Warren Buffett’s Berkshire Hathaway scores $17 billion gain across 5 stocks as value stages a comeback

warren buffett
Warren Buffett.

  • Warren Buffett has racked up $17 billion in gains across just five stocks this year.
  • Berkshire Hathaway’s Bank of America stake has soared in value by $9 billion.
  • Buffett is up more than $1 billion on Kraft Heinz, GM, and US Bancorp in 2021.
  • See more stories on Insider’s business page.

Warren Buffett is winning big from the flight to value stocks ahead of the global economy reopening this summer. The famed investor’s Berkshire Hathaway conglomerate has notched an astounding $17 billion in gains across only five stocks this year.

Buffett’s company is up $9 billion on Bank of America alone. The banking group’s stock price has surged 30% since the start of January, boosting the value of Berkshire’s enlarged stake from $30 billion to $39 billion.

Moreover, Berkshire has scored a $3.7 billion gain on American Express, as the financial-services group’s stock has jumped 30% this year. It has also made $1.5 billion on Kraft Heinz, $1.4 billion on General Motors, and $1.3 billion on US Bancorp in under three months.

Buffett’s bets on five Japanese trading houses last fall are delivering too. Itochu, Mitsui, Marubeni, Mitsubishi, and Sumitomo shares have gained an average of 26% this year, lifting the combined value of Berkshire’s holdings by $1.6 billion.

Other Berkshire investments are outperforming as well. Chevron, Suncor Energy, and Synchrony Financial have all climbed more than 20% this year, while Wells Fargo – previously one of Berkshire’s biggest holdings – has rallied 37%. Meanwhile, the benchmark S&P 500 index is up 5.8% this year.

However, Berkshire’s gains have been partly offset by the recent exodus from tech stocks. Apple – which makes up more than 40% of Buffett’s US stock portfolio – has slumped 7% this year. The decline has wiped close to $8 billion off the value of Berkshire’s stake.

Berkshire has also taken a hit from Coca-Cola, leaving its shares worth about $900 million less today than at the start of January. The company’s also down about $400 million on both Snowflake and Verizon.

Buffett’s signature approach of sniffing out high-quality, undervalued businesses and investing for the long term is finally paying off. Yet if growth stocks do take off again, his Apple wager will likely flourish. It appears Buffett’s found a way to have his cake and eat it too.

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Treasury yields spike to highest in 14 months, pulling tech stocks down while boosting banks

GettyImages 1229890667
Fed Chairman Jerome Powell.

  • The 10-year Treasury yield pushed past 1.7% on Thursday, marking a fresh 14-month high for the benchmark note.
  • The 30-year yield also made a notable move by rising to 2.5% for the first time in more than a year.
  • Tech stocks were losing ground but bank shares advanced on the back of richer yields.
  • See more stories on Insider’s business page.

Borrowing costs quickly picked up pace Thursday as the benchmark 10-year Treasury note yield surged to a fresh 14- month high, with the move pressuring tech stocks but bolstering bank shares.

The 10-year yield climbed to an intraday high of 1.754%, a leap of nine basis points since ending at 1.64% on Wednesday. Meanwhile, the 30-year yield on Thursday rose to 2.5% for the first time since August 2019. That yield on Wednesday settled at 2.437%.

Investors keep a close watch on long-dated yields as they are tied to a range of lending programs such as mortgages and auto loans. Yields have been rising, while bonds sell off, as investors continue to price in expectations of higher inflation as the US economy recovers from the COVID-19 crisis.

But the increase in borrowing costs has stoked selling in growth stocks, including large-cap tech stocks that have run up over the past year. Thursday’s moves included Apple falling by 2.3%, Google’s parent company Alphabet down by 1.1%, and Microsoft losing 1.7%. The Nasdaq Composite, home to numerous tech stocks, lost 1.4%, and the S&P 500‘s information technology sector slumped 1.5%.

The 10-year yield on Wednesday reached its highest since January 2020 as investors positioned themselves before the Federal Reserve released its policy decision and economic projections. The central bank’s upgraded economic outlook included its view that gross domestic product will expand by 6.5% this year, up from the prior estimate of 4.2%. The 10-year yield pulled back from the 1.6% area during Wednesday’s session before roaring higher again on Thursday.

“Right now the market is pricing in a rate hike in the latter half of 2022, which we think is very early and, in fact, it’s nearly mathematically impossible for the Fed to hike in 2022 if they truly intend to look past transitory inflation,” Calvin Norris, US rates strategist at Aegon Asset Management, told Insider on Thursday. “What the market is implying is the Fed is going to cave on this persistency-of-inflation idea.”

Fed Chairman Jerome Powell on Wednesday reiterated the central bank’s stance of allowing inflation to rise past 2% to support growth in the labor market and the economy before it starts raising interest rates.

While tech stocks sold off, bank stocks charged up, with Bank of America gaining 4.1%. Banks aim to lend money on long-term rates and the increase in long-dated yields improves their prospects for growth in interest income.
Wells Fargo climbed 3.8% and JPMorgan Chase popped up 3.5%.

Also, the Invesco KBW Bank ETF tacked on 3% and the SPDR S&P Regional Banking ETF gained 3.2%.

“While it’s difficult to say when this might occur but we’re kind of setting the stage for some type of counter-trend rally here in Treasuries,” said Norris. “Treasuries are oversold, sentiment is extremely bearish, Treasuries are very cheap to foreign buyers,” he said.

“I think the market is trying to challenge the Fed. But if you do believe the Fed and the projections for growth and inflation, valuations look very attractive at these levels. Not to say that they can’t get cheaper and be more attractive but we’re at those levels that I think it’s difficult to add to short positions in here,” Norris added.

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JPMorgan Chase and Wells Fargo aren’t giving customers their $1,400 stimulus checks until March 17. Other banks have paid out already.

Wells Fargo ATM
A Wells Fargo ATM during the coronavirus pandemic.

  • JPMorgan Chase and Wells Fargo customers won’t get their $1,400 stimulus checks until at least March 17.
  • Some people with other banks have already got their checks.
  • The banks say they are working off the official IRS payment date.
  • See more stories on Insider’s business page.

Customers with JPMorgan Chase and Wells Fargo aren’t getting their $1,400 stimulus checks until at least March 17, while customers with some smaller banks have them already.

The latest round of stimulus checks arrived in some people’s accounts on Friday, after President Joe Biden signed the $1.9 trillion stimulus package on Thursday.

Biden celebrated the fast payment over the weekend, tweeting that the payments had begun and that “help is here.”

But the two major banks told their customers that they won’t be able to access the funds until Wednesday.

Chase says in a statement on its website that “We expect that electronic stimulus payments will be available in eligible Chase accounts as soon as Wednesday, March 17, 2021.”

And Wells Fargo says that it “will process all of the direct deposits according to the effective date provided by the US Treasury” – which is March 17.

It said on Twitter that “Customers who are eligible to receive direct deposit of their stimulus payment may expect it as soon as March 17, 2021.”

The IRS said that the “official payment date” is March 17. However, the agency noted that some payments could arrive sooner.

The Wall Street Journal reported on Friday that banking apps Chime and Current had said they had already started depositing the money into some customers’ accounts.

Chime tweeted on Friday: “These payments will be available at traditional banks on 3/17 but Chime members already have access and more is on the way.”

The Journal noted that in previous rounds of coronavirus stimulus checks the money sometimes took days to show up for people with accounts at larger banks.

Some people were angry at the banks for not putting money in accounts earlier:

Wells Fargo said in a statement to HuffPost that it is following the IRS plans.

“We know the importance of the stimulus funds to our customers, and we are providing the payments to our customers as soon as possible on the date the funds are available – based on IRS direction,” it said.

“Wells Fargo is not holding the funds.”

The IRS also noted that the checks will not arrive to all people at once.

Some of the payments could take weeks, especially for people receiving the money in physical form, either via paper checks or debit cards int he mail.

The IRS also says that that people can track the status of their checks with its “Get my Payment” portal.

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Stimulus checks are starting to hit Americans’ bank accounts this weekend, but some may not be able to access the money right away

Angry man arguing during conference call on laptop
Some Americans may not be able to access their federal cash this weekend.

  • Many Americans are seeing $1,400 stimulus checks in their bank accounts, but they may not be able to access the money immediately.
  • The IRS said it is officially releasing the payments on March 17.
  • That means it may take several more days for the checks to clear at major financial institutions.
  • See more stories on Insider’s business page.

Many Americans are seeing $1,400 stimulus checks hit their bank accounts this weekend under President Joe Biden’s stimulus law. But people may not be able to immediately tap into it – at least, not until St. Patrick’s Day at the earliest.

The direct payments, which the IRS labeled as “Economic Impact Payments,” are set to be paid out on March 17, per the agency.

“As with the first two Economic Impact Payments in 2020, most Americans will receive their money without having to take any action,” the IRS said on its website. “Some Americans may see the direct deposit payments as pending or as provisional payments in their accounts before the official payment date of March 17.”

That means it could take several more days for the relief checks to clear at major banks like Wells Fargo. Others such as Chase said on their website it expected to release the payouts March 17 and after.

“Wells Fargo will process all of the direct deposits according to the effective date provided by the U.S. Treasury,” the bank said in numerous follow-up tweets to customers frustrated with the delay.

Some digital banks, like Chime, however, said they authorized clients to instantly access their federal cash. On Friday, they issued a “stimmy alert” on Twitter saying the service had already distributed $600 million.

Chime did not immediately respond to a request for comment on their decision.

The IRS also said Friday that people can begin tracking the status of their checks using the “Get my Payment” portal on Monday. The agency also said it expects to issue more direct deposits and send payments as a check or debit card over the coming weeks.

Singles earning up to $75,000 in adjusted gross income qualify for the full amount, along with couples making up to $150,000. Each adult dependent is eligible for a check as well.

However, the stimulus payments phase out much quicker. Individuals earning above $80,000 and couples making above $160,000 will not receive anything.

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A top Wells Fargo exec shares a strategy any leader can use to create an inclusive workplace culture

Lisa McGeough
Lisa McGeough, head of Wells Fargo’s international banking operations, said leaders shouldn’t be afraid to call out bias when they see it.

  • Lisa McGeough leads all of Wells Fargo’s international banking operations.
  • She said calling out microaggressions is crucial to creating an inclusive workplace culture.
  • Leaders must get comfortable having uncomfortable conversations around bias, she said.
  • This article is part of a series called “Leaders by Day,” which takes a look at how prominent business leaders are tackling various challenges in today’s economy.

Lisa McGeough leads Wells Fargo’s international banking operations, which encompasses all the firm’s businesses across the Americas, Asia Pacific, and Europe, Middle East, and Africa.

In other words, she’s one of the most important people at the bank, and one of a select few women who’ve broken the finance world’s glass ceiling, or the set of barriers that hold women back from the industry’s top positions.

According to Deloitte research from 2019, women hold only 22% of leadership roles in finance. While the number of women in leadership roles is expected to grow to 32% by 2030, that’s still well below parity.

Microaggressions, or subtle forms of discrimination and prejudice, are a major reason why more women and others from underrepresented backgrounds aren’t able to climb the corporate ladder, McGeough said.

Calling out microaggressions is one important part of creating an inclusive environment where everyone can succeed, she said.

“We must address all aspects of diversity in both our recruiting and managing strategies, asking difficult questions about where we don’t measure up and why?” she said.

McGeough knows from experience just how microaggressions can turn a workplace toxic. She shared her suggestions for any leader to address microaggressions in the workplace.

Learning from her own experience

Since starting at her first banking job in 1984, McGeough has experienced many subtle forms of bias.

Male colleagues would say things like “You’re so good at note-taking” or “I didn’t know you were interested in golf.”

She even had one manager who insisted she go home to take care of her kids instead of offering her the opportunity to cover clients who required extensive travel. This was despite her insistence she was the family’s breadwinner.

“If microaggressions are left unchecked or are not addressed in real time, they can create an exceptionally negative workplace environment and culture,” she said.

Today, as a leader, she uses her past experience to inform how she oversees her direct reports. She has a zero-tolerance policy for microaggressions, and will call them out.

How to call out microaggressions

In the wake of the racial reckoning happening in the US after the murder of George Floyd, fighting prejudice in the workplace is no longer an option. Employees, customers, and investors are demanding more diverse and inclusive companies.

In addition to the moral imperative, it’s also crucial for business. Microaggressions alienate employees, increase stress, and lead to a decrease in productivity, McGeough said.

A study based on over 11 million survey comments by Peakon, an employee engagement platform, revealed that a poor office environment is one of the top three reasons why people quit their jobs.

The first step, Sheena Howard, associate professor of communication for the online Masters of Business Communication program at Rider University, previously told Insider, is to remain calm. Then, address the comment in a direct and composed manner.

McGeough said managers shouldn’t be afraid to say things like “She was talking,” “Don’t interrupt them,” “What did you mean by that?” “Let her finish,” and “Don’t talk over them.”

“It’s essential that leaders and managers prioritize building diverse and inclusive teams,” she said.

Facebook COO Sheryl Sandberg recently told Insider that the key to creating a more inclusive environment is not being afraid to have uncomfortable conversations. McGeough agreed.

“Leaders must challenge this behavior by addressing it directly,” she said.

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A top exec at Wells Fargo shares the career moves that helped her crack the glass ceiling

Lisa McGeough
Lisa McGeough says being the CEO of your career means you actively take control of it, rather than passively waiting for success to come your way.

  • Lisa McGeough, head of international banking at Wells Fargo, shared how she broke the glass ceiling. 
  • Deloitte research from 2019 shows that women hold only 22% of leadership roles in finance.
  • The glass ceiling is the set of obstacles women face when trying to ascend to top corporate positions. 
  • Visit the Business section of Insider for more stories.

When Lisa McGeough first walked onto the fixed income trading floor at Salomon Brothers (which was later acquired by Citi) in 1984, she was one of about 12 women in her class. There were more than some 65 men. 

McGeough, then 21, quickly learned she was in a man’s world. And the odds were not in her favor. 

Over the years, she’d experience numerous microaggressions from her male colleagues.  

“Girls can’t trade.” 

“You’re so good at note-taking.” 

“I didn’t know you were interested in golf.”

But she refused to let them get to her. Today, McGeough holds one of the highest positions in finance. She leads Wells Fargo’s international banking operations, which encompasses all the businesses across the Americas, Asia Pacific and Europe, Middle East, and Africa. 

“It was a tough place, the trading floor,” McGeough told Insider. “But that’s where I developed my resilience because I was not able to change the culture. I had to adapt to the culture, and survive the culture, and then thrive within the culture.” 

There’s been progress toward gender equality since the 1980s. Social norms have changed. The recent #MeToo movement has forced leaders to take a hard look at sexual harassment and the lack of women in leadership within their own walls. 

The Civil Rights Act of 1991, for example, gave people suing for workplace discrimination more rights and forced employers to take claims more seriously. 

Yet, at the same time, many things have remained the same. Executive positions are still mostly occupied by white men. Out of all the CEOs on the Fortune 500 list, only about 37 are women. There are only 6 black CEOs. 

There’s still a glass ceiling, a set of barriers women face when trying to climb the corporate ladder and make it into the C-suite. According to Deloitte research from 2019, women hold only 22% of leadership roles in finance. While it’s expected to grow, to 32% by 2030, that’s still well below parity.  

Approximately 48% of senior leaders at Wells Fargo are women, according to company data provided to Insider. Some 25% are racially or ethnically diverse and 9% are Black. 

Industry leaders like Salesforce and Amazon still wrestle with workplace discrimination, according to reports. And businesses across a range of industries show disappointing diversity numbers when it comes to their executive leadership. 

This is despite women holding 50% of entry-level positions, according to 2019 research from McKinsey and LeanIn. 

McGeough cracked the ceiling, though. For International Women’s Day, she reflected on how she did it. 

Learning the value of hard work 

McGeough said she’ll never forget visiting her immigrant grandparents. Her grandmother, who emigrated from Italy, worked two jobs – one at a men’s tailor shop and another at a local garden. She’d come home, pick food from the family’s garden in their backyard, cook dinner, and then would routinely stay up until nearly 3 a.m. sewing clothes for the family. 

McGeough’s parents, who owned an IT company in Chicago, encouraged her and her three younger siblings to work hard in school and in life. 

“It’s been in my psyche for my whole life, watching them as role models and how hard they worked,” she said. “Hard work, focused dedication, and resilience are the things that I got from them.” 

McGeough attended Bowdoin College in Maine, graduating with a degree in economics. Shortly after, she began a three-year career at Salomon Brothers. 

She worked hard to make it in the cut-throat world of finance, facing constant microaggressions and bosses who didn’t believe in her abilities. 

But she stayed determined. 

“No, one’s going to knock me out,” she’d tell herself. “No, one’s going to win. I am going to be the one that’s going to. I’m going to survive and I’m going to thrive.”  

Hard work alone, however, didn’t make her an executive, she said. 

“There is no fairy godmother. There’s no person who’s going to just notice you and pull you into a high level role,” she said.  

Be the CEO of your career

Lisa McGeough
McGeough said women and people from underrepresented groups should have a team of people who know their hard work and can advocate for them in rooms where decisions are being made.

Women and other professionals from underrepresented groups have to be more active about how they plan their career growth, she told Insider.  

Her philosophy boils down to a simple catchphrase: “Be the CEO of your career.” 

In other words, take charge of your career, as a CEO would take charge of their company. Actively advocate for yourself.

For example, do not assume your manager or your manager’s manager will notice your hard work, she said. Keep track of your progress, she said, and bring it up in meetings, especially when it comes time to performance reviews.

Make sure your career has a “board of directors,” or a group of people who can help you along the way and advocate for you. 

“It’s not just your boss. It’s your clients, a lateral manager, mentors or sponsors,” she said. 

They can advocate for you when you’re not in the rooms where decisions are being made. 

By having a board of directors, McGeough said she was recommended for roles that other women were passed up for. 

Know when to move and look for new opportunities 

Women have to know when to leave a job where they can no longer grow.

For McGeough, that happened when she had a manager who insisted she go home to take care of her kids instead of offering her the opportunity to cover clients who required extensive travel. This was despite her insistence she was the family’s breadwinner. 

After that experience she knew she had to get out.

Career progress often isn’t a straight path, but rather a series of lateral moves, she said. Some of those moves happened when she saw an opportunity, raised the issue with leadership, and pitched herself for the role. 

“I raised my hand to do something very hard that no one else was doing. And there was a very large gap in this particular role that I observed,” she said. “Take risks, be uncomfortable.” 

Now, as a leader, she actively advocates for up-and-coming talent, especially women and those from underrepresented backgrounds. 

“How do I advocate for this talented woman or diverse person on my team to give them the visibility that they need? Because I’ve experienced what they’re experiencing now. How do I create a diverse leadership team?” 

Those are questions she says more leaders should be thinking about, she said. 

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Big banks, including Deutsche Bank and Bank of America, are testing employees for COVID-19 before they step into the office. Insider took a closer look at their plans.

Arizona covid-19 testing coronavirus
Physician John Jones, D.O. tests administrative assistant Morgan Bassin for COVID-19 at One Medical in Scottsdale, Arizona.

  • As COVID-19 continues to spread, big banks worldwide are monitoring staff that come into the office.
  • Deutsche Bank, Credit Suisse, and BoA are all testing employees for COVID-19, sources told Insider.
  • JPMorgan and Wells Fargo said they require employees to complete a health check before they arrive.
  • Visit the Business section of Insider for more stories.

Major banks worldwide have launched COVID-19 testing programs in order to enable a return to work for some employees during the pandemic.

Some banks are offering their staff lab-based PCR tests, which are considered the most accurate way of detecting coronavirus, but they can cost around $100 to process, per The New York Times. Results of PCR tests usually come back within a couple of days.

Other banks are providing antigen tests, also known as lateral flow tests, which give results in about 15 to 30 minutes. Both antigen and PCR tests require swabbing the nose or throat.

“I have been back at work since the start of the year and have been asked to produce three negative test results every week,” a source who works in a bank in London told Insider on the condition of anonymity. “It’s a bit stressful but the antigen tests are quick and I have got into a nice routine now. It’s also nice to be able to go back to work, although I miss the pre-COVID office environment,” they said.

However, a number of other banks are asking employees to fill out questionnaires about possible symptoms and exposure to the virus before they come into the workplace.

Insider spoke with sources working in banks across the world to get a sense of return-to-work plans. 

Deutsche Bank

Twice a week, Deutsche Bank is testing UK employees considered key workers that work on the busiest floors in the office, sources familiar with the system said. They are being tested with PCR tests. It’s unclear whether staff working on other floors are being also tested.

Deutsche Bank declined to comment to Insider.

Bank of America

Bank of America is testing employees on a weekly basis if they’re coming into the office, according to sources familiar with the matter. The testing is currently targeted at UK offices, and there are plans to roll out the tests to the rest of Europe, the Middle East, and Africa region. 

Bank of America declined to comment.

Read more: Bank of America has promoted 86 managing directors in its sales and trading, research, and operations groups – here are all the names

JPMorgan

JPMorgan told Insider that employees coming into the workplace in all locations are required to take a daily health check before entering an office. The health check is a survey that can be completed via mobile or laptop, and asks if you’ve been exposed or in close contact with someone who is infected with COVID-19 or showing related symptoms.

The bank said the daily health checks had been in place since the pandemic began in March.

On top of this, JPMorgan is also sending at-home testing kits to staff, if they want one. Employees are also able to book a PCR COVID-19 test at one of the bank’s on-site health and wellness centers.

Wells Fargo

A Wells Fargo spokesperson confirmed to Insider that all workers who go into the bank are required to complete a self-screening assessment, which involves filling out a questionnaire about whether they have symptoms or have been exposed to COVID-19. They must complete this every day before entering the workplace, the spokesperson said.

In its largest US locations, the bank has an on-site nurse to check staff for COVID-19 symptoms and refer them for testing.

Credit Suisse

Sources familiar with the situation at Swiss bank Credit Suisse said it is offering its staff in London weekly testing, despite only a small number of them coming into the workplace. Credit Suisse declined to comment.

Citibank and Barclays could not be reached for comment. HSBC didn’t respond to Insider’s request for comment.

Are you an employee in the banking sector being tested for COVID-19 on a daily basis? Get in touch with this reporter via email: kduffy@insider.com.

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Warren Buffett’s right-hand man blasted Robinhood, slammed SPACs, dismissed bitcoin, and warned against speculating at the Daily Journal annual meeting. Here are the highlights.

charlie munger
Charlie Munger.

Warren Buffett’s right-hand man issued a warning to stock-market speculators, criticized the trading platforms enabling them, blasted SPACs, and downplayed the significance of bitcoin at the Daily Journal annual meeting on Wednesday.

Charlie Munger, the vice-chairman of Buffett’s Berkshire Hathaway, is also the chairman of Daily Journal, a newspaper publisher and software developer.

Here’s a roundup of the 97-year-old executive’s key comments during the meeting, lightly edited and condensed for clarity.

Market speculation

“These things do happen in a market economy, you get crazy booms. I’ve been around for a long time and my policy’s always been to just ride it out.”

“A lot of investors are buying stocks in a frenzy, frequently on credit, because they see them going up. That’s a very dangerous way to invest.”

“Shareholders should be more sensible and not crowd into stocks and just buy them just because they’re going up and they like to gamble.”

“I think it must end badly but I don’t know when.”

GameStop

“That’s the kind of thing that can happen when you get a whole lot of people who are using liquid stock markets to gamble the way they would bet on racehorses.”

“The frenzy is fed by people who are getting commissions and other revenues out of this new bunch of gamblers. When things get extreme you have things like that short squeeze.”

“It’s very dangerous and it’s really stupid to have a culture which encourages as much gambling in stocks by people who have the mindset of racetrack bettors. Of course that is going to cause trouble, as it did.”

Robinhood and trading apps

“If you’re selling people gambling services where you make profits off the top like many of these new brokers who specialize in luring gamblers in, it’s a dirty way to make money and I think we’re crazy to allow it.”

“[Wretched excess in the financial system] is most egregious in the momentum trading by novice investors lured in by new types of brokerage operations like Robinhood. All of this activity is regrettable, civilization would do better without it.”

“Human greed and the aggression of the brokerage community creates these bubbles from time to time. Wise people just stay out of them.”

“When you pay for order flow, you’re probably charging your customers more in pretending to be free. It’s a very dishonorable, low-grade way to talk. Nobody should believe that Robinhood’s trades are free.”

Stock valuations when interest rates are low

“Everybody is willing to hold stocks at higher price-earnings multiples when interest rates are as low as they are now. I don’t think it’s necessarily crazy that good companies sell at way higher multiples than they used to.”

“On the other hand, I didn’t get rich by buying stocks at high price-earnings multiples in the midst of crazy, speculative booms, and I’m not going to change.”

SPACs

“The world would be better off without them. This kind of crazy speculation, in enterprises not even found or picked out yet, is a sign of an irritating bubble. The investment-banking profession will sell shit as long as shit can be sold.”

Bitcoin

“I don’t think bitcoin is going to end up the medium of exchange for the world. It’s too volatile to serve well as a medium of exchange.”

“It’s really kind of an artificial substitute for gold and since I never buy any gold, I never buy any bitcoin. I recommend that other people follow my practice.”

“[The Daily Journal] will not be following Tesla into bitcoin.”

Tesla and bitcoin

Munger was asked to choose which was more ridiculous, bitcoin trading at $50,000 or Tesla’s fully diluted enterprise value of $1 trillion.

He quoted author Samuel Johnson, who when presented with two choices, said, “I can’t decide the order of precedency between a flea and a louse.”

“I feel the same way about those choices,” Munger said. “I don’t know which is worse.”

Banks

“Banking, run intelligently, is a very good business. The kind of executives who have a Buffett-like mindset and never get in trouble are a minority group, not a majority group.”

“It’s hard to run a bank intelligently. There’s a lot of temptation to do dumb things which will make the earnings next quarter go up, but are bad for the long term.”

Wells Fargo

“There’s no question that Wells Fargo has disappointed long-term investors like Berkshire. The old management were not consciously malevolent or thieving, but they had terrible judgment in having a culture of cross-selling, with incentives on the poorly paid employees that were too great to sell stuff the customers didn’t really need.

“When the evidence came in that the system wasn’t working very well because some of the employees were cheating some of the customers, they came down hard on the employees instead of changing the system. That was a big error in judgment. It’s regrettable.”

“You can understand why Warren got disenchanted with Wells Fargo. I’m a little more lenient. I expect less out of bankers than he does.”

BYD

“BYD stock did nothing for the first five years we held it and last year it quintupled. What happened was that BYD is very well-positioned for the transfer of Chinese automobile production from gasoline-driven cars to electricity-driven cars.”

“It’s in a wonderful position and that excited the people in China – which has its share of crazy speculators – and so the stock went way up.”

Selling overvalued stocks

“I so rarely hold a company like BYD that goes to a nosebleed price, that I don’t think I’ve got a system yet. I’m just learning as I go along.”

Costco

“It’s been amazing that one little company, starting up not all that many decades ago, could become as big as Costco did, as fast as Costco did. Part of the reason for that was cultural. They have created a strong culture of fanaticism about cost and quality and efficiency and honor, all the good things, and it’s all worked.”

“People really trust Costco to deliver enormous values and that is why Costco presents some danger to Amazon. They’ve got a better reputation for providing value than practically anybody, including Amazon.”

Value investing

“Value investing, the way I conceive it, is always wanting to get more value than you pay for when you buy a stock. That approach will never go out of style.”

“All good investing is value investing. It’s just that some people look for value in strong companies and some people look for value in weak companies.”

Portfolio diversification

“In wealth management, a lot of people think that if they have 100 stocks, they’re investing more professionally than they are if they have four or five. I regard this as insanity, absolute insanity.”

“I’m way more comfortable owning two or three stocks which I think I know something about and where I think I have an advantage.”

Amazon founder Jeff Bezos

“I’m a great admirer of Jeff Bezos, whom I consider one of the smartest businessmen who ever lived.”

Alibaba founder Jack Ma

“Jack Ma was very arrogant to be telling the Chinese government how dumb they were and how stupid their policies were and so forth. Considering their system, that is not what he should have been doing.”

The pandemic enriching the wealthy

“We were trying to save the whole economy under terrible conditions. We made the rich richer not as a deliberate choice; it was an accidental byproduct of trying to save the whole civilization. It was probably wise that we acted exactly as we did.”

Modern monetary theory

“So far, the evidence would be that maybe the modern monetary theory is right. Put me down as skeptical.”

Inequality

“I’m way less afraid of inequality than most people who are bleating about it. Inequality is absolutely an inevitable consequence of having the policies that make a nation grow richer and richer and elevate the poor. I don’t mind a little inequality.”

Politics

Munger bemoaned the rising amount of “hatred and irrationality” in politics, but argued the country had been well-governed for the past century.

“The system of checks and balances and elections that our founders gave us, actually gave us pretty much the right policies during my lifetime, and I hope that will continue in the future.”

The evolution of business

“Long-term business success is a lot like biology. In biology, the individuals all die and eventually so do all the species. And capitalism is almost as brutal as that.”

“Think of what’s died in my lifetime. Who ever dreamed when I was young that Kodak and General Motors would go bankrupt? It’s incredible what’s happened in terms of the destruction.”

Lifelong learning

“I think I had the right temperament. When people gave me a good idea, I quickly mastered it and started using it and just used it for the rest of my life. It’s such a simple idea. Without the method of learning, you’re like a one-legged man in an ass-kicking contest.”

Psychology

“It’s one of the most ignorant professions in the world,” Munger said, highlighting that many psychologists fail to connect their theories and insights with other types of knowledge.

Adapting to technological change

“If you have a fixable disadvantage, remove it, and if it’s unfixable, learn to live without it. What else can you do?”

Challenging one’s beliefs

“I’m not really equipped to comment on a subject until I can state the arguments against my conclusion better than the people on the other side. If you’re looking for disconfirming evidence, that’s a good way to help remove ignorance.”

“When we shout our knowledge out, we’re really pounding it in, we’re not enlarging it.”

Early-stage investments

“Warren and I are better at buying mature industries than we are at backing startups. I would hate to compete with Sequoia in their field, they would run rings around me.”

“I got close to Sequoia when, with Li Lu, we bought into BYD. We were buying into a venture-capital-type investment, but in the public market. With that one exception, I’ve stayed out of Sequoia’s business because they’re so much better at it than I would be.”

The Queen’s Gambit and investing

“I have seen an episode or two. What I think is interesting about chess is to some extent, you can’t learn it unless you have a natural gift. And even if you have a natural gift, you can’t be good at it unless you start playing at a very young age and get huge experience.”

“Any intelligent person can get to be pretty good as an investor and avoid certain obvious traps, but I don’t think everybody can be a great investor or a great chess player.”

Do managers have a moral responsibility to have their shares trade as close to fair value as possible?

“I don’t think you can make that a moral responsibility because if you do that, I’m a moral leper. The Daily Journal stock sells way above the price I would pay if I were buying a new stock.”

“The management should tell it like it is as all times and not be a big promoter of its own stock.”

Oil and gas

“The oil-and-gas industry will be here for a long, long time even if we stop using many hydrocarbons in transportation. The hydrocarbons are also needed as chemical feedstocks. I’m not saying that oil and gas is going to be a wonderful business, but I don’t think it’s going away.”

Wealth and happiness

“Most people are born with a happy stat, and their happy stat has more to do with their [inherent] happiness than their outcomes in life,” Munger said. He argued that most people wouldn’t be significantly happier if they were richer or much more miserable if they were poorer.

Physics and investing

“I don’t use much physics in solving my investing problems. Occasionally some damn fool will suggest something that violates the laws of physics, and I will always turn off my mind the minute I realize the poor bastard doesn’t know any physics.”

Marriage

“A little wisdom in spouse selection is very desirable. You can hardly think of a decision that matters more to human felicity than who you marry.”

Creativity in old age

“I don’t have any wonderful new thoughts. To the extent that my thoughts have helped my life, I’ve pretty well run the course. I don’t think I’m likely to have any new thoughts that are going to work miracles either. But I find that the old ways of doing things still work. I’m kind of pleased that I’m still functioning at all. I’m not trying to move mountains.”

Secrets to a long, happy, and healthy life

“I’m alive because of a lucky genetic accident. I don’t have any secrets. I think I would have lived a long time if I’d lived a different life.”

“The first rule of a happy life is low expectations. If you have unrealistic expectations, you’re going to be miserable all your life. Also, when you get reverses, if you just suck it up and cope, that helps more than if you just fretfully stew yourself into a lot of misery.”

Rose Blumkin [of Nebraska Furniture Mart] had quite an effect on the Berkshire culture. Her mottos were, ‘Always tell the truth’ and ‘Never lie to anybody about anything.’ Those are pretty good rules and they’re pretty simple.”

Life after the pandemic

“When the pandemic is over, I don’t think we’re going back to just the way things were. We’re going to do a lot less travel and a lot more Zooming. The world is going to be quite different.”

Read the original article on Business Insider

Warren Buffett’s right-hand man blasted Robinhood, slammed SPACs, questioned bitcoin, and warned against speculating at the Daily Journal annual meeting. Here are the highlights.

charlie munger
Charlie Munger.

Warren Buffett’s right-hand man issued a warning to stock-market speculators, criticized the trading platforms enabling them, blasted SPACs, and downplayed the significance of bitcoin at the Daily Journal annual meeting on Wednesday.

Charlie Munger, the vice-chairman of Buffett’s Berkshire Hathaway, is also the chairman of Daily Journal, a newspaper publisher and software developer.

Here’s a roundup of the 97-year-old executive’s key comments during the meeting, lightly edited and condensed for clarity.

Market speculation

“These things do happen in a market economy, you get crazy booms. I’ve been around for a long time and my policy’s always been to just ride it out.”

“A lot of investors crowd in to buying stocks on frenzy, frequently on credit, because they see them going up. And of course that’s a very dangerous way to invest.”

“Shareholders should be more sensible and not crowd into stocks and just buy them just because they’re going up and they like to gamble.”

“I think it must end badly but I don’t know when.”

GameStop

“That’s the kind of thing that can happen when you get a whole lot of people who are using liquid stock markets to gamble the way they would in betting on racehorses.”

“The frenzy is fed by people who are getting commissions and other revenues out of this new bunch of gamblers. When things get extreme you have things like that short squeeze.”

“It’s very dangerous and it’s really stupid to have a culture which encourages as much gambling in stocks by people who have the mindset of racetrack bettors. Of course that is going to cause trouble as it did.”

Robinhood and trading apps

“If you’re selling people gambling services where you make profits off the top like many of these new brokers who specialize in luring gamblers in, it’s a dirty way to make money and I think we’re crazy to allow it.”

“[Wretched excess in the financial system] is most egregious in the momentum trading by novice investors lured in by new types of brokerage operations like Robinhood. All of this activity is regrettable, civilization would do better without it.”

“Human greed and the aggression of the brokerage community creates these bubbles from time to time. Wise people just stay out of them.”

“When you pay for order flow, you’re probably charging your customers more in pretending to be free. It’s a very dishonorable, low-grade way to talk. Nobody should believe that Robinhood’s trades are free.”

Stock valuations when interest rates are low

“Everybody is willing to hold stocks at higher price-earnings multiples when interest rates are as low as they are now. I don’t think it’s necessarily crazy that good companies sell at way higher multiples than they used to.”

“On the other hand, I didn’t get rich by buying stocks at high price-earnings multiples in the midst of crazy, speculative booms, and I’m not going to change.”

SPACs

“The world would be better off without them. This kind of crazy speculation, in enterprises not even found or picked out yet, is a sign of an irritating bubble. The investment-banking profession will sell shit as long as shit can be sold.”

Bitcoin

“I don’t think bitcoin is going to end up the medium of exchange for the world. It’s too volatile to serve well as a medium of exchange. It’s really kind of an artificial substitute for gold and since I never buy any gold, I never buy any bitcoin. I recommend that other people follow my practise.

“[The Daily Journal] will not be following Tesla into bitcoin.”

Tesla and bitcoin

Munger was asked to choose which was more ridiculous, bitcoin trading at $50,000 or Tesla’s fully diluted enterprise value of $1 trillion.

He quoted author Samuel Johnson, who when presented with two choices, said, “I can’t decide the order of precedency between a flea and a louse.”

“I feel the same way about those choices,” Munger saiud. “I don’t know which is worse.”

Banks

“Banking, run intelligently, is a very good business. The kind of executives who have a Buffett-like mindset and never get in trouble are a minority group, not a majority group.”

“It’s hard to run a bank intelligently. There’s a lot of temptation to do dumb things which will make the earnings next quarter go up, but are bad for the long term.”

Wells Fargo

“There’s no question that Wells Fargo has disappointed long-term investors like Berkshire. The old management were not consciously malevolent or thieving but they had terrible judgment in having a culture of cross-selling, with incentives on the poorly paid employees that were too great to sell stuff the customers didn’t really need.

“When the evidence came in that the system wasn’t working very well because some of the employees were cheating some of the customers, they came down hard on the employees instead of changing the system. That was a big error in judgment. It’s regrettable.”

“You can understand why Warren got disenchanted with Wells Fargo. I think I’m a little more lenient. I expect less out of bankers than he does.”

BYD

“BYD stock did nothing for the first five years we held it and last year it quintupled. What happened was that BYD is very well-positioned for the transfer of Chinese automobile production from gasoline-driven cars to electricity-driven cars. It’s in a wonderful position and that excited the people in China which has its share of crazy speculators and so the stock went way up.”

Selling overvalued stocks

“I so rarely hold a company like BYD that goes to a nosebleed price, that I don’t think I’ve got a system yet. I’m just learning as I go along.”

Costco

“People really trust Costco to be delivering enormous values and that is why Costco presents some danger to Amazon. They’ve got a better reputation for providing value than practically anybody, including Amazon.”

Value investing

“Value investing, the way I conceive it, is always wanting to get more value than you pay for when you buy a stock. That approach will never go out of style.

“All good investing is value investing. It’s just that some people look for value in strong companies and some people look for value in weak companies.”

Portfolio diversification

“In wealth management, a lot of people think that if they have 100 stocks, they’re investing more professionally than they are if they have four or five. I regard this as insanity, absolute insanity. I’m way more comfortable owning two or three stocks which I think I know something about and where I think I have an advantage.”

Amazon founder Jeff Bezos

“I’m a great admirer of Jeff Bezos, whom I consider one of the smartest businessmen who ever lived.”

Alibaba founder Jack Ma

“I think Jack Ma was very arrogant to be telling the Chinese government how dumb they are. Considering their system that is not what he should have been doing.”

The rich getting richer during the pandemic

“That’s a misplaced concern. Nobody’s was trying to make the rich richer, that was an accidental byproduct of trying to save the economy under terrible conditions. It was probably wise that we acted exactly as we did.”

Modern monetary theory

“Maybe the modern monetary theory is right. Put me down as skeptical.”

Inequality

“I don’t mind a little inequality,” Munger said, describing it as an “inevitable consequence” of a growing economy.

Wealth tax

“Any rich nation ought to have a social safety net that expands a little with its wealth.”

Politics

Munger bemoaned the rising amount of “hatred” in politics, but argued the country had been well governed for the past century.

“The system fo checks and balances and elections that our founders gave us actually gave us pretty much the right policies during my lifetime, and I hope that will continue.”

Haven

“I don’t know anything about Haven,” Munger said, referring to the joint healthcare initiative between Berkshire, JPMorgan, and Amazon that was dismantled recently.

The evolution of business

“Business success long term is a lot like biology. In biology, the individuals all die and eventually so do all the species. And capitalism is almost as brutal. Just look at what’s changed in my lifetime. Who ever dreamed when I was young that Kodak and General Motors would go bankrupt? It’s incredible what’s happened in terms of the destruction.”

Learning

“I think I had the right temperament. When people gave me a good idea I quickly mastered it and used it. It’s such a simple idea. Without the method of learning, you’re like a one-legged man in an ass-kicking contest.”

Psychology

“It’s one of the most ignorant professions in the world,” Munger said, highlighting that many psychologists can’t connect what they know with other types of knowledge.

Adapting to technological change

“If you have a fixable disadvantage, remove it, and if it’s unfixable, learn to live without it. What else can you do?”

Challenging one’s beliefs

“I think I’m not really equipped to comment on a subject until I can state the arguments against my position better than the other side. That’s a good way to help remove ignorance. When we shout our knowledge out, we’re really pounding it in, we’re not enlarging it.”

Zero-commission trading

“Commission-free trading is a very good candidate if you want to emphasize disgusting lies. Commission-free trading is not free.”

Sequoia Capital

“Warren and I are better at buying mature industries than we are at investing in startups. I would hate to compete with Sequoia in their field, they would run rings around me.”

“I got close to Sequoia when, with Li Lu, we bought into BYD. We were buying into a venture-capital-type investment on the public market. With that one exception, I’ve stayed out of Sequoia’s business because they’re so much better at it than I would be.”

The Queen’s Gambit and investing

“I have seen an episode or two. To some extent, you can’t be good at chess unless you have a natural gift, and even if you have a natural gift, you can’t become great at it unless you start playing at a very young age. Any intelligent person can get to be pretty good as an investor and avoid obvious traps, but I don’t think everybody can be a great investor or a great chess player.”

Managers owning their stock

“If you do that I’m a moral leper,” Munger said about the idea that managers have a moral responsibility to own their stock at as close to its fair value as possible.

“The Daily Journal stock sells way above the price I would pay if I was buying a new stock. The management should tell it like it is as all times and not be a big promoter of its own stock.”

Technology and company valuations

“I don’t know how permanent it will be but it’s certainly caused a change,” Munger said about the idea that technology has permanently altered how companies should be valued.

Wealth managers being too active

“The wealth-management industry has a crisis on its hands. They really need the world to stay the way it is. That isn’t necessarily right for its customers.”

Oil and gas

“The oil-and-gas industry will be here for a long, long time even if we stop using many hydrocarbons in transportation. The hydrocarbons are also needed as chemical feedstocks. I’m not saying that oil and gas is going to be a wonderful business, but I don’t think it’s going away.”

Bill Gates and climate change

“I kind of admire the way Bill takes on these very hard problems,” Munger said, adding that he avoids challenges he won’t be good at addressing.

Wealth and happiness

“Most people are born with a happy stat, and their happy stat has more to do with their hap pines than their outcomes in life,” Munger said, arguing that most people wouldn’t be significantly happier if they were richer or much more miserable if they were poorer.

Physics and investing

“I don’t use much physics in investing. Occasionally some damn fool will suggest something that violates the rules of physics, and I will always turn off my mind when I realize the poor bastard doesn’t know any physics.”

Ageing and innovation

“I’ve pretty well run the course. I don’t think I’m likely to have any new thoughts that are likely to work miracles. I’ve found that the old thoughts work well still. I’m kind of pleased that I’m still functioning at all. I’m not trying to move mountains.”

The secret to a long and happy and healthy life

“I don’t have any secrets. I’m alive because of a lucky genetic accident. I think I would have lived a long time if I’d lived a different life.”

“A happy life is very simple. The first rule of a happy life is low expectations. That’s one you can easily arrange. If you have unrealistic expectations, you’re going to be miserable all your life. When you get reverses, if you just suck it up and cope, that helps more than if you just fretfully stew yourself into a misery.”

Rose Blumkin [of Nebraska Furniture Mart] had quite an effect on the Berkshire culture. Her mottos were, ‘Always tell the truth’ and ‘Never lie to anyone about anything.'”

Lessons from the pandemic

“We can do with a lot less travel and a lot more Zooming,” Munger said. “A lot of things are going to change,” he continued, predicting a lot of people will work from home a couple days each week once the pandemic ends.

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Citigroup slashed its Chief Executive Michael Corbat’s compensation by over 20% in 2020

Michael Corbat, CEO of Citigroup
Michael Corbat, CEO of Citigroup

The board at Citigroup Inc. said it cut Chief Executive Michael Corbat’s pay by 20.7% to $19.035 million based on its assessment of his performance in respect to “risk and control concerns,” according to a regulatory filing. 

A consent order issued by regulators in October required Citigroup to fix its risk-management systems. The Federal Reserve Board and Office of the Comptroller of the Currency announced $400 million in fines levied against Citigroup due to “deficiencies in enterprise-wide risk management, compliance risk management, data governance, and internal controls.

Corbat will be retiring at the end of the month and he will be succeeded Jane Fraser, the bank’s president and CEO of its consumer banking division, making her the first woman to serve as the chief executive of a major US bank.

His 2020 annual compensation included his base salary of $1.5 million and a total incentive award of $17.535 million, according to the company.

His compensation is determined by the impact of the pandemic as wall as other factors, including financial and leadership performance. 

Citigroup’s net income fell to $11.4 billion in 2020, compared to net income of $19.4 billion in 2019, according to the company’s statement.

Bank of America is also cutting its CEO Brian Moynihan’s pay by 7.5% to $24.5 million due to the impact of the Coronavirus pandemic, according to the Wall Street Journal. Moynihan’s 2020 compensation included a base salary of $1.5 million and $23 million of restricted stock, the newspaper said. 

Bank of America didn’t respond to Insider’s requests for immediate comments. 

Bank of America’s net income fell 28% to $5.5 billion or $0.59 per share in its fourth quarter of 2020, beating analyst expectations. But its revenue dropped 10% as it was impacted by low interest rates that affected its consumer banking business.

Last month, Wells Fargo slashed its CEO Charles Scharf’s pay by around 12% in 2020 to $20.3 million, according to a regulatory filing disclosure.

Scharf’s annual pay dropped from $23 million in 2019, according to the bank. His earnings in 2020 consisted of a $2.5 million base salary, a cash incentive compensation of $4.4 million, and long-term incentive compensation of $13.5 million, according to the filing.

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