Investing Warren Buffett Watch

  Tuesday, 17 Oct 2017 | 8:00 AM ET

Trump's fortune drops to $3.1 billion, ties Snap's Evan Spiegel on new Forbes 400 rich list

Donald Trump's fortune fell by $600 million, and the president is now tied with Snap founder Evan Spiegel on Forbes' 2017 ranking of the 400 richest Americans.

Trump ranks No. 248 on the billionaires list this year with a net worth of $3.1 billion, according to Forbes, which released the rankings Tuesday.

Trump ranked No. 156 in 2016.

Forbes, which has tracked Trump since the list's debut in 1982, said the president's faltering net worth is due to weakening in the New York City real estate market.

Trump did not campaign with the magazine in an effort to boost his ranking as he's done in years past, said Luisa Kroll, Forbes magazine senior wealth editor.

"We'll see if he tweets today," Kroll told CNBC's "Squawk Box." "I know he cares a lot."

The president shares his spot on the list with the 27-year-old Spiegel, co-founder and CEO of the parent of Snapchat.

Spiegel was the youngest on the list, Kroll said. "And he's been the youngest for a number of years," she said. Spiegel took his ephemeral photo messaging company public on the New York Stock Exchange earlier this year.

Forbes used closing stock prices from Sept. 22, 2017, to compile the Forbes 400 list.

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  Friday, 13 Oct 2017 | 10:15 AM ET

North Korea renews Guam threat: Only one market move to make when 'Rocket Man' launches a missile

From July to mid-September, North Korea launched five missile tests, including two intercontinental ballistic missiles. More recently, the North Korean threat has taken a backseat to hurricanes and tax reform as stock market triggers, and major indexes are touching new record highs.

But "Little Rocket Man" will be back, as will headlines attributing short-term volatility in the market to a potential geopolitical crisis. Ahead of planned joint naval exercises between the United States and South Korea next week, North Korea threatened on Friday to launch ballistic missiles near the U.S. territory of Guam.

During Kim Jong Un's six-year reign, he has tested more missiles than his father and grandfather combined, including 15 tests in 2017. Based on history, there's one piece of advice that may come in handy for investors (and the current president) when Kim Jong Un celebrates his next nuclear success: Don't overreact. In fact, for investors, don't do anything.

Consider the country stock market arguably facing the gravest existential threat from a nuclear crisis: South Korea. There is reason not to be complacent. U.S.-based investors may have more exposure to South Korea than they realize.

Financial advisors and retail investors have been piling into overseas stocks, primarily through exchange-traded funds based on the MSCI and FTSE developed (EAFE) and emerging markets (EM) indices. Those indexes have significant exposure to South Korea. MSCI defines South Korea as an emerging market, and its emerging markets index has between 14 percent to 15 percent exposure to South Korea. The iShares Core MSCI Emerging Markets ETF (IEMG) has taken in $13.5 billion from investors. FTSE defines South Korea as a developed market, and its EAFE index has between 4 percent to 5 percent exposure to South Korean stocks. The Vanguard FTSE Developed Markets ETF (VWO) has taken in more than $14 billion from investors this year.

But here is what the South Korean stock market returned between the July to mid-September periods, when missiles were flying: 1.37 percent. Year-to-date, the South Korean stock market is up roughly 30 percent.

»Read more
  Thursday, 12 Oct 2017 | 6:48 AM ET

October continues to buck bad reputation on Wall Street

Though futures were modestly lower this morning, the autumn months continue to defy their historical trends as the worst months of the year. »Read more
  Wednesday, 11 Oct 2017 | 3:34 PM ET

Warren Buffett decides not to do second wager against hedge funds, citing his age

Posted ByTae Kim
Warren Buffett
David A. Grogan | CNBC
Warren Buffett

Warren Buffett, 87, told fund manager Mark Yusko he will not do another bet that a simple S&P 500 index fund will beat a basket of hedge funds.

The "Oracle of Omaha" cited his age as reason not to go forward with a second 10-year wager against the hedge fund industry, in an email to Yusko Tuesday. Buffett is on track to beat the original wager this year by a blowout.

Wrote Buffett to Yusko:

"I think the Protege bet proved the point and has stimulated a re-evaluation of professional management. If I were to do another ten-year bet — and I regard that as the reasonable term for measurement — that would take me to 97 and not at the best point to write and talk about the results. There's no doubt in my mind, however, that the S&P 500 will do better than the great majority of professional managers achieve for their clients after fees."

Buffett told CNBC's Becky Quick last week that he was willing to do another bet on active versus passive as long as anybody wants to put up "a significant percentage of their net worth" on the wager.

Morgan Creek Capital's founder and chief investment officer, Mark Yusko, accepted Buffett's offer on the same day. His firm manages $1.8 billion.

The bet with Buffett "is definitely not happening. I'm surprised because he came on CNBC offering another bet. After talking to him last week I thought there was a good chance," said Yusko in a phone interview Wednesday.

But the Oracle must have changed his mind.

"I'm disappointed because his involvement would have kept the public interest on this very important topic [active versus passive] at the highest level," said Yusko.

The investor explained why he was so adamant over his advocacy for hedge funds last week.

"It's an important time in terms of the market cycle. I think it's important to be aware about the propensity of investors to chase hot returns at the peak of the cycle. It is a better time to get hedged," Yusko said on Oct. 3.

Even though Buffett said no to Yusko, the investor is hopeful perhaps another person will take the wager.

A decade ago, Buffett made a million-dollar bet with Seides, a former co-manager of Protege Partners, that the S&P 500 will beat a basket of fund of hedge funds over the next 10 years, ending this year. The Berkshire Hathaway chairman and CEO will likely win that bet by a large margin.

Seides conceded he lost the bet earlier this year.

Buffett still won the original wager even after a vicious bear market occurred as a result of the housing crisis. The new bull market began in March 2009.

Hedge funds lost out to simple index funds as an economic recovery and extraordinary Federal Reserve stimulus lifted the majority of stocks and assets during this latest run.

The S&P 500 "will absolutely kill every one of the fund of funds," Buffett said on CNBC's "Squawk Box" last week. "Passive investment in aggregate is going to beat active investment because of fees."

Berkshire Hathaway did not immediately respond to a request for comment.

»Read more
  Thursday, 5 Oct 2017 | 1:42 PM ET

The 3 traits Warren Buffett looks for in an employee

Posted ByEmmie Martin

Warren Buffett's workdays no longer include dealing with much of the minutiae of running Berkshire Hathaway. In place of conducting interviews and managing teams, he makes big picture decisions and spends 80 percent of his time reading. But what the legendary investor looks for in quality employees still speaks volumes.

"You look for three things: You look for intelligence, you look for energy and you look for integrity," he told Nebraska Business magazine, an alumni publication for Buffett's alma mater, the University of Nebraska at Lincoln's College of Business Administration, in a 2001 interview.

Out of these three traits, Buffett says it's most important to cultivate integrity.

"Every business student you have has the requisite intelligence and requisite energy," he says. "Integrity is not hard-wired into your DNA."

»Read more
  Wednesday, 4 Oct 2017 | 1:49 PM ET

Hedge fund manager some call the next Warren Buffett owns nearly $1 billion of Puerto Rico's bonds

Posted ByTae Kim

Seth Klarman, the value investing giant who draws comparisons to Warren Buffett, has a very large position in Puerto Rico's controversial debt.

Klarman's hedge fund, Baupost, owns $911 million of the island's bonds through Decagon Holdings entities, according to a July public court filing.

"The Baupost Group is a holder of COFINA bonds through the Decagon entities. Baupost regularly makes investments through subsidiary holding entities," Baupost spokeswoman Diana DeSocio wrote in an email.

COFINA stands for the Puerto Rico Sales Tax Financing Corp. that issues bonds.

The Intercept on Tuesday was first to report the hedge fund's large stake. It was previously known that Baupost had a holding in COFINA bonds, but the size was not.

Puerto Rico's bonds plunged Wednesday after President Donald Trump pledged to wipe out its debt in an interview with Fox News. The island's general obligation bonds fell to 36 cents on the dollar versus 56 cents on the dollar last month.

The fund declined to comment specifically on the plunge in the debt Wednesday.

Two weeks ago, the island was hit by Hurricane Maria, a Category 4 storm that left most of the population without electric power.

Puerto Rico currently has more than $70 billion in debt. Cate Long, founder of Puerto Rico Clearinghouse, told CNBC in an email retail investors own about 75 percent of the island's debt.

Baupost has $30 billion of assets under management as of March 2017, according to the firm.

Klarman's fund has generated annual returns of 16.4 percent and $22.6 billion in net profit for clients since inception through 2015, according to a Morgan Creek Capital letter. Baupost's main fund posted a 'high single-digit' return last year.

The hedge fund manager has largely avoided controversy over his career and is often compared with Buffett for his disciplined investing philosophy and solid returns. As the political rhetoric heats up around what Wall Street is owed as Puerto Rico tries to recover from this tragedy, a negative spotlight could fall on owners of the controversial debt like Baupost.

That is likely something Klarman would not welcome since he is notoriously reclusive. He rarely appears publicly and used copies of his "Margin of Safety" investment book still sell for more than $700 online.

— CNBC's Fred Imbert contributed to this report.

»Read more
  Wednesday, 4 Oct 2017 | 12:30 PM ET

Legendary investor Warren Buffett says this one investment 'supersedes all others'

Billionaire investor Warren Buffett says the very best investment you can make is one that "you can't beat," can't be taxed and not even inflation can take away from you.

"Ultimately, there's one investment that supersedes all others: Invest in yourself," Buffett says in a recent interview with Forbes. "Nobody can take away what you've got in yourself, and everybody has potential they haven't used yet."

One of Buffett's investments in himself came in early adulthood, when he signed up for a $100 Dale Carnegie public speaking course that he says changed his life.

"I was terrified of public speaking when I was young. I couldn't do it," Buffett says. In fact, he admits he would become physically ill when the time came to take the podium.

The course was taught at Dale Carnegie, the institute named for the influential speaker and author of "How to Win Friends and Influence People."

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  Wednesday, 4 Oct 2017 | 10:27 AM ET

Billionaire Warren Buffett: ‘I don’t need a tax cut’

Billionaire investor Warren Buffett is keenly aware of the potential for gross inequality in the very system that has allowed him his own success. The octogenarian investor is worth almost $80 billion and is the third richest person in the world, according to Forbes.

"I don't think I need a tax cut," Buffett tells CNBC regarding the recently released Republican tax plan.

The new tax framework would eliminate the estate tax, which is levied on money and assets transferred from one person to another at the time of death. Nixing the "death tax" would be a "terrible mistake," says Buffett, because he says that change inordinately benefits the rich.

"The truth is: if they passed the bill that they're talking about, I could leave $75 billion to a bunch of children and grandchildren and great grandchildren, and if I left it to 35 of them, they would each have a couple of billion dollars," all without having to pay tax to receive the inheritance, says Buffett, who has three grown kids.

"Is that a great way to allocate resources in the United States?"

»Read more
  Wednesday, 4 Oct 2017 | 6:06 AM ET

Warren Buffett and Larry Fink criticize Trump's tax plan

Warren Buffett, Chairman and CEO of Berkshire Hathaway.
Lacy O'Toole | CNBC
Warren Buffett, Chairman and CEO of Berkshire Hathaway.

President Donald Trump's tax reform plan came under new criticism on Tuesday from two towering Wall Street figures, including billionaire investor Warren Buffett, who called into question a Republican drive to slash the U.S. corporate rate.

With the White House and top Republicans in Congress already on the defensive over claims the plan would not cut taxes for many middle-class Americans, Buffett and BlackRock Chief Executive Larry Fink suggested in separate interviews that the corporate rate may not have to be cut as deeply as proposed.

"We have a lot of businesses... I don't think any of them are non-competitive in the world because of the corporate tax rate," Buffett, thechairmanand CEO of Berkshire Hathaway, told CNBC.

Fink said a corporate rate as high as 27 percent could satisfy U.S. businesses' need for tax relief, while avoiding an increase in the federal deficit.

"What is being proposed is a pretty large expansion of our deficits," Fink told Bloomberg TV.

The Republican tax plan unveiled last month calls for slashing the corporate income tax rate to 20 percent from the current level of 35 percent, which many multinationals already avoid paying by taking advantage of abundant tax loopholes.

The plan contains up to $6 trillion in tax cuts, according to independent analysts, which Trump and top Republicans say they would offset by eliminating loopholes, deductions and tax breaks and boosting annual economic growth.

Hungry for legislative victory after repeated failures in their push to overturn Obamacare, many Republicans are now willing to accept a tax plan that raises the federal deficit, a fact that bothers some deficit hawks.

"I feel like in some ways, since Election Day, we've moved into a party atmosphere. And that concerns me," said Republican Senator Bob Corker, who has vowed not to vote for a tax bill that increases the deficit.

Republicans also insist that cutting the corporate tax rate to 20 percent will help workers by increasing jobs and raising salaries, though this claim is disputed by Democrats.

Senator Ron Wyden, the top Senate Democrat on tax policy, accused the Trump administration on Tuesday of removing a research paper from the U.S. Treasury's website that showed workers would benefit only marginally from a corporate rate cut.

"Apparently that mainstream economic analysis had to be purged because it basically didn't jibe with the Trump team's patter," Wyden said at a Senate Finance Committee hearing.

A Treasury spokeswoman said the document was a dated analysis from the Obama administration that "does not represent our current thinking and analysis."

An analyst who testified at the Senate hearing said only about 20 percent of the benefits of a corporate tax cut would directly help workers.

Buffett and Fink also criticized other Republican tax initiatives. Buffett said a proposal to repeal the estate tax would be "a terrible mistake" that would benefit the wealthiest Americans unnecessarily. Fink predicted tax legislation would not pass if it includes a proposal to eliminate a popular deduction for state and local tax payments.

"I don't believe we're going to get tax reform if there is the elimination of deductibility of state and local taxes," he said.

Eliminating the state and local tax deduction would raise about one-quarter of the $4 trillion in revenues that some Republicans say they need to prevent tax cuts from creating a massive increase in the federal budget deficit.

But eliminating that deduction is already opposed by Republican lawmakers from high-tax states such as New York and California, who say it helps their state governments pay for social programs, including public education.

House of Representatives Ways and Means Committee Chairman Kevin Brady discussed the state and local tax deduction at dinner on Monday evening with about a dozen other House Republicans, including some New York lawmakers. At least one came away predicting there would be a compromise.

"We kicked around six or eight or 10 different types of options," Republican Representative Chris Collins, a staunch Trump ally from New York, told reporters.

»Read more
  Tuesday, 3 Oct 2017 | 4:54 PM ET

Dick Bove: Why I'm still not buying Wells Fargo, despite Tim Sloan's 'superb' efforts

Posted ByMichelle Fox

Wells Fargo CEO Tim Sloan is doing a "superb job" in restoring the company, but widely followed banking analyst Dick Bove told CNBC he's still not buying the stock.

Sloan testified about the bank's fake account scandal before the Senate Banking Committee on Tuesday.

"Tim Sloan has taken huge efforts to try to turn this company around and re-establish its credibility," the equity research analyst at the Vertical Group said in an interview with "Closing Bell" on Tuesday.

However, his problem with Wells Fargo comes down to the fundamentals.

"For the last seven years they haven't been able to increase their operating earnings. And they haven't been able to increase them in the last 12 months," Bove said. "Now they're facing a restructuring of the business at a time when they need to do something to show they can increase sales and earnings and it isn't happening."

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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.