorn, letter to Greenlight Capital investors, January 20, 2009 “I am 100 percent sure that the U.S. will go into hyperinflation… The problem with government debt growing so much is that when the time will come and the Fed should increase interest rates, they will be very reluctant to do so and so inflation will start to accelerate.” —Marc Faber, interview with Bloomberg Television, May 27, 2009 “My main worry right now is the possibility of inflation due to the actions of the government. Inflation is part of how the world is trying to get out from under the excess level of leverage that exists. Not to contradict another gentleman who is smarter than I am, Milton Friedman, but inflation is not just a monetary phenomenon in my opinion. There are psychological aspects to it as well. If inflationary psychology takes hold I don’t see how you could keep long term interest rates anywhere near where they are today. If long rates go up then the price of every asset goes down. While I think intellectual capital with repricing ability is the best way to mitigate that risk it will not be fun to go through that process if inflation heats up too much. There is a ‘tipping point’ as Malcolm Gladwell would say where a little inflation is helpful, but too much is absolutely destructive. And I mean destructive way beyond just the stock market but in terms of social fabric issues. I am constantly thinking about this dimension and trying to be a good steward of the finances at Markel in the context of this risk.” —Tom Gayner, interview with The Manual of Ideas, April 6, 2009

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June 19, 2009 – Page 6 of 87

“...most of Liberty’s liabilities are very long term and fixed, and those represent a pretty darned good bet on inflation. Our cash is basically all very liquid, very short term, very safe. We’re sitting with cash looking for opportunity and with liabilities looking to be devalued by government policy. That’s our philosophical view of how we sit right at the moment.” —John Malone, interview with Denver Business Journal, April 27, 2009 “In the longer term, we have to wonder about the effect on the world of a glut of newly printed dollars, sterling and euros. The reason owning printing presses makes repayment easy is that it lets a nation cheapen its currency. But one would think that more units of currency per unit of GDP means a debasement of the currency, and thus reduced purchasing power (read: higher inflation).” —Howard Marks, memo to Oaktree clients, October 15, 2008 “I’m amazed at the amount of money the government is throwing at this thing. You don’t even react anymore unless somebody’s talking about $1 trillion. I genuinely admire the administration’s courage in doing what it’s doing, but not the wisdom of it. I look at the TALF (Term Asset-Backed Securities Loan Facility) program, for example, and it’s almost a bribe to get people to put on more leverage… I ask anyone to give me an example of an economy beefed up by huge amounts of quantitative easing that did not inflate tremendously when or if the economy improved. I think what we’re doing now will either fail, or it will result in unbelievably high inflation – and tragically, maybe both. That would mean a depression and explosive inflation, which is frightening.” —Julian Robertson, interview with Value Investor Insight, May 31, 2009 “…there is inflation now in many things. There’s temporary deflation in raw material prices and in some property. But throughout history, whenever you’ve had gigantic printing of money and spending of borrowed money, it has always led to higher prices. Unless something is dramatic, it’s going to happen again. When? I don’t know. It’s already happening in some things. I don’t know if you’ve bought any sugar recently or some other things, prices are up and that will continue and it will get worse.” —Jim Rogers, interview with DailyMarkets.com, January 15, 2009 We will see inflation in assets we need (commodities) and deflation in assets we own. —Peter Thiel, paraphrased from Ira Sohn conference notes, May 27, 2009 “We’ve had this massive fiscal stimulus, massive monetary stimulus, and it’s hard to see how that doesn’t translate into pretty substantial inflation, or at least pretty substantial risk of inflation.” —David Swensen, interview with WealthTrack, May 22, 2009

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June 19, 2009 – Page 7 of 87

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