Buffett Watch

  Friday, 13 Sep 2019 | 10:31 AM ET

Famous economist: Government should give all French citizens $132,000 in cash when they turn 25

What if you came into $132,000 in cash when you turned 25?

If it seems a pie-in-the-sky question, it's not completely fantastical.

Thursday, famous French economist and professor Thomas Piketty released his book, "Capital and Ideology" (in French; the English version comes out in early 2020).

In the 1,232 page tome, Piketty suggests all French citizens should receive a lump-sum cash payment of 120,000 euros ($132,000) from the government when they turn 25, according to Bloomberg. He calls this payment, "inheritance for all," the site reported.

The cash payment is part of Piketty's proposal for fixing wealth inequality.

It's not clear from the Bloomberg story how the "inheritance for all" payment would be funded and Piketty did not immediately respond to CNBC Make It's request for clarification. However, Bloomberg reports that in the book Piketty does suggest taxes as high as 90% on France's super wealthy.

"[T]hose with several hundred million euros, or several billion, will have to share power," Piketty told French magazine L'Obs, according to Bloomberg.

The idea of the government distributing cash — via a universal basic income (UBI) — in order to combat wealth inequality has been gaining attention in the United States.

Elon Musk, for example, has suggested UBI will become necessary as automation eliminates jobs, and Mark Zuckerberg sees it as a way to give people a safety net to support entrepreneurship.

»Read more
  Thursday, 12 Sep 2019 | 12:50 PM ET

America's richest could afford this investment to help fight climate change, scientist says

The technology exists to "green" America's electricity grid to fight climate change — and together, the country's richest people have enough money to pay for it. In fact, they could even make a profit on the investment.

That's according to a 2019 research paper on solar energy led by Joshua Pearce, a professor of materials science and engineering at Michigan Technological University.

Burning coal, oil or gas to produce electricity creates a lot of carbon dioxide, which contributes to climate change. Solar energy, meanwhile, is better for the environment and slows climate change. Replacing all carbon dioxide-generating fossil-fuel electricity with sustainable solar electricity in the U.S. would cost $1.59 trillion, a price that it would take just 79 of America's wealthiest billionaires to cover, according to Pearce's study.

Pearce, who heads Michigan Tech's Open Sustainability Technology Lab, says if a few dozen of the richest Americans (whom he identifies in his study) invested the $1.59 trillion, they could not only solve the problem but even make their money back and then some.

"With current solar technology, a remarkably small number of investors could effectively 'green' the U.S. electric grid," Pearce tells CNBC Make It. "The bottom line is: Solar costs have dropped so radically and wealth is now concentrated to such a degree, that only a few wealthy Americans could green the U.S. electric grid by making targeted investments in solar energy."

Each billionaire would, in Pearce's hypothetical calculation, invest all of their wealth except $1 billion, which they would keep to live on, Pearce says. Pearce's list of multibillionaires include a slew of technology inventors and executives such as Jeff Bezos, Bill Gates, Warren Buffett, Mark Zuckerberg, Larry Ellison, Michael Bloomberg, Larry Page, Sergey Brin, Jim Walton, Elon Musk, Laurene Powell Jobs, Ray Dalio and Eric Schmidt.

"To be clear, we analyzed the potential investment, not charity," Pearce says in a written statement from Michigan Tech.

The 79 billionaires would get a return on their investment because the electricity generated by the solar panels would be sold to a consumer or electricity reseller, Pearce tells CNBC Make It. "Sun shines, electricity is produced, buyer pays for it and the investors gets their money back with a handsome profit," Pearce tells CNBC Make It.

It's hard to predict when the investors would be paid back, though.

"It will be highly location dependent," Pearce tells CNBC Make It. "Here in Michigan it would vary between only a few years to about a dozen years for a payback period."

»Read more
  Tuesday, 10 Sep 2019 | 11:56 PM ET

We went inside Alibaba's global headquarters. Here's what we saw

Posted ByUptin Saiidi

HANGZHOU, China — Chinese tech giant Alibaba's global headquarters in Hangzhou is more than an office or corporate campus. It's an incubator for all things tech, testing everything from self-driving cars to automated hotels.

One hour away by train from Shanghai, Alibaba boasts six campuses around Hangzhou. It also has other offices across China, and globally, including Silicon Valley.

CNBC recently took a tour of the company's main Hangzhou headquarters — Xixi campus, which is home to about 22,000 of its 100,000 global employees. Its main campus is also where its corporate office, as well as its major e-commerce brands Tmall, Taobao, and AliExpress, are at.

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  Tuesday, 10 Sep 2019 | 8:15 AM ET

Millionaire in training: how to teach your kid to think like an entrepreneur

Posted ByMichelle Fox
Boys videotaping circuit board assembly in bedroom
Hero Images | Hero Images | Getty Images

Kids can come up with some pretty amazing ideas.

In fact, ear muffs, the popsicle and the trampoline were all invented by children.

Even Berkshire Hathaway CEO Warren Buffett, who is worth $81.7 billion, according to Forbes, began hustling as a child, going door to door selling chewing gum.

Yet, even if your kid isn't destined to be the next Buffett or Mark Zuckerberg, encouraging an entrepreneurial mindset will help them develop necessary life skills, as well as teach them important financial lessons.

"There are these unbelievable opportunities, as parents, that happen right under your roof to teach kids about money and entrepreneurship on the top of the list," said Thomas Henske, a certified financial planner with New York-based Lenox Advisors.

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  Wednesday, 20 Jun 2018 | 4:48 PM ET

Buffett, Bezos and Dimon's health-care pick is known as a thought leader, not a business leader

Dr. Atul Gawande writes and speaks about health care — a lot. But he hasn't actually spent nearly as much time changing it.

Despite that, the surgeon and Harvard professor soon will lead the most anticipated health-care company, a joint venture between three corporate titans: J.P. Morgan, Amazon and Berkshire Hathaway.

Those firms tapped Gawande on Wednesday to head the as-yet-unnamed health company. J.P. Morgan CEO Jamie Dimon, Amazon Chief Jeff Bezos and Berkshire leader Warren Buffett announced the venture in January.

Skeptics have questioned whether the trio's grand project can actually change the system or whether it will become just the latest failed attempt by employers to lower health-care costs. Many have tried unsuccessfully over the years on their own or through other alliances.

»Read more
  Wednesday, 14 Aug 2019 | 4:25 PM ET

Warren Buffett's Berkshire Hathaway raises Amazon stake by 11%, now worth $947 million

Posted ByKate Rooney
Warren Buffett
Bloomberg | Getty
Warren Buffett

Warren Buffett's Berkshire Hathaway has been loading up on shares of Amazon.

Berkshire upped its stake in the e-commerce giant by 11%, the Omaha, Nebraska-based holding company revealed in a government filing Wednesday. Berkshire now owns 537,300 shares of Amazon, worth $947 million. The holdings are as of the end of the second quarter.

Buffett announced his initial Amazon investment in May, but said he was not the one behind the share purchases.

"One of the fellows in the office that manage money" bought shares of Amazon on behalf of Berkshire, Buffett told CNBC's Becky Quick on the eve of the company's annual shareholders meeting in Omaha.

Buffett also slightly increased his bet on bank shares, which have been hit this month on concerns about an inverted yield curve hurting profits for the group. Berkshire's Bank of America stake was increased by 3.5% last quarter, according to the filing. It also raised its holding of US Bancorp by 2.4%. Other big bank holdings, including Wells Fargo and J.P. Morgan Chase, remained the same.

The famous value investor has historically avoided major technology bets, ending a rough chapter in IBM last year. But in February 2017, he announced that Berkshire was buying a large stake in Apple. In the the first quarter of 2018, Berkshire added 75 million shares of the iPhone maker and told CNBC at the time that he clearly likes Apple, and "we buy them to hold."

One of his two lieutenants, Todd Combs or Ted Weschler, who each manage portfolios of more than $13 billion in equities for Berkshire, is behind the original Amazon purchase and likely the increase seen last quarter.

The Berkshire chairman and CEO has long admired Amazon founder Jeff Bezos and is working with him on a joint health care venture. But the legendary investor has basically said that he missed his chance on Amazon.

Amazon has "far surpassed anything I would have dreamt could have been done. Because if I really felt it could have been done, I should have bought it," Buffett told CNBC in 2018. "I had no idea that it had the potential. I blew it."

Apparently one of his managers thinks there is still an opportunity for gains still in the shares, which are 12% in the last month amid a broader market sell-off.

Kraft Heinz, Berkshire's fourth largest holding, hit a record low last week after the company announced an additional write-down of $1.22 billion and missed revenue expectations. Buffett told CNBC in June that he "made a mistake in the Kraft purchase in terms of paying too much."

In its last major SEC filing, Berkshire Hathaway disclosed an 18% increase in its J.P. Morgan Chase stake to 59.5 million shares in its last quarterly filing, and a 22% increase to its Red Hat holdings to 5.1 million shares. Red Hat was acquired by IBM for $34 billion in July.

»Read more
  Wednesday, 14 Aug 2019 | 9:23 AM ET

Ray Dalio reveals the 'most important thing you need to do' to be a successful investor

If you are going to take investing advice from anybody, Ray Dalio is a good bet.

Dalio founded investment firm Bridgewater Associates out of his two-bedroom apartment in New York City in 1975. Currently, Bridgewater Associates has $160 billion in assets under management, making it the largest hedge fund in the world.

According to Dalio, "diversifying well is the most important thing you need to do in order to invest well," he wrote on LinkedIn on Monday.

By diversifying, Dalio means spreading out your money into different kinds of investments, such as stocks, bonds, commodities, real estate, etc.

Dalio said in the 2016 book "Money Master the Game: 7 Simple Steps to Financial Freedom" by Tony Robbins that a well-diversified portfolio might include 30 percent allocated to stocks, 40 percent to long-term U.S. bonds, 15 percent to intermediate U.S. bonds, 7.5 percent to gold and 7.5 percent to other commodities. A typical portfolio split of half stocks and half bonds is not really diversified, according to Dalio.

Diversification is important because there is so much you don't know when you are putting your money in an investment, Dalio said in his LinkedIn post.

"It's very hard to make money in the markets for the same reason that it's hard to make winning bets at the racetrack: because the unknowns are so large in relation to what is 'discounted' or 'priced in,'" Dalio wrote.

»Read more
  Thursday, 8 Aug 2019 | 6:40 PM ET

Uber's Q2 losses were bigger than total 2018 losses for all but three S&P 500 companies

Posted ByAri Levy

Uber's $5.2 billion second-quarter loss is big on its face.

But it seems even bigger when you consider this — only three companies in the S&P 500 lost that much money in all of 2018.

The ride-hailing company, which held its stock market debut in May, attributed most of its quarterly deficit to stock-based compensation. Excluding that expense, Uber's losses were around $1.3 billion, or roughly 30% wider than the prior period.

High stock-related compensation costs are normal for Silicon Valley companies. Equity packages are the price of luring talented engineers who could otherwise command bigger salaries at more established companies. Eventually those options and restricted stock units vest, and the companies then have to account for the costs.

Snap recorded a $2 billion expense in its first post-IPO earnings report in 2017. On Wednesday, Lyft reported a $296.6 million stock-compensation expense following an $894 million cost in the previous quarter.

Stil, Uber's quarterly loss is eye-popping for investors who are used to companies being well on their way to sustainable profits by the time they reach such a lofty market cap. As of Thursday's close, Uber was worth $67.3 billion, which would make it the 84th most valuable company in the S&P 500, if it were in the index.

Uber shares traded roughly 8% lower in premarket trading on Friday.

"We think that 2019 will be our peak investment year and we think that 2020, 2021, you'll see losses come down," CEO Dara Khosrowshahi told CNBC.

Among S&P 500 companies, only 26 lost money in 2018. The only three to lose more for the year than Uber lost in the second quarter were General Electric ($20.6 billion), Kraft Heinz ($10.2 billion) and Newell Brands ($6.8 billion).

GE's massive deficit was the result of a $23 billion charge taken in the third quarter last year for its struggling power business. At the same time of that announcement in October, the company abruptly removed CEO John Flannery after only a year on the job.

In the fourth quarter, Kraft Heinz slashed the value of its Kraft and Oscar Mayer brands by $15.4 billion, leading to a 27% plunge in the stock price in one day. The performance was even a shock to Warren Buffett, who admitted in February that "we overpaid for Kraft." In 2013, he teamed with Brazilian private equity firm 3G to acquire Heinz and two years later helped merge it with Kraft.

»Read more
  Thursday, 8 Aug 2019 | 5:23 PM ET

Kraft Heinz's latest tumble begs question what is value of its brands

Posted ByLauren Hirsch
Protestors outside 3G Capital's office, angry about its performance
Lauren Hirsch | CNBC
Protestors outside 3G Capital's office, angry about its performance

For Kraft Heinz investors, their main worry can be summed up in one sentence uttered by its CEO on Thursday.

"There's going to be continued risk of future impairments," Miguel Patricio told analysts during the company's quarterly earnings call Thursday.

Ahead of the call, Kraft Heinz announced its net income in the first half of the year was half the size it was in the same period a year ago. Profits were weighed down by another round of impairment charges — $1.2 billion to write down the value of business units and brands like Velveeta and Cool Whip. Before Patricio joined Kraft Heinz in April, the company had written down the value of its two of its biggest brands, Kraft and Oscar Mayer, by $15 billion.

But the warning that more could be ahead, sent Kraft Heinz's already beaten up stock to its lowest levels yet, an all-time low of $26.05.

Patricio, a former chief marketing officer at Anheuser-Busch InBev, brought the promise that his brand-building skills would revive growth. But he admitted on Thursday he didn't have enough clarity yet to provide financial guidance.

"We have a big agenda to build ... But I think that working on targets will not help. But second since I've been here just for 40 days, I wouldn't feel comfortable about [giving] a guidance that I still do not have the necessary confidence about that number."

The refusal to provide a forecast frustrated analysts who had gone six months without a quarterly filing, and hoped they would finally have insight into how the company expects to regain its footing. Kraft Heinz's shares have fallen nearly 30% year-to-date, as sales have stalled and profit has crumbled. Its filings have been delayed amid a Securities and Exchange Commission investigation into its accounting and procurement practices.

The aversion to targets, meantime, surprised some industry insiders, who remarked that the company's backers, 3G Capital, developed a reputation for intense focus on numbers and a target-based compensation system that helps it achieve its aggressive goals.

Now, without any guidance, investors and analysts alike are left wondering what the true value of Kraft Heinz's brands are, and how much farther those values might fall.

»Read more
  Thursday, 8 Aug 2019 | 12:32 PM ET

Carl Icahn calls Occidental's deal for Anadarko one of the worst he's ever seen

Posted ByThomas Franck

Billionaire investor Carl Icahn told CNBC on Thursday Occidental's $38 billion deal to acquire Anadarko "is one of the worst I've ever seen."

"And I've seen a lot of stuff that has gone over the many years we've been involved," the 83-year-old Icahn said in a telephone interview with Scott Wapner. "You take a look at OXY and you take a look at Vicki Hollub, who says that's she's done a great job and is interested in the long-term benefits to the company."

Since Hollub started as CEO, "the value of Occidental has dropped $23.7 billion, down 41%," he continued, adding that major energy ETFs are down far less over the same period. Since May 1, 2016, the Energy Select Sector SPDR is down more than 12%, while Occidental has fallen nearly 40%; the S&P 500 is up 42%.

Icahn was a vocal critic of Occidental Petroleum's deal to buy Anadarko Petroleum, a purchase seen by the longtime activist investor as "hugely overpriced." Expensive financing, he and other stakeholders argued, could put the Houston-based oil giant at risk if crude prices fall.

But Icahn's qualms with the deal put him at odds with another famous investor, Warren Buffett. The Omaha-based value hunter contributed $10 billion in financing for the Occidental bid via Berkshire Hathaway, Buffett's holding conglomerate.

As part an agreement struck with Occidental's management, Buffett receives 100,000 shares of cumulative perpetual preferred stock with a value of $100,000 per share and an annual dividend of 8%. Icahn scrutinized the arrangement, saying Buffett tricked Hollub into a bad deal.

"They didn't have to give Warren — I mean Warren did a great job for himself and Berkshire ... but they didn't have to give him a $1.5 billion gift," Icahn said in the interview on CNBC's "Halftime Report."

Hollub "ran to Omaha to make this deal ... [she] was with Buffett for 90 minutes," he said. "Usually Buffett goes with Charlie Munger before he does a deal. He didn't even bother on this one. He just did the deal in 90 minutes. The whole thing is a travesty."

Representatives of Berkshire and Buffett did not immediately respond to CNBC's requests for comment. Occidental declined to comment on Icahn's criticism.

Icahn owned $1.6 billion in Occidental shares, or nearly 5% of the oil company as of May 30. The longtime activist investor — known for agitating for change at his investments — also blasted the deal for its lack of shareholder input.

The Occidental-Anadarko deal closed on Thursday in a transaction valued at $55 billion, including the assumption of Anadarko's debt. Anadarko shareholders are receiving $59 in cash and 0.2934 shares of Occidental common stock per share of Anadarko common stock.

»Read more

About Buffett Watch

  • Warren Buffett is arguably America’s most-admired and most-followed investor. Buffett is the largest shareholder and CEO of Berkshire Hathaway and one of the world’s most famous and most generous philanthropists. Legions of investors - from all walks of life - follow Buffett's homespun investment philosophy: invest in what you know, invest in value. Here on CNBC.com's Warren Buffett Watch, we’ll keep you up to date on what the “Oracle of Omaha” is doing by following Buffett's trades, words and deeds.