FORTUNE -- Warren Buffett has a piece of advice for Ben Bernanke: It's easier to buy than it is to sell.
Buffett, speaking on Saturday at Berkshire Hathaway's (BRKA) annual meeting in Omaha, said he is worried about what will happen when the Federal Reserve tries to wind down its recent efforts to stimulate the economy. Via a program nicknamed QE, short for quantitative easing, the Fed in recent years has bought up over $2 trillion in bonds in order to lower interest rates and promote borrowing and investment.
Some have warned that when the Fed decides to sell its trove of bonds, or even just stops adding to it, stock markets could tank. Rising interest rates could cause banks to lose billions, perhaps igniting another financial crisis. Buffett says we don't know what will happen, but he is concerned.
"QE is like watching a good movie, because I don't know how it will end," says Buffett. "Anyone who owns stocks will reevaluate his hand when it happens, and that will happen very quickly."
Buffett says he has enormous respect for Bernanke. And he says the economy, and Berkshire, have "benefited significantly" from quantitative easing. Low interest rates are allowing Berkshire to do deals it wouldn't have done in the past, he said, citing the recent Heinz deal. And he doesn't think low interest rates are discouraging banks from lending. He says he knows Wells Fargo (WFC), of which Buffett is a large shareholder, is doing everything it can to find borrowers.
Nonetheless, Buffett says the Fed's moves have the ability to cause a lot of inflation. And that it may not always be promoting the best decision making.
"People make different decisions when they can borrow for practically nothing," says Buffett. "It's a huge experiment."
Charlie Munger, Buffett's long-term chief lieutenant, who was also talking at the meeting, says he worries about more than just inflation.
"What has happened in macroeconomics has surprised pretty much everyone," says Munger. "Given that history, economists should be more cautious when they print money in massive amounts."
For investors worried about rising prices, it's a good time to consider Treasury Inflation-Protected Securities.
By Janice Revell, contributor
FORTUNE -- Nothing stokes inflation fears like the prospect of the Federal Reserve pumping unlimited amounts of new money into the economy. And in September the Fed said it would do just that, announcing an open-ended program to buy billions of dollars in mortgage-backed securities each month until the employment picture improves. MOREOct 31, 2012 5:00 AM ET
New study suggests that stocks do a better job of predicting inflation than gold, real estate or anything else.
Fortune -- Federal Reserve chairman Ben Bernanke often gets criticized for overreacting to the stock market. But maybe that's exactly what he should be doing.
QE2 and Operation Twist were announced after market drops. And the recent swoon in the Dow, despite rebounding yesterday, along with some rather weak economic data, have reignited MOREStephen Gandel, senior editor - Jun 15, 2012 6:00 AM ET
Rents are soaring, and that's bad news for inflation -- and for Federal Reserve chairman Ben Bernanke's plans to keep it low.
FORTUNE – Most of us don't want to pay higher prices, but there's a growing debate over whether we should allow inflation to edge a little higher to help the U.S. economy grow.
Earlier this week, Nobel Prize-winning economist Robert Engle joined fellow prize winner Paul Krugman in building the MORENin-Hai Tseng, Writer - May 3, 2012 10:03 AM ET
A New NBER paper suggests that Bernanke's personality has stymied the Federal Reserve.
FORTUNE -- Would we all be better off if Ben Bernanke were more like Simon Cowell? A new paper published this week by the National Bureau of Economic Research seems to suggest so.
The paper by economics professor Laurence Ball of Johns Hopkins University, which is titled Bernanke and the Zero Bound, asks why the Federal Reserve hasn't been MOREStephen Gandel, senior editor - Feb 14, 2012 3:13 PM ET
If you don't want your dollars going toward Chinese-made products, don't sweat it -- most of the cash you spend on them goes to U.S. companies and workers.
By Sheridan Prasso, contributor
FORTUNE -- Worried about buying a $70 pair of sneakers that say "Made in China" this back-to-school season because you'd rather spend your dollars on "Made in U.S.A." products instead? Worry not, according to a new study.
More than half the MOREAug 12, 2011 5:00 AM ET
We're living with slowing growth, high unemployment, and accelerating inflation. Oh, and a Federal Reserve that consistently makes inaccurate projections.
By Daryl G. Jones, Hedgeye
The Federal Reserve provided further support this week to our dovish thesis, which postulates that interest rate policy will stay at, or below, current levels well into 2012. In addition, the door for a third round of quantitative easing was opened ever so slightly based on our read.
The MOREJun 24, 2011 12:32 PM ET
Feeling good about the economy?
Let's face it, probably not. The misery index – the sum of the unemployment and consumer price inflation rates – hit a 28-year high last month, notes Paul Dales of Capital Economics.
At a recent 12.7, the misery index is at its highest level since 1983, when Ronald Reagan was president and the great bull markets in stocks and bonds were in their infancy. Yet as always, MOREColin Barr - Jun 17, 2011 1:11 PM ET
Is the Fed doomed to repeat its most infamous mistake, the 1937 monetary tightening that extended the Great Depression?
The answer is no if you take the Fed's word for it – though it's hard to feel reassured if you happened to keep an eye on one top official over the past year. Recent hawkish comments by St. Louis Fed President James Bullard show the temptation to talk a big game MOREColin Barr - Jun 6, 2011 6:36 AM ET
The stock market run-up since March 2009 may have created a false sense of confidence among investors.
By Daryl G. Jones, Hedgeye
FORTUNE -- What would General George Custer say about the recent stock market rally? I'm in the middle reading Nathaniel Philbrick's book, The Last Stand, which is an account of Custer's infamous defeat at the Battle of the Little Bighorn. Even a novice in American history knows the outcome of MOREMay 24, 2011 1:08 PM ET
|Stocks finish higher for fourth straight week|
|Prison exclusive: Bernie Madoff can't sleep|
|Signs of new housing bubble in several areas|
|Google says you'll know when Glass is sketchy|