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Thursday, April 3, 2014

Warren Buffet Made An Astonishingly Wrong Prediction

Tuesday, March 4, 2014

Warren Buffett plugs cheap Vanguard trackers in latest investor letter

Warren Buffett plugs cheap Vanguard trackers in latest investor letter
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By Tanya Jefferies

PUBLISHED: 12:28 EST, 4 March 2014 | UPDATED: 13:01 EST, 4 March 2014

Billionaire investor Warren Buffett has just delivered the latest of his popular letters to shareholders in his firm Berkshire Hathaway – and this year he is full of praise for cheap tracker funds.

Warning against active investing and trying to ‘pick winners’, Buffett tells non-professional investors their aim should be to own a cross-section of businesses that together are bound to do well and ‘a low-cost S&P 500 index fund will achieve this goal’.

Buffett recommends a very simple portfolio split between shares and government bonds which he believes will beat long-term returns made by most investors – pension funds, institutions or individuals – who use ‘high-fee managers’.

Laying on entertainment: Warren Buffett plays the ukulele and sings with the Quebe Sisters Band at an annual shareholders meeting of Berkshire Hathaway in Omaha, Nebraska

‘My money, I should add, is where my mouth is,’ he says, before describing the investing instructions left in his will for a trust bequeathed to his wife.

‘My advice to the trustee could not be more simple: Put 10 per cent of the cash in short-term government bonds and 90 per cent in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.)’

Buffett has informed and entertained investors with annual letters since the 1960s – go here to read those going back to 1977 and check below for some more nuggets from the latest, including about his mistakes and how often to check stock prices.

The latest Berkshire Hathaway results reveal it made £11.6billion last year, up from £8.8billion the year before.

But growth of 18.2 per cent in the company’s book value – its assets minus liabilities – lagged the 32.4 per cent rise in the US’s S&P 500 share index with dividends included last year.

It also emerged that Buffett has cut his stake in struggling UK supermarket Tesco from 5.2 per cent to 3.7 per cent, though it remains among his biggest holdings alongside the likes of Coca-Cola and Goldman Sachs.

After Tesco’s shock profit warning in January 2012, Buffett took the opportunity to increase his stake. However, he seems to be having second thoughts and started selling some of his shares last autumn.

Read more here about Buffett’s investment in Tesco, and how British investing guru Neil Woodford looks to have made a better call by offloading his stake straight after the profit alert.

What does Warren Buffett say about…?

Outperforming the S&P 500 index

Over the stock market cycle between year ends 2007 and 2013, we overperformed the S&P. Through full cycles in future years, we expect to do that again. If we fail to do so, we will not have earned our pay. After all, you could always own an index fund and be assured of S&P results.

Berkshire’s biggest purchases in 2013, HJ Heinz and NV Energy

Both companies fit us well and will be prospering a century from now.

With Heinz, Berkshire now owns eight and a half companies that, were they stand-alone businesses, would be in the Fortune 500. Only 491 and a half to go.

Owning part-stakes in companies

Long-term success: Buffett reckons Heinz will still be prospering a century from now

At Berkshire, we much prefer owning a non-controlling but substantial portion of a wonderful company to owning 100 per cent of a so-so business; it’s better to have a partial interest in the Hope diamond than to own all of a rhinestone

Belief in America

Our subsidiaries spent a record $ 11billion on plant and equipment during 2013, roughly twice our depreciation charge. About 89 per cent of that money was spent in the United States. Though we invest abroad as well, the mother lode of opportunity resides in America.

Charlie [Munger, his business partner] and I have always considered a “bet” on ever-rising US prosperity to be very close to a sure thing. Indeed, who has ever benefited during the past 237 years by betting against America? If you compare our country’s present condition to that existing in 1776, you have to rub your eyes in wonder. And the dynamism embedded in our market economy will continue to work its magic. America’s best days lie ahead..

Car insurer GEICO

GEICO in 1996 ranked number seven among US auto insurers. Now, GEICO is number two, having recently passed Allstate. The reasons for this amazing growth are simple: low prices and reliable service. You can do yourself a favor by calling 1-800-847-7536 or checking Geico.com to see if you, too, can cut your insurance costs.

STILL A PAPERBOY AT HEART…

Buffett gives details of an unusual Berkshire Hathaway tradition – newspaper throwing.

Arrangements for Berkshire’s annual meeting on Saturday May 3 2014

CenturyLink’s doors will open at 7am, and at 7.30 we will have our third International Newspaper Tossing Challenge. Our target will be a Clayton Home porch, precisely 35 feet from the throwing line. I tossed about 500,000 papers when I was a teenager, so I think I’m pretty good.

Challenge me: I’ll buy a Dilly Bar for anyone who lands his or her throw closer to the doorstep than I do. The papers will be 36 to 42 pages, and you must fold them yourself (no rubber bands allowed).

No one likes to buy auto insurance. But almost everyone likes to drive. The insurance needed is a major expenditure for most families. Savings matter to them – and only a low-cost operation can deliver these. GEICO’s cost advantage is the factor that has enabled the company to gobble up market share year after year. Its low costs create a moat – an IIII enduring one – that competitors are unable to cross.

Making mistakes

The crowd of companies in this section sells products ranging from lollipops to jet airplanes. Some of these businesses, measured by earnings on unleveraged net tangible assets, enjoy terrific economics, producing profits that run from 25 per cent after-tax to far more than 100 per cent. Others generate good returns in the area of 12 per cent to 20 per cent.

A few, however, have very poor returns, a result of some serious mistakes I made in my job of capital allocation. I was not misled: I simply was wrong in my evaluation of the economic dynamics of the company or the industry in which it operated.

Fortunately, my blunders usually involved relatively small acquisitions. Our large buys have generally worked out well and, in a few cases, more than well. I have not, however, made my last mistake in purchasing either businesses or stocks. Not everything works out as planned.

The fundamentals of investing

Focus on the future productivity of the asset you are considering. If you don’t feel comfortable making a rough estimate of the asset’s future earnings, just forget it and move on. No one has the ability to evaluate every investment possibility. But omniscience isn’t necessary; you only need to understand the actions you undertake.

Second thoughts? Buffett has cut his stake in struggling UK supermarket Tesco from 5.2 per cent to 3.7 per cent

If you instead focus on the prospective price change of a contemplated purchase, you are speculating. There is nothing improper about that.

I know, however, that I am unable to speculate successfully, and I am skeptical of those who claim sustained success at doing so. Half of all coin-flippers will win their first toss; none of those winners has an expectation of profit if he continues to play the game. And the fact that a given asset has appreciated in the recent past is never a reason to buy it.

Games are won by players who focus on the playing field – not by those whose eyes are glued to the scoreboard. If you can enjoy Saturdays and Sundays without looking at stock prices, give it a try on weekdays.

Being realistic

The unsophisticated investor who is realistic about his shortcomings is likely to obtain better long term results than the knowledgeable professional who is blind to even a single weakness.

Active investing

Both individuals and institutions will constantly be urged to be active by those who profit from giving advice or effecting transactions. The resulting frictional costs can be huge and, for investors in aggregate, devoid of benefit. So ignore the chatter, keep your costs minimal, and invest in stocks as you would in a farm.

The benefits of cheap tracker funds

The goal of the non-professional should not be to pick winners – neither he nor his “helpers” can do that – but should rather be to own a cross-section of businesses that in aggregate are bound to do well. A low-cost S&P 500 index fund will achieve this goal.

Investing instructions laid out in his will

One bequest provides that cash will be delivered to a trustee for my wife’s benefit. (I have to use cash for individual bequests, because all of my Berkshire shares will be fully distributed to certain philanthropic organizations over the 10 years following the closing of my estate.)

My advice to the trustee could not be more simple: Put 10 per cent of the cash in short-term government bonds and 90 per cent in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.) I believe the trust’s long-term results from this policy will be superior to those attained by most investors – whether pension funds, institutions or individuals – who employ high-fee managers.

Home of Warren Buffett: Modest dwelling place of the billionaire in Omaha, Nebraska

Benjamin Graham’s book The Intelligent Investor, which he bought in 1949

I can’t remember what I paid for that first copy of The Intelligent Investor. Whatever the cost, it would underscore the truth of Ben’s adage: Price is what you pay, value is what you get. Of all the investments I ever made, buying Ben’s book was the best (except for my purchase of two marriage licenses).

Money | Mail Online

Read more about Warren Buffett plugs cheap Vanguard trackers in latest investor letter and other interesting subjects concerning Business at TheDailyNewsReport.com

Monday, February 3, 2014

Elizabeth Warren Has A Radical Plan To Remake The Post Office

Massachusetts Senator Elizabeth Warren wants to solve two American problems with one solution — turn the country’s increasingly empty post offices into simple retail banks for low-income citizens without bank accounts.

In an op-ed in the Huffington Post, Warren writes that “about 68 million Americans — more than a quarter of all households — are underserved by the banking system. Collectively, these households spent about $ 89 billion in 2012 on interest and fees for non-bank financial services like payday loans and check cashing, which works out to an average of $ 2,412 per household.”

That means poor Americans spend roughly 10% of their income on basic banking services, according to a recent report from the Office of the Inspector General.

Meanwhile, we’ve got an entire infrastructure of post offices and postal employees who are seeing the number of letters and packages they deliver dwindle more and more by the day.

The services Warren and the OIG are suggesting aren’t complex — just check cashing, small international money transfers, small loans, reloadable prepaid cards, and bill paying. The OIG insists that the USPS wouldn’t become a bank. In fact, it insists that these services would merely use the USPS’s ubiquitous network to complement what banks do and go where banks can’t go.

Other countries have already done this, and the OIG says that if even 10% of what underserved Americans pay on interest and fees went to the USPS it would generate $ 8.9 billion in new revenue per year.

Hey, if it works …

Politics

Elizabeth Warren Has A Radical Plan To Remake The Post Office

Thursday, January 23, 2014

Clean Water Action, Warren PA, 8/21/13, Part 4

Wednesday, November 13, 2013

The Clinton vs. Warren fantasy: Why progressives shouldn’t get distracted

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The Clinton vs. Warren fantasy: Why progressives shouldn’t get distracted

Tuesday, November 12, 2013

Elizabeth Warren Slams Regulators for Keeping Banks "Too Big to Fail"

Five years after the financial crash, most congressional Democrats seem content to live with the status quo. They tackled financial reform in 2010 when they passed the Dodd-Frank Wall Street Reform and Consumer Protection Act, and they’d prefer to leave the nitty-gritty details of keeping banks in check to federal agencies rather than pass new legislation.

But Sen. Elizabeth Warren (D-Mass.) won’t be so easily assuaged. On Tuesday, she delivered a speech to a room full of academics, consumer advocates, and senate aides, that criticized federal regulators for failing to meet the deadlines to write rules regulating banks, as outlined in Dodd-Frank. “Since when does Congress set deadlines, watch regulators miss most of them, and then take that failure as a reason not to act?” she said. “I thought that if the regulators failed, it was time for Congress to step in. That’s what oversight means. And that’s certainly a principle that would have served our country well prior to the crisis.”

She noted that the Consumer Financial Protection Bureau (CFPB), the agency she conceived of and helped guide to formation, has met its deadlines for writing rules. But the other federal agencies have been an utter failure at keeping to the schedule laid out by Dodd-Frank. A recent report by Davis Polk found that 60 percent of deadlines had been missed. Thirty percent of Dodd-Frank-mandated rules haven’t even been proposed yet, let alone finalized.

Warren spoke at an event assessing the state of financial reform hosted by Americans for Financial Reform (AFR) and the Roosevelt Institute. The two organizations released a 125-page report Tuesday outlining where Dodd-Frank has succeeded and failed, with a heavy emphasis on where the act failed to tame the biggest banks’ risky activities and how they still expose the entire economy to risk should they collapse.

Continue Reading »

Politics | Mother Jones

Elizabeth Warren Slams Regulators for Keeping Banks "Too Big to Fail"

Sunday, October 27, 2013

Peter Schiff, Hyperinflation, Dollar Collapse, Warren Buffett / Capital Account RT News

Peter Schiff, Hyperinflation, Dollar Collapse, Warren Buffett / Capital Account RT News
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Wednesday, September 25, 2013

Elizabeth Warren Brings News Anchors To Knees

Monday, September 16, 2013

Resistance Led by Eliz Warren Knocks Summers Out—Now It"s Yellen"s Turn

Obama can now make history by nominating the first woman to lead the Federal Reserve.

Something to cheer about, people! If you"ve been concerned about the power of big banks, the need for financial reform and the blight of crony capitalism, you can breathe a sigh of relief: Larry Summers will not be your next Fed chair. The man who helped bring you the last financial crisis will not get his hands on one of the country"s two most powerful economic levers.

On Sunday, the former White House economic adviser and Treasury secretary officially withdrew his name as a candidate, according to the Washington Post.

For weeks, despite Obama"s apparent enthusiasm for Summers, progressives have been actively voicing their strong objections for reasons ranging from his preference for Wall Street over Main Street to his blatant sexism (for the full list, see “7 Reasons to Fight Obama on Picking Out-of-Touch Crony Capitalist Larry Summers as Fed Chair“). Most recently, his troubling conflict of interest problem has been highlighted with particular attention to his lucrative consulting gig with megabank Citigroup. In the Senate, Elizabeth Warren (D-Mass) signaled strong opposition to Summers, and was joined by senators Sherrod Brown (D-Ohio) and Jeff Merkely (D-Ore). When Sen. Jon Tester (D-Mont.), considered a moderate, joined the “no” group, things began to look very shaky for Summers and the press began to predict an ugly confirmation battle.

In a letter to the President, Summers explained his reasons for stepping aside.

“It has been a privilege to work with you since the beginning of your Administration as you led the nation through a severe recession into a sustained economic recovery,” he wrote. “This is a complex moment in our national life. I have reluctantly concluded that any possible confirmation process for me would be acrimonious and would not serve the interest of the Federal Reserve, the Administration, or ultimately, the interests of the nation’s ongoing economic recovery.

Senator Warren deserves full props for not backing down under White House pressure. She had good reason to remain firm: Not only does Summers represent a bank-centic worldview, he actively lobbied to prevent Warren from heading the Consumer Financial Protection Bureau, her brainchild.

President Obama now has the opportunity to make history by nominating Janet Yellen as the first-ever female head of the Federal Reserve. She has always been the most qualified person for the job, known for her attention to the unemployment crisis, her cool head, her collaborative talent, and her foresight on the economy. Unlike Summers, Janet Yellen was not a cheerleader for the deregulation that helped cause the 2007-"08 financial crisis.

Earlier this summer, about a third of Senate Democrats signed a letter to Obama endorsing Janet Yellen for Fed chair over Summers. In recent days, Nobel laureaute Joseph Stiglitz and 400 other economists wrote a letter to President Obama laying out their reasons for supporting Yellen.

In addition to Yellen, the White House has also mentioned the possibility of Donald Kohn, former vice chairman of the U.S. Federal Reserve. Progressives have vowed to keep up the pressures for a Yellen appointment.

Thursday, June 13, 2013

Senator Warren calls for tough cross-border swap rules

Senator Elizabeth Warren (D-MA) listens to answers during a testimony while sitting on the Senate Banking, Housing and Urban Affairs Committee in Washington February 14, 2013.

Credit: Reuters/Gary Cameron

By Sarah N. Lynch and Douwe Miedema

WASHINGTON | Thu Jun 13, 2013 2:42pm EDT

WASHINGTON (Reuters) – Democratic Senator and Wall Street critic Elizabeth Warren is urging federal regulators to “show some backbone” and stick to their proposal for how new derivatives rules will apply to foreign banks who do business with U.S. companies.

“If the Commodity Futures Trading Commission moves in the wrong direction here, it could create loopholes that the big banks will be able to drive a truck through,” Warren said in an interview with Reuters on Thursday.

“We need to remember the enormous role that the unregulated derivatives market played in the 2008 financial collapse. I know it has been five years, but our regulators need to have more memory than that and they need to show some backbone here,” the freshman lawmaker from Massachusetts said.

Her remarks are significant because a temporary exemption that grants banks more time to comply with the new rules expires on July 12, and the CFTC is under considerable pressure to extend it.

The exemption allows foreign banks to continue doing business as usual until the CFTC makes a final decision on how broadly to apply its U.S. rules.

Banks, foreign regulators and some members of Congress have assailed the commission for crafting a plan they say is too aggressive and far-reaching.

Under the CFTC proposal unveiled last summer, foreign banks would have to register with the agency as “swap dealers” and comply with the same rules as American banks if their annual swaps trading volume with U.S. banks exceeds $ 8 billion.

European regulators have been particularly harsh, saying the scope of the CFTC’s proposed reach for U.S. rules could create duplication.

They have urged the CFTC to carve out foreign branches and certain affiliates of U.S. banks from the rules, and to give foreign regulators greater leeway in policing their own markets.

Derivatives are contracts that derive their value from other assets, and are often used by companies seeking to reduce their exposure to risks like interest-rate fluctuations.

‘DIRECT AND SIGNIFICANT’

Bad derivatives bets at American International Group nearly toppled the company and led to a massive government bailout during the 2008 financial crisis.

In response to that, the 2010 Dodd-Frank Wall Street reform law requires swap dealers and major traders to set aside capital and post margin.

It also calls for swaps to be routed through clearinghouses to protect against default and to be traded on regulated platforms.

Although the law focuses primarily on U.S. trading, it contains a provision that calls for American regulators to oversee trading abroad it if has a “direct and significant” effect on U.S. business.

The power struggle between the CFTC and foreign regulators is further complicated because the CFTC also shares authority with the Securities and Exchange Commission to police over-the-counter derivatives trading.

Last month the SEC came out with its own cross-border swaps plan that differs substantially from what the CFTC initially proposed. It would give some regulatory relief to foreign branches of U.S. banks and guaranteed affiliates, and give more deference to foreign regulators.

Frustrated by the different approaches between the two regulators, a bipartisan group of lawmakers in the House of Representatives on Wednesday passed a bill that would force the CFTC and SEC to jointly write rules and exempt trading outside the United States unless the foreign country did not have equivalent rules.

The House bill is at odds with the position of several influential senators. Earlier this year, Senator Carl Levin, a Michigan Democrat, also said he feared the CFTC might water down the rules.

In a letter to regulators, he pointed to a London-based trader at JPMorgan, whose credit derivatives trades cost the bank $ 6.2 billion in losses, as an example of why U.S. rules should be applied more broadly.

Warren said she opposes the House bill, which also received a veto threat from President Barack Obama earlier in the week.

“I understand the CFTC and the SEC are operating under different statutory authorities here, but I think the SEC’s rules fall short,” Warren said. “The CFTC’s approach is far better.”

(Reporting by Sarah N. Lynch and Douwe Miedema; Editing by Karey Van Hall and Xavier Briand)

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Reuters: Politics

Senator Warren calls for tough cross-border swap rules

Wednesday, May 15, 2013

Elizabeth Warren to Obama Administration: Take the Banks to Court, Already!

On Tuesday, fierce consumer advocate and needler of banks Sen. Elizabeth Warren (D-Mass.) called out Wall Street regulators for their habit of giving tepid punishments to misbehaving banks, and asked the agencies to justify their policy of settling with the wrongdoers out of court.

Warren sent a letter to the Justice Department, as well as to the Securities and Exchange Commission and the Federal Reserve, asking them for evidence on how a settlement that doesn’t require a bank to admit guilt would be better policy than taking the bad apple to trial. If regulators at least show that they are willing to play tough, she argued, it will help deter bad behavior and allow regulators to negotiate bigger fines in the event of a later settlement.

Continue Reading »

Politics | Mother Jones

Elizabeth Warren to Obama Administration: Take the Banks to Court, Already!