Buffett Watch

  Thursday, 19 Sep 2019 | 12:55 PM ET

Mark Cuban: 7 money and career tips for young people to survive a recession

The Great Recession lasted from December 2007 through June 2009 and was the longest economic downturn since World War II. And now, a decade out from that recession, there is talk and worry that another one is coming.

More than half of U.S. CFOs (53%) believe the country will be in a recession by the end of the third quarter next year, a new survey from Duke University showed. And the number of Google searchesfor the word "recession" even spiked at the end of July.

The resulting anxiety has people looking for advice on how to prepare and what to expect.

One Twitter user asked billionaire tech entrepreneur and star of ABC's "Shark Tank," Mark Cuban, for advice: "Hey Mark! I have a question I think many people would like to hear you answer. With all the talks of a Recession coming, what do you think will help someone going through it for the first time? For example 'Millennials.'"

In response, Cuban tweeted a prescription. Here are Cuban's seven pieces of advice to prepare for an economic downturn.

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  Thursday, 19 Sep 2019 | 12:25 PM ET

Want to invest like Warren Buffett? Follow these key principles

Posted ByMichelle Fox

Self-made billionaire Warren Buffett has been called the greatest investor in the world.

So it should come as no surprise that the Berkshire Hathaway CEO has scores of investors hoping to follow in his footsteps by adopting his investing principles.

Former hedge-fund manager and Buffett follower Whitney Tilson attributes the 89-year-old's success to his "off-the-charts smarts," his more than seven decades of experience and his temperament.

"What he does is simple in concept but difficult in practice," said Tilson, now the founder and CEO of Empire Financial Research and publisher of a daily subscription newsletter. He has attended 21 Berkshire Hathaway annual shareholder meetings in Omaha, Nebraska.

"There are a lot of people, myself included, who have tried to do what he does, but he has done it better than anyone for a longer period of time," he added.

Buffett, who is worth $83.4 billion according to Forbes, began investing as a child. He bought his first stock when he was 11-years-old and he's been doing it ever since.

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  Thursday, 19 Sep 2019 | 11:40 AM ET

Index funds are more popular than ever—here's why they're a smart investment

U.S. stock index funds are more popular than actively managed funds for the first time ever, according to investment research firm Morningstar. As of August 31, these index funds held $4.27 trillion in assets, compared to $4.25 trillion in active funds.

Index funds were created by Jack Bogle almost 45 years ago as a way for everyday investors to compete with the pros. They're designed to be simple, all-in-one investments: Rather than picking stocks you or your fund manager thinks will out-perform the market, you own all of the stocks in a certain market index, like the S&P 500 or the Dow Jones Industrial Average.

The thinking isn't that you'll beat the market, but rather that you'll keep up with it. And considering that the stock market has historically increased in value over time, that pays off for retirement investors.

Index funds have turned out to be a huge win for retirement savers and other non-finance professionals for many reasons. First, because you're not paying someone to pick stocks for you anymore, index funds tend to be less expensive for investors than actively managed funds: The average expense ratio of passive funds was 0.15% in 2018, compared to 0.67% for active funds, Morningstar reported. The original index fund, the Vanguard 500, has an expense ratio of just 0.04%.

Index funds also typically make trades less often than active funds, which leads to fewer fees and lower taxes.

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  Wednesday, 18 Sep 2019 | 7:19 AM ET

The worst-performing stock in the S&P 500 this year could have more room to fall

Posted ByLizzy Gurdus

Kraft Heinz is getting squeezed.

The stock fell by over 4% on Tuesday after private equity firm 3G Capital — its second-largest shareholder after Warren Buffett — said it sold 25 million shares of the ketchup maker's stock.

The worst-performing stock in the S&P 500 for 2019, Kraft Heinz is now down over 34% for the year and nearly 52% off its 52-week high.

And unfortunately for shareholders, things look like they could get even worse, warns longtime technical analyst Mark Newton, president and founder of Newton Advisors.

"The only thing that we can say is that momentum has gradually gotten less bad, and that's really not sufficient to call a bottom in a stock that's just continued to move lower," Newton said Tuesday on CNBC's "Trading Nation," citing a four-year chart of Kraft Heinz stock.

"Unfortunately, the downtrend is very much intact," Newton said. "We have lower lows, lower highs, and in technical analysis, you want to see at least some evidence of that trend being broken before you can take a real stand. Saying it's oversold is just, unfortunately, not sufficient, even if it's a well-known brand name, to say that I want to take a real stab at trying to buy."

For Newton, the proof is in the ketchup.

"I want to see that proof, and unfortunately, it's just not there yet," he said. "We continue to hear negative news and more volume to be on the downside and people ditching it, so I want to avoid and/or wait before I take a step in the water."

Michael Binger, president of Gradient Investments, had a similarly dismal outlook on the consumer food giant.

"The playbook here when they put this merger together is that you lever up, you get a couple of big, strong, activist-type investors and ... Warren Buffett to come in, you cut a lot of costs, you talk about synergies and then you spur some growth in more niche and growth-oriented areas," Binger said in the same "Trading Nation" interview.

"Well, they cut costs, they got some synergies, but there has been no growth in their core — I'm even going to call it commodity — type of business: ketchup, cheese, mac 'n' cheese, those kinds of things," Binger said.

In addition, he noted, the company has cut its dividend as well as its profit forecasts, leaving investors with these questions that shouldn't go unanswered.

  1. What kind of value trap are Kraft Heinz investors facing?
  2. When might 3G and Buffett sell out of their positions?
  3. How can the company recapture growth?
  4. How can Kraft Heinz delever?

"You sum all these things together [and] it's just a no-growth company," Binger said. "They can't go out and acquire right now because they're levered up so much. I think it is kind of a value trap at this point in time. I'm with Mark; there's no proof that it's not."

Even with a price-to-earnings multiple of about 10 times next year's estimates, which is cheap for Kraft Heinz, it could still get cheaper, Binger said.

"I think it could still fall a couple of bucks," the investor said. "I certainly don't think there's any catalyst to drive it higher from here in the current time period."

Kraft Heinz is expected to issue its next earnings report on Nov. 7. It will be the second earnings release for CEO Miguel Patricio, formerly of AB InBev, who was tapped to lead the company earlier this year.

Disclaimer

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  Tuesday, 17 Sep 2019 | 7:29 AM ET

Kraft Heinz falls after second-largest shareholder 3G Capital sells more than 25 million shares

Posted ByThomas Franck

The second-largest investor in Kraft Heinz Company disclosed that it has again trimmed its stake in the food company.

Private equity firm 3G Capital Partners said Monday it sold 25.1 million shares at a price of $28.44 per share, bringing its stake down by about 9% to 245 million shares.

The Brazilian private equity giant founded by Jorge Paulo Lemann is the company's second largest shareholder, after Warren Buffett's Berkshire Hathaway. After the sale, 3G Capital still has 20% ownership of Kraft Heinz. The stock was down 4% Tuesday afternoon.

In a separate filing Monday, Lemann disclosed that he increased his personal holding of Kraft Heinz stock by approximately $100 million. The 3G sale was also sparked by periodic liquidity windows by 3G investors in the fund that holds Kraft Heinz stock and the private equity fund has no current intention to sell any additional shares, a spokesman for Kraft Heinz told CNBC.

Still, the latest disclosure by 3G comes amid a string of brand write-downs and financial woes at the packaged food giant.

The stock crated nearly 25% in February after Kraft Heinz wrote down $15.4 billion on two of its most iconic brands, Kraft and Oscar Mayer. It also cut its dividend by 36% to 40 cents at the time and announced it had received a subpoena from the Securities and Exchange Commission on its accounting policies and internal mechanics in 2018.

Last month, it sank to a new all-time low after it again delayed the filing of its financial results and wrote down the value of its business by an additional $1.22 billion.

The struggling performance also represent a rare loss for the bargain-hunting Buffett and Berkshire, who partnered with Brazil's 3G capital in the Kraft Heinz merger.

Shares of Kraft Heinz hit a record low on Aug. 28 and remain down more than 31% in 2019 and about 50% over the last 12 months. By early August, Berkshire had lost almost $5 billion this year on its investment.

3G Capital gained a successful reputation on Wall Street for scaling back costs through strict budgeting, layoffs and other changes at the companies it invests in or acquires. The firm bought Heinz in 2013 and merged it with Kraft in 2015. But that strategy hit a snag with a large consumer products company like Kraft, which is seeing a big competitive threat from a trend for fresher and healthier foods. Some investors believe 3G will be unable to revive Kraft through cost-cutting alone and may need to invest more to compete in this environment.

Despite speculation that tensions were mounting between Buffett and 3G Capital, the so-called Oracle of Omaha told CNBC in June that such reports were wrong and that Lemann was still "a good friend."

"I made a mistake in the Kraft purchase in terms of paying too much," Buffett said at the time, adding that the write-down of the Kraft and Oscar Meyer brands was an acknowledgement of that.

Buffett stepped down from the Kraft Heinz board in 2018, but Berkshire Vice Chairman Greg Abel remains on the board and has been actively involved, Buffett said in June.

3G Capital reported a similar sale as this one in August 2018, when it sold 20.6 million shares at a price of $59.85.

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  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.

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  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."

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  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.

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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.