A very good opportunity.

Taking a firm position in an ongoing debate in the financial markets, Buffett says he's not concerned about deflation, but thinks inflation will be a problem in coming years.

Despite his negative view on the economy, Buffett still believes the stock market is attractive "over the next 10 years" when compared to alternatives like Treasury bonds.

Buffett endorsed Ben Bernanke's reappointment as Federal Reserve Chairman, saying "you couldn't do better." He also praised Treasury Secretary Tim Geithner.

Frank Naylor, head of investments at Hermes Pension Fund, which manages BT's scheme - the largest in the UK - said investment in distressed debt was a "very good opportunity".

"Even though people are talking about the outlook improving, we still think there will inevitably be a lot of bankruptcies and insolvencies," Mr Naylor said. "We will be able to get quite powerful returns."

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