‘Only real cloud on the horizon’

Warren Buffett is not a doom-and-gloom type of investor. He’s not shy about expressing his seemingly endless optimism over the U.S. economy.

But if there’s one threat that keeps the investing legend up at night, it’s most certainly the threat of nuclear war.

“It is the ultimate problem of mankind,” Buffett said at his company Berkshire Hathaway’s annual shareholders meeting back in 2006. “And it will happen someday.”

He explained how weapons have evolved through human civilization.

“We've always had people who wish evil on others. Thousands of years ago, if you were psychotic or a religious fanatic or a malcontent, and you wished evil on your neighbor, you picked up a rock and threw it at them, and that was about the damage you could do,” he said.

“We went on to bows and arrows and cannons. But since 1945, the potential for inflicting enormous harm on incredible numbers of people has increased at a geometric pace.”

Buffett expressed similar concerns in 2017.

“I've been concerned since 1945 when the first atomic bomb was used,” he said during a CNBC interview.

“We have developed over these 72 years, since August of 1945, the ability around the world to almost destroy civilization. It's the only real cloud on the horizon.”

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What to own in times of crisis

Given this geopolitical crisis and other uncertainties looming in the distance — like an extremely hawkish Fed — it might be tempting to hide out in cash. After all, the stock market has been pummeled in 2022.

Buffett doesn’t exactly believe in stashing your savings under the mattress.

“The one thing you can be quite sure of is if we went into some very major war, the value of money would go down — that's happened in virtually every war that I'm aware of,” he told CNBC in 2014, the last time Russia invaded Ukraine.

“The last thing you'd want to do is hold money during a war.”

Of course, consumers have already learned first-hand the risk of holding money over the past year. With rampant inflation, the purchasing power of your cash savings can deteriorate rapidly.

What should investors own then?

Buffett has always believed in owning productive assets. And his suggestion for times of crisis is no different.

“You might want to own a farm, you might want to own an apartment house, you might want to own securities.”

It’s easy to see the appeal of farmland. Whether boom or bust — or World War III — people still need to eat. These days, it’s also easy to invest in farmland even if you know nothing about farming.

Apartment buildings could be another hedge against inflation and uncertainty.

Sure, real estate has its cycles, but no matter how much economic growth slows down, people need a place to live. And with real estate prices rising to unaffordable levels in many parts of the country, renting has become the only option for many people.

The segment is also becoming increasingly accessible to retail investors.

As for securities, Berkshire discloses its holdings every quarter so you can see which stocks the Oracle of Omaha favors.

According to the latest 13F filing, Buffett’s top five holdings were Apple (AAPL), Bank of America (BAC), Coca-Cola (KO), Chevron (CVX), and American Express (AXP) at the end of Q2.

Pour your portfolio a glass of recession resistance

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Ownership in real assets like fine wine could be the diversification you need to protect your portfolio against the volatile effects of inflation and recession. High-net-worth investors have kept this secret to themselves for too long.

Now a platform called Vinovest helps everyday buyers invest in fine wines — no sommelier certification required.

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About the Author

Jing Pan

Jing Pan

Investment Reporter

Jing is an investment reporter for MoneyWise. Prior to joining the team, he was a research analyst and editor at one of the leading financial publishing companies in North America. An avid advocate of investing for passive income, he wrote a monthly dividend stock newsletter for the better half of the past decade. Jing holds a Master’s Degree in Economics and an Honours Bachelor of Science Degree, both from the University of Toronto.

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