^It's been ages since I'd seen that movie! Really, the sentence is gramatical; buffalo in that sentence refers to the city name, Buffalo, the animal (properly, bison), and the verb to buffalo, meaning to bully. It is a sentence commonly used to demonstrate a phenomenon called semantic satiation.
Real-life exercise in class:
"I think that that that that that student wrote on the whiteboard is wrong."
Class gawked. Class dismissed.