Buffett Watch

  Monday, 17 Dec 2018 | 3:48 PM ET

Warren Buffett suggests you read this 19th century poem when the market is tanking

The stock market has had a volatile year, and it's not over yet: The Dow Jones Industrial Average lost more than 520 points on Monday and the S&P 500 fell 2.1 percent. Both are in correction and on pace for their worst December performance since the Great Depression in 1931.

But for the average person, shifts in the market, even ones as dramatic as the ones we've seen this year, shouldn't be cause for panic. During times of volatility, seasoned investor Warren Buffett says it's best to stay calm and stick to the basics, meaning, buy-and-hold for the long term.

So, during downturns, "heed these lines" from the classic 19th century Rudyard Kipling poem "If—" which help illustrate this lesson, Buffett wrote in his 2017 Berkshire Hathaway shareholder letter:

If you can keep your head when all about you are losing theirs ...
If you can wait and not be tired by waiting ...
If you can think – and not make thoughts your aim ...
If you can trust yourself when all men doubt you ...
Yours is the Earth and everything that's in it.

Market downturns are inevitable, Buffett pointed out, using his own company as an example: "Berkshire, itself, provides some vivid examples of how price randomness in the short term can obscure long-term growth in value. For the last 53 years, the company has built value by reinvesting its earnings and letting compound interest work its magic. Year by year, we have moved forward. Yet Berkshire shares have suffered four truly major dips."

He went on to cite each of the steep share-price drops, including the most recent one from September 2008 to March 2009, when Berkshire shares plummeted 50.7 percent.

Major declines have happened before and are going to happen again, he says: "No one can tell you when these will happen. The light can at any time go from green to red without pausing at yellow."

Rather than watch the market closely and panic, keep a level head. Market downturns "offer extraordinary opportunities to those who are not handicapped by debt," he says, which brings up another important investing lesson: Never borrow money to buy stocks.

"There is simply no telling how far stocks can fall in a short period," writes Buffett. "Even if your borrowings are small and your positions aren't immediately threatened by the plunging market, your mind may well become rattled by scary headlines and breathless commentary. And an unsettled mind will not make good decisions."

Don't miss: Warren Buffett and Ray Dalio agree on what to do when the stock market tanks

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  Monday, 17 Dec 2018 | 11:30 AM ET

5 of Warren Buffett's best tips for investing in the stock market

At 88, Warren Buffett's white hair, bushy eyebrows and aw-shucks grin hardly make for an intimidating visage. But he is one of the most powerful investors in the world, thanks to his Midas Touch on Wall Street.

Today Buffett is CEO of Berkshire Hathaway, but he bought his first stock when he was just 11. Since then he's bought stocks through seven Democratic U.S. presidencies and seven Republican, he told CNBC's "Squawk Alley," in August.

And in that time, he's been very, very good at it. Buffett is worth $82.5 billion, according to Forbes, making him the third richest person alive (behind Amazon founder Jeff Bezos and his friend and Microsoft co-founder, Bill Gates).

So how does he do it? Here are five of his best bits of investing wisdom.

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  Saturday, 15 Dec 2018 | 10:00 AM ET

Jennifer Aniston cut hair for $10 in high school—here's how 6 other celebs earned money early on

Even the rich and famous have to start somewhere. Before Jennifer Aniston made it big in Hollywood, she was cutting hair as a high schooler.

When asked about the weirdest thing she ever did to make money during a round of "Burning Questions" on Ellentube with Ellen Degeneres, the actress responded, "I cut hair in the ninth grade and made $10 a haircut."

She's far from the only celeb who started out with a less-than-glamorous gig. Read on to see how six other rich and famous people made their first few bucks.

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  Wednesday, 12 Dec 2018 | 1:28 PM ET

If you invested $1,000 in Tesla in 2010, here's how much you'd have now

Despite some lingering controversy around Tesla's co-founder and chief executive officer Elon Musk, the automaker's shares are up 37 percent in the past three months, and the company was a top performer in the Nasdaq 100 on Monday, even amid steep stock market dips.

If you invested in Tesla in 2010, when it made its initial public offering, that investment would definitely have paid off. A $1,000 investment would be worth more than $21,000 as of Dec. 12, according to CNBC calculations, including price appreciation and dividend gains reinvested.

While the company's stock has performed well over the years, though, any individual stock can over- or under-perform and past returns do not predict future results.

In September, Musk was forced to step down as chairman of Tesla's board of directors for three years in a deal with the Securities and Exchange Commission after he wrote on Twitter that he was considering taking the company private, and he remains a polarizing figure.

CNBC: Tesla stock as of Dec. 12, 2018

In an interview on CBS' "60 Minutes," Musk said that, while he plans to comply with the settlement, he does not respect the SEC itself. He made no apologies for his recent behavior, including one incident where he appeared to smoke marijuana and drink whiskey on comedian Joe Rogan's podcast, and another where he suggested that a diver in the Thailand cave rescue was a "pedo."

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  Wednesday, 12 Dec 2018 | 10:39 AM ET

Bernie Sanders: America is 'owned and controlled by a small number of multi-billionaires'

The power and greed of billionaires in the United States is threatening the country.

So says Bernie Sanders, the 77-year-old senator from Vermont who tried unsuccessfully to win the Democratic presidential nomination in 2016.

"We live in a nation owned and controlled by a small number of multi-billionaires whose greed, incredible greed, insatiable greed, is having an unbelievably negative impact on the fabric of our entire country," Sanders told Paul Jay, CEO and senior editor of The Real News Network, in an interview posted Thursday.

Sanders, who has become a political figurehead for the liberal end of the Democratic Party, said billionaires and their greed are to blame for any number of social problems in the United States.

"When we deal with climate change, when we deal with the economy, when we deal with housing, when we deal with criminal justice or immigration issues, we have got to deal with those in a holistic way, and understand why all of that is happening. Not see them as silo-ized separate issues," Sanders said. "A lot of that has to do" with the pervasive power of the ultra rich in this country, he said.

It is the responsibility of America to look at the extreme gap between the rich and the poor, Sanders said.

"What you have here is, first of all, massive income and wealth inequality. And as a nation we have got to think from a moral perspective and an economic perspective whether we think it is appropriate that three people, one, two, three, own more wealth than the bottom half of the American society," Sanders said. (A November 2017 report published by the progressive think tank Institute for Policy Studies found that Bill Gates, Jeff Bezos and Warren Buffett collectively had more wealth than the 160 million poorest Americans, or half the population of the United States.)

"You know, that's really quite outrageous, and it's appropriate that we take a hard look at that," Sanders said.

The disparity Sanders refers to is getting worse. A report released in July from the nonprofit, nonpartisan think tank Economic Policy Institute shows that income inequality has increased in every US state since the 1970s. A family in the top 1 percent of families in the United States in 2015 (the most current data available) was bringing in 26.3 times as much income as a family in the bottom 99 percent, according to the report.

"While the degree of income inequality differs across the country, the underlying forces are clear. It's the result of intentional policy decisions to shift bargaining power away from working people and towards the top 1 percent," said Mark Price, an economist at the Keystone Research Center in Harrisburg, Penn., in a written statement released with the report. "To reverse this, we should enact policies that boost workers' ability to bargain for higher wages, rein in the salaries of CEOs and the financial sector, and implement a progressive tax system."

The influence wielded by the ultra-wealthy is visible in politics and the media, according to Sanders.

"They don't put their wealth under neath their mattresses, right. They use that wealth to perpetrate, perpetuate their power. And they do that politically," Sanders said. "So you have the Koch brothers and a handful of billionaires who pour hundreds of millions of dollars into elections, because their Supreme Court gutted the campaign finance laws that were in existence, and now allow billionaires quite openly to buy elections."

Charles and David Koch are each worth more than $48 billion, according to Forbes. Their wealth comes from their family business, Koch Industries, the second largest private company in the United States, according to Forbes. Though their PAC does reportedly spend hundreds of millions on elections, that includes funds raised by a network of about 300 donors, according to The Washington Post.

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  Tuesday, 11 Dec 2018 | 2:14 PM ET

How a late night phone call from Warren Buffett in 2008 may have helped save the US economy

Posted ByYoni Blumberg

In October 2008, in the midst of the financial crisis, Berkshire Hathaway CEO Warren Buffett made a late-night phone call to then-Treasury Secretary Henry "Hank" Paulson, with an idea about how the government might be able to turn the economy around.

Paulson was asleep. He'd had a busy night working through various policy ideas with his team to restore confidence in Wall Street.

"I was exhausted," he recounts on Vice Special Report's "Panic: The Untold Story of the 2008 Financial Crisis," a documentary that debuted Monday night on HBO. It features interviews with private sector and government officials on the front lines of the crisis, including former Presidents Barack Obama and George W. Bush.

At the time, Congress had just passed the Emergency Economic Stabilization Act, or the "bailout bill" as it came to be known, and created a $700 billion Troubled Assets Relief Program to purchase assets of failing banks. But these actions were not enough to calm investors.

WATCH: In-depth interview with Warren Buffett on the 2008 financial crisis

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  Friday, 7 Dec 2018 | 2:49 PM ET

US mall owners have been slow to change for years. But now they're trying to embrace it

Posted ByLauren Thomas
Shoppers walk through the Menlo Park Mall in Edison, New Jersey.
Michael Nagle | Bloomberg | Getty Images
Shoppers walk through the Menlo Park Mall in Edison, New Jersey.

Mall and shopping center owners across the U.S. are starting to talk about change, realizing that if their centers keep the same antiquated models, anchored solely by department stores, they risk them going dark in the coming years.

Roaming the halls of the largest retail real estate conference on the East Coast this past week, put on by ICSC, were more digital brands than traditional ones. Companies that started selling goods on the web — like Warby Parker, Untuckit, Allbirds, M.Gemi and Winky Lux — were taking meetings with landlords about opening stores. Also making a big splash were new concepts like Neighborhood Goods, Fourpost, Brand Box and HiO, which are pushing a new model where a slew of brands come together in one space, on a rotating basis, to sell merchandise targeting younger generations of shoppers.

"We are all getting more creative," Michael Glimcher, CEO of Starwood Retail Partners, told CNBC. Starwood is privately held and owns 30 malls and lifestyle centers across the U.S., including Metreon in San Francisco and The Shops at Willow Bend in Plano, Texas.

"What you realize as a landlord is that — by being more creative — it makes every mall different and every [shopping] trip different" for customers, he said. "It historically has been us asking: What is the best retail use for a property? Now it's: What is the highest and best use for this real estate" no matter if it's a Macy's store, an office complex, a medical facility or apartments.

As 2018 comes to an end, it's been announced that more than 146 million square feet of retail space will be shut across the U.S. in malls and shopping centers, according to real estate research group CoStar. That's far more than the roughly 105 million square feet of space that was announced for closure in 2017.

Sears, typically occupying more than 100,000 square feet for each of its stores, has contributed to a large share of closures this year, in addition to Toys R Us and Bon-Ton. And Sears' future is still uncertain as it's in the midst of bankruptcy court proceedings, with hundreds of stores still open for business. But many real estate owners and investors said this week at ICSC that they've already started to plan for a complete liquidation, should the department store chain be forced to shut all of its remaining locations.

"The [mall] anchors going out of business deserve to go out of business," Pyramid CEO Steve Congel told CNBC. Pyramid is a privately held company that runs more than a dozen malls across the country, including Palisades Center in New York.

"The consumer changes and preferences change," Congel said. "You have to not only reinvest but you have to provide people with what they want. … We're letting the consumer dictate what to put in our mall."

An industry that has long been opposed to negotiating short-term deals with tenants — because they promise a less stable flow of rent income — is now welcoming pop-up marketplaces like Brand Box or The Edit. And that's as digital brands, which were initially not thinking about opening stores, are investing heavily in bricks and mortar. Commercial real estate firm JLL has predicted e-commerce companies including Casper and Adore Me will open at least 850 stores, altogether, in the next five years.

According to Glimcher, the retail real estate industry is "turning a corner." And Sears filing for bankruptcy helped with that, he said, even though it meant hundreds of Sears and Kmart stores going dark. "Now it can all wash out."

Landlords including Simon and Seritage have already come out and said they see Sears store closures as opportunities to create more profitable centers. Seritage in particular is in a unique position in that its business was created entirely from Sears stores — as a spinoff — in 2015. But Seritage CEO Ben Schall has told shareholders that the real estate investment trust has the ability to redevelop its assets thanks to a $2 billion loan it received from Warren Buffett's Berkshire Hathaway.

"One would like to believe there's a mass answer [to fill closed stores] but there's not," Neill Kelly, head of the retail restructuring practice at commercial real estate services provider CBRE, told CNBC. "But that doesn't mean the better-positioned malls won't use the opportunity to create value, provided the ... store closures don't exceed their ability from a capital standpoint to repurpose those spaces."

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  Thursday, 6 Dec 2018 | 2:22 PM ET

Tony Robbins: The No. 1 lesson I learned from Warren Buffett, Ray Dalio and other top investors

Business strategist and bestselling author Tony Robbins knows the importance of surrounding yourself with leaders: That's why he pays attention to some of the world's most successful people, including billionaire investors Warren Buffett, Ray Dalio, Carl Icahn and Richard Branson.

There's a lot to learn from these business leaders, but Robbins says the most important takeaway might be that "none of them let the motion of the market control them," he tells CNBC Make It.

"Most people live with so much fear and anxiety in their lives and these people just learn to say: 'This is part of life. There's going to be ups, there's going to be downs, and my job is never to let what's happening in the moment define me.'"

In other words, they stay calm, and stay the course, even when the market is fluctuating.

This lesson is particularly relevant right now, given recent stock market volatility. On Thursday, the Dow Jones Industrial Average dropped nearly 800 points, bringing two-day losses to more than 1,500 points.

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  Wednesday, 5 Dec 2018 | 3:11 PM ET

Billionaire Warren Buffett: The 'one easy way' to increase your worth by 50 percent 

Legendary investor and billionaire Warren Buffett has a tip for young people: Focus on learning how to write and speak clearly.

"The one easy way to become worth 50 percent more than you are now — at least — is to hone your communication skills — both written and verbal," says Buffett in a video posted on LinkedIn on Monday.

The video was posted by Michael Hood, the co-founder of the Toronto based start-up Voiceflow, which enables users to design, build and launch skills for Amazon's smart speaker, Alexa, without needing to know how to code.

"If you can't communicate, it's like winking at a girl in the dark — nothing happens. You can have all the brainpower in the world, but you have to be able to transmit it," Buffett continues.

"And the transmission is communication," says Buffett, who is currently worth more than $86 billion, according to Forbes.

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  Wednesday, 5 Dec 2018 | 8:36 AM ET

As the Dow tanks, here is Warren Buffett on the biggest puzzle for investors

Warren Buffett (L) and Berkshire-Hathaway partner Charlie Munger
Eric Francis | Getty Images
Warren Buffett (L) and Berkshire-Hathaway partner Charlie Munger

In May of 2007, as the markets were reaching new records (and moving closer to a bear market precipice and the financial crisis), Warren Buffett and Charlie Munger were discussing intrinsic value at the annual Berkshire Hathaway conference. The decade-long run for the current bull market and widespread concerns about elevated values in U.S. stocks leading to days like Tuesday, when the Dow Jones Industrial Average fell by close to 800 points, are reminders that getting at the true value of corporations is as important as it has ever been.

The concept of intrinsic value came up earlier this year when Buffett made the decision to change his trigger for buying back Berkshire shares from a quantifiable discount to the company's book value (1.2 times book value) to a discount to intrinsic value. In moving back to monitoring intrinsic value, Buffett invoked the method also used by J.P. Morgan CEO Jamie Dimon.

As buybacks across the corporate sector continue to reach new records, it becomes more questionable whether all of these companies are basing their share repurchases on a valuation metric that uncovers a discount in a stock's trading price to intrinsic value — or are just buying back stock to keep shareholders happy and prop up earnings. Jamie Dimon said on Tuesday at a Goldman Sachs conference that buying back stock when market prices are high is not a wise idea, and companies should be reinvesting in the business instead.

Now the issue of valuation isn't limited to buyback analysis. As many sectors within the S&P 500, including one of Buffett's favorites (banking) are in correction, every investor should be questioning the value of what they own in their stock portfolio.

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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.