Also worth a read: Canadian Business U.S. contributor Rachel Pulfer’s Q&A with Lewis from our March 30, 2009 issue.

Soros joins a lengthening list of  luminaries warning of a tumble in government bond prices (which I am looking to play with exchange traded funds that track the inverse of bond prices):

“When the financial history of this decade is written, it will surely speak of the Internet bubble of the late 1990s and the housing bubble of the early 2000s,”  writes Warren Buffett in his latest letter to shareholders.  “But the U.S. Treasury bond bubble . . . may be regarded as almost equally extraordinary.”

Kenneth Rogoff, an economics professor at Harvard University and former chief economist of the International Monetary Fund, is in the same camp. Mr. Rogoff says annual inflation could go as high as 8% to 10% within three to five years in the U.S., and sooner in the U.K. That can have a big impact on bond prices. If, for example, investors expected U.S. inflation to rise to 8% to 10% a year, the price of the 10-year U.S. Treasury bond would have to be about 25% lower than it is now.

“Government bonds may be the last bubble that is developing,” says legendary hedge fund investor Jim Rogers. “I plan to sell short US government long bonds sometime in the foreseeable future… I don’t know when, whether it’s this quarter or this year.”

There are naysayers. For example, one commentator, Mark Sadowski, says: “The risk of a bond bubble is much overdone. It is instructive to see what happened to Japanese government bonds….”  

“The United States invariably does the right thing, after having exhausted every other alternative.” Winston Churchill 

“Stop experimenting with your savings.” Ad on Yahoo Finance, promoting ING Direct’s high-interest savings account. 

“When there is a stock market boom, and everyone is scrambling for common stocks, take all your common stocks and sell them,” he elucidated. “Take the proceeds and buy conservative bonds. No doubt the stocks you sold will go higher. Pay no attention to this–just wait for the depression which will come sooner or later.” When this depression–or panic–becomes a national catastrophe, sell out the bonds (perhaps at a loss) and buy back the stocks. No doubt the stocks will go still lower. Again pay no attention. Wait for the next boom. Continue to repeat this operation as long as you live, and you’ll have the pleasure of dying rich.” Fred Schwed, Where Are the Customers’ Yachts? 

According to data from the Investment Funds Institute of Canada, AIC Funds had net redemptions of $1.45 billion over the 12 months to June 30, bringing assets under administration to $5.17 billion. The 22% percentage decline in assets was the worse of any fund, as far as I can see.

AIC Funds was pretty much the fund most committed to the Warren Buffett, buy-and-hold value philosophy in Canada. The turnover rate in its portfolio was among the lowest, making it one of the most tax-efficient funds to hold in a non-registered account.

But with their portfolio emphasis on the financial sector, many of the flagship funds are down 25% to 35% on a yearly basis. It looks like AIC Ltd. customers don’t have the resolve to stick out the downturns as true buy-and-hold types should have (and even though AIC Funds’ long-term averages remain respectable – for example, the AIC Advantage Fund has returned 10.6% annually over the last 20 years).

Just when AIC Fund managers should be buying up good companies on the cheap, they are instead faced with the prospect of having to sell holdings to raise cash for redemptions. That’s not a good omen for one of the “good guys” in the Canadian mutual fund universe. And if the redemption notices keep coming in, that could put more downward pressures (ceteris paribus) on the shares of the companies in which they have invested – notably Canadian financials.

What makes this book unique is that the author had the full cooperation of Buffett. She spent thousands of hours with him and was given unprecedented access to his files, friends, and associates. The title comes from something Buffett said: “Life is like a snowball. The important thing is finding wet snow and a really long hill.”

When news of the book first broke in October of 2005, it was billed as the official biography of Buffett. The North American rights were purchased for some $7 million (U.S.) and apparently went to Schroeder. But by 2007, the focus seemed to have changed: the author told the Omaha World Herald: “It doesn’t read like a biography….It’s not a business book. It’s a book about the business of life. There’s a lot of business lore and histories in it.”

Yet, I wonder just how much more we can learn about Buffett that hasn’t already been said. In fact, Roger Lowenstein’s masterful work, Buffett: The Making of an American Capitalist told me just about every thing I wanted to know.