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BUFFETT: 'Be very, very, very suspicious' of a budget trick Trump is about to use

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Warren Buffett

In an interview with CNBC, billionaire investing legend Warren Buffett told people to be wary of a trick the Trump administration is about to use to make the federal budget look more balanced — dynamic scoring.

"Everybody that wants a cut in taxes can hire some academics and they look for dynamic scoring and they say the country will really be better off if I pay less tax," he said. "I don't blame them, it's very understandable. So be very, very, very suspicious of dynamic scoring."

Trump has promised to pass "the biggest [tax cuts] in history", and according to the Tax Policy Center, the corporate tax cut alone could cost the country $2 trillion over the next 10 years.

To do that, and also keep the budget somewhat balanced, the administration will have to use dynamic scoring as Buffett suggested, which essentially allows it to massage the numbers a bit.

Here's how dynamic scoring works: To make tax cuts look as if they wouldn't put a massive hole in the budget, policy wonks estimate the future benefits of tax cuts after making a load of assumptions about how they'll affect economic growth, including about what a future government might do in response to falling tax revenue.

Those imagined benefits are then added to future budget projections, and — BOOM — you've got a healthy-looking balance sheet for America.

We've argued that this is nothing more than a massive generational theft. The Tax Policy Center seems to agree:

"If 'dynamic scoring' means that Congress can use any macroeconomic model it wants, then we are thrown back 100 or 150 years in terms of the rigor of our thinking. There are too many models with a very wide variety of assumptions and implications. It is not exactly true that you can find a model that will support any claims, but this is sometimes uncomfortably close to the truth."

It's nice to have the Oracle of Omaha agree.

SEE ALSO: Trump is about to use a budget trick to steal from an entire generation

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BUFFETT ON GOOGLE: Imagine having a business where ‘a cash register rung somewhere out in California’ every time someone clicks (GOOGL)

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warren buffett

Warren Buffett regrets not investing in Google. 

The Berkshire Hathaway CEO told shareholders on Saturday that he "blew it" even though he understood the company's prospects for growth. 

In an interview with CNBC on Monday, Buffett explained why: Google's search ad business is like a natural monopoly, meaning that the costs of building a company with a similar market share are large enough to fend off any serious takers. Google is poised to get approximately 78% of total US search ad revenues in 2017, according to eMarketer

Here's Buffett: 

"Just imagine having something every time to just hit a click, you know, a cash register rung somewhere out in California. So, it was and is an extraordinary business and it has some aspects of a natural monopoly. I mean, it's very easy for me when I go to a computer.

I've worked with Google before ... I'm looking for information for the annual report. I used to have to mail away to federal agencies or go down to the public library, and now I can get it in 10 seconds. So it's a hugely valuable device, which the other guy pays for. The user of the computer doesn't. The answer is we missed it."

Buffett was speaking specifically about search, just one of several units of Google that include YouTube and Android. Google itself was folded into parent company Alphabet in 2015.

The European Commission, which oversees competition policy, opened an antitrust investigation seven years ago that was prompted by complaints from US and European rivals including Microsoft. Google rejected the case last year after a follow-up case was brought against it, and argued that other major tech companies like Amazon demonstrated that it had not cornered the local market.  

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Here's what to make of Warren Buffett dumping some IBM

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Warren Buffett

When Warren Buffett first announced in 2011 that Berkshire Hathaway had invested billions in International Business Machines, it came as a surprise to many. Buffett has typically kept his distance from the technology sector, instead sticking to businesses that he understands. Technology changes quickly, and predicting which tech companies will be able to thrive far into the future is hard.

But Buffett saw something in IBM. In an interview with CNBC, Buffett laid out his reasoning: "And then we went around to all of our companies to see how their IT departments functioned and why they made the decisions they made. And I just came away with a different view of the position that IBM holds within IT departments and why they hold it and the stickiness and a whole bunch of things."

Buffett viewed IBM's vast, global customer base as a key competitive advantage, one that would allow it to thrive regardless of how technology evolved.

Fast-forward nearly six years, and Buffett has changed his tune. Before Berkshire's annual meeting, Buffett announced that he had sold roughly one-third of his stake in IBM. Buffett cited tough competition, admitting that he was too optimistic when he first bought the stock. He revalued the stock "somewhat downward," saying that he doesn't value it the same way anymore.

What to make of Buffett's mea culpa

Berkshire still owns around 50 million shares of IBM, and Buffett stated that he had stopped selling for the time being. That's good for a $7.6 billion stake, still one of Berkshire's largest. But it's clear that Buffett has lost much of his confidence in IBM.

A lot has changed in the past six years. Cloud computing has gone from a buzzword to a transformative force, upending business models and forcing even the most dominant technology companies to adapt or perish. IBM has been building out its own cloud business, with a heavy focus on enterprise customers, hybrid clouds, and high-value cloud services. Cloud computing has become a big business for IBM, generating $14.6 billion of revenue over the past year.

But many of if its other businesses have been shrinking. Some of this is by design; IBM has sold off major businesses, such as its x86 server business, in the past few years as it focused on growth areas, and it's been shifting resources away from businesses in declining markets. Currency has also been a major headwind, as the bulk of IBM's revenue comes from overseas. The headline numbers have exaggerated IBM's revenue decline over the past few years, but even adjusting for these factors, it's been a slow and steady decline.

ibm revenue q1 2017_large

Buffett was expecting IBM to perform better than it has. The company's $20 annual adjusted EPS target was abandoned in 2014 as profits began to follow revenue lower. IBM generated just $13.59 in adjusted EPS last year, far below its previous goal. Per-share earnings growth is expected to return in 2017, according to the company's guidance, but revenue is still trending downward.

That still translates into a lot of profit. Adjusted net income was $13 billion last year, giving IBM adequate resources to pay a generous dividend, buy back shares, and make strategic acquisitions. Despite all the disruption, IBM is still a cash machine.

But the turnaround, still far from complete, has dragged on, longer than even Warren Buffett is willing to wait. IBM's competitive advantages, while still intact, have deteriorated. IBM's big cognitive computing push, led by Watson, creates a lot of headlines. But it hasn't yet translated into growing revenues.

Buffett could be wrong about being wrong. Many of IBM's initiatives are inherently long-term, taking years to bear fruit. CEO Virginia Rometty has emphasized that revenue growth for the sake of revenue growth is not the goal at IBM. Speaking at a conference in 2015, Rometty said: "What's important is that we grow in the right areas. Tech is littered with areas that you can have high growth and make no money. That's not us."

Buffett's selling IBM isn't a reason for investors to sell, just as Buffett's buying IBM wasn't a reason to buy. The billionaire's about-face comes at a pivotal time for IBM. After years of laying the groundwork, the century-old tech company needs to prove that its dramatic transformation is leading somewhere. Earnings growth this year is a start, but investors looking for revenue growth won't wait forever. 

SEE ALSO: Warren Buffett brilliantly explains how bubbles are formed

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$385 BILLION FUND CHIEF: There are too many fund managers on Wall Street

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Martin Gilbert

Investors have been pouring their money into low-cost index funds at a clip, leaving some people wondering if the active management business is dead.

Warren Buffett, the billionaire every investor looks to for advice, has repeatedly said anyone who gives their money to someone to manage is essentially throwing money away

Business Insider recently asked Martin Gilbert, the head of Aberdeen Asset Management, a $385 billion dollar money manager, whether criticism against active management had any teeth. 

In a wide-ranging interview with Business Insider, Gilbert said he agreed with Buffett in some cases. 

"I think for some investors, just buying an index fund is the right way to go," Gilbert said."Good active fund managers can outperform indices consistently, so if you do find the right active fund manager it's clearly better than a passive fund."

He also said that "there are probably too many asset management companies in the world." Aberdeen has announced a merger with UK peer Standard Life, in a deal that would create a group with a combined £581 billion ($750 billion) in assets under management. Gilbert is due to be co-CEO of the combined group. 

Here's what Gilbert had to say:

Gilbert: I think for some investors, just buying an index fund is the right way to go. Good active fund managers can outperform indices consistently, so if you do find the right active fund manager it's clearly better than a passive fund. In areas like US large cap, which are becoming more and more commoditized, even the Warren Buffett's of this world would buy an active fund rather than passive.

BI: Where does it make sense to invest in active management?

Gilbert: It still makes sense to invest with active fund managers in areas like emerging market equities, global equities, Asian equities, emerging market debt. Any of these areas, there is still huge scope to outperform because of the inefficiencies in these markets. An example would be, you could underweight Russia, overweight India, or underweight India, overweight China. There's a huge asset allocation opportunities, and huge opportunities in stock picking because the markets are relatively inefficient compared to the very efficient large cap markets. 

BI: How do active managers fight back?

Gilbert: Asset management CEOs globally are looking at their business models. They're looking at costs, they're looking at making their businesses more efficient, because they're seeing revenues under pressure all over the world. 

BI: Is the problem that there are just too many asset managers?

Gilbert: I think there are probably too many asset management companies in the world, and I think the place to be is either big or small. The area where it is probably more difficult to be is in the middle ground, where you've got that cost of regulation, you've got the cost of buying your own research, you've got all the costs of running an asset management company without the benefits of a big income producing asset.

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Some of the most powerful people in the US are talking about a massive change to healthcare

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doctor patient concern worry

Once confined to the fringes of debate, the idea of single-payer healthcare is making a comeback with support from some unlikely places.

The single-payer healthcare is a system used by countries including Canada, France, the UK, Australia, and others that in theory provides near universal coverage through the government rather than private insurance companies (some countries use a hybrid public/private structure).

While progressive groups have long pushed for a single-payer system in the US, some of the richest and most powerful Americans — many of them Republicans — have recently brought up the possibility of shifting to the single-payer system.

The most recent, and perhaps most striking, was the admission by Aetna CEO Mark Bertolini, at a private conference, that the US should start considering the idea.

According to Vox's Sarah Kliff, Bertolini told Aetna employees at a town-hall-style meeting that regarding single-payer, "I think we should have that debate as a nation."

Kliff said, according to a person who was in attendance and provided the comments, that Bertolini did not support a total government-run single-payer system, but could be open to a private-public system that is used in some nations.

"So the industry has always been the back room for government," Bertolini said. "If the government wants to pay all the bills, and employers want to stop offering coverage, and we can be there in a public private partnership to do the work we do today with Medicare, and with Medicaid at every state level, we run the Medicaid programs for them, then let’s have that conversation."

The idea for Bertolini is that the government would finance insurers to provide the care, similar to a Medicare-for-all. The Aetna CEO, however, didn't think total government run healthcare was the solution, which makes sense considering it would put him out of business.

"But if we want to turn it all over to the government to run, is the government really the right place to run all this stuff?" Bertolini said. "And that’s the debate that needs to be had. They could finance it, and if there is one financier, and you could call that single-payer."

The shift is understandable for Aetna, since for the first-time most of its business is coming from government programs like Medicare and Medicaid. Additionally, as Bertolini repeatedly likes to point out in interviews, the insurer was the first Medicare provider in 1965.

In addition to the CEO of one of the five largest public insurers in the US, the single-payer idea has also received recent calls of support from American business titans Warren Buffett and Charlie Munger.

charlie munger and warren buffett

Munger, who is a Republican, railed against the current US healthcare system at Berkshire's annual meeting on May 6, and in subsequent interviews said the country should shift to single-payer.

"The whole system is cockamamie," Munger said in an interview with CNBC's Becky Quick on Monday. "It's almost ridiculous in its complexity and it's steadily increasing cost and Warren is absolutely right. It gives our companies a big disadvantage in competing with other manufacturers. They've got single-payer medicine and we're paying it out of the company."

Buffett, when asked by Quick if he supported single-payer said, "I personally do."

Buffett also bemoaned the fact that the US pays roughly 17% of GDP to healthcare costs (according to the Centers for Medicare and Medicaid Services it was 17.8% of GDP in 2015), much higher than any other developed nation. The Berkshire CEO noted that these increased costs for businesses are holding back American competitiveness, rather than the corporate tax rate.

Even President Donald Trump praised Australia's public-private system (the government pays roughly 70% of all healthcare costs) in a meeting with Prime Minister Malcolm Turnbull and in subsequent tweets.

"I shouldn’t say this to our great gentlemen and my friend from Australia … cause you have better healthcare than we do,"Trump said in his meeting with Turnbull on May 5.

After critics noted that Australia has a universal healthcare system in which the government pays roughly 70% of all costs, Trump took to Twitter to defend the comment the next day.

"Of course the Australians have better healthcare than we do — everybody does,"Trump tweeted.

Currently, however, much of the single-payer debate is simply talk. The Republican bill to repeal and replace Obamacare is more of a step away from single-payer and the GOP's control over Congress and the White House makes any movement towards single-payer unlikely.

There is some work being done on the state level, though. Both California and Illinois are discussing legislation that would provide single-payer in those states. Other states have also discussed the issue in the past.

While the government is unlikely to adopt the change anytime soon, the growing burden of healthcare costs has driven insurance CEOs, wealthy investors, and even indirectly the president, to bring up single-payer as a possible solution.

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Bill Gates tweeted some advice for new college grads — here's what he had to say

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bill gates harvard commencement

Bill Gates used Twitter on Monday morning to offer some words of wisdom to the class of 2017.

Here's what he had to say.

SEE ALSO: This is the 'safest' age to give your child a smartphone, according to Bill Gates

Like most good commencement speakers, he started with some levity.



But he made a quick pivot and shared an interesting piece of information: the field he would pursue if he were beginning his career in 2017.



Gates, who dropped out of Harvard after his sophomore year, said there were several things he wished he had known when he left.



See the rest of the story at Business Insider

24 mind-blowing facts about Warren Buffett and his $70 billion fortune

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Warren Buffett

With a net worth of over $70 billion, Warren Buffett is the second-richest person in the world, behind only his good friend Bill Gates.

But to those who knew him from the beginning, Buffett's success comes as no surprise: He was picking out stocks at 11 years old and had amassed the equivalent of $53,000 in today's dollars by the time he was 16

Inspired by a Quora thread asking "What are some mind-blowing facts about Warren Buffett," we rounded up 24 astonishing facts about the "Oracle from Omaha" and his massive amount of wealth.  

This is an update of an article originally written by Kathleen Elkins.

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While his elementary school classmates were dreaming about the major leagues and Hollywood, 10-year old Buffett was having lunch with a member of the New York Stock Exchange and setting life goals.

Buffett's legendary career all began with an epiphany at age 10 when he was on a trip to New York City with his dad.

Dining with a member of the NYSE planted the idea in young Buffett's head to organize his life around money.

Source: Business Insider



He bought his first stock at age 11.

He purchased multiple shares of Cities Service Preferred for $38 apiece.

Source: GOBankingRates



When Buffett was a teen, he was already raking in about $175 a month — more than his teachers (and most adults).

He pulled this off by dutifully delivering the Washington Post.

Source: Business Insider



See the rest of the story at Business Insider

5 of Warren Buffett's most frugal habits

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Warren Buffett playing bridge

Trying to save more, pay off debt and make the most of your money? You might want to try living like a billionaire— but only if that billionaire is Warren Buffett.

The investor — known as the “Oracle of Omaha” — is the CEO of Berkshire Hathaway, but there’s more to this American business magnate than just his job. Despite his roughly $74 billion net worth, the second-wealthiest man in the world enjoys a life with simple taste, frugal living and generous philanthropy.

“What would Warren do?” is a good question to ask yourself when modeling your lifestyle after Buffett’s. The billionaire doesn’t describe himself as frugal, just a man with simple tastes. “I buy everything I want in life,” he told People Magazine recently. “Would 10 homes make me more happy? Possessions possess you at a point. I don’t like a $100 meal as well as a hamburger from McDonald’s.”

Here’s a look at how the brilliant billionaire maintains a frugal lifestyle. If you decide to live like Warren Buffett, who knows — perhaps you can become one of the richest people in the world, too?

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Warren Buffett lives in the same house he bought in 1958.

Billionaires live in mansions, right? Not Warren Buffett.

He lives in the same Omaha residence he bought in 1958 for $31,500, the equivalent of roughly $270,000 in 2017 dollars. Buffett has no intention of putting his own home up for sale. “I wouldn’t trade it for anything,” he said.

In today’s money, Buffett would have paid about $41 per square foot for the 6,570-square-foot home. But these days, you’ll pay about $180 per square foot for a home in Omaha of that size and era, including one listed across the street from the multi-billionaire.

If you want to live like Buffett, consider buying less home than you can afford. Instead of paying pricey mortgage payments, you’ll be able to put more of your money toward savings, retirement or vacations. And if you must take out a loan, consider getting a 30-year mortgage. It’s “the best instrument in the world,” Buffett told CNBC. Buffett took out a 30-year mortgage in 1971 when he bought a vacation home in California.

“If you’re wrong and rates go to 2 percent, which I don’t think they will, you pay it off,” he said. “It’s a one-way renegotiation. It is an incredibly attractive instrument for the homeowner and you’ve got a one-way bet.”



Buffett starts his day with a cheap breakfast.

You might assume something like eggs Benedict and mimosas would be part of every billionaire’s breakfast. Or, all billionaires have a personal chef who can whip up whatever and whenever they want — right?

Wrong. Adopting Buffett’s lifestyle doesn’t include paying high prices for daily gourmet French toast prepared in the comforts of your own home.

When it comes to food, the billionaire investor has been known to save money by taking the fast food route. In fact, he might kick off his day with a trip to McDonald’s during his five-minute drive to work, reports CNBC.

If he’s feeling prosperous, he’ll splurge by spending $3.17 on a bacon, egg and cheese biscuit sandwich. If the market’s down, he might spend $2.95 on a sausage, egg and cheese sandwich instead. On a really bad day, he buys two sausage patties for $2.61, puts them together and washes it down with a Coke.

Buffett is also known to eat cheap when he’s on the road. But forget the cholesterol-soaked bacon and eggs at a local restaurant. Buffett’s travel breakfast might consist of a pack of Oreos, his friend Bill Gates — yes, his good buddy is the Microsoft founder — wrote on his blog.

“One thing that was surprising to learn about Warren is that he has basically stuck to eating what he liked when he was 6 years old,” wrote Gates. “He did move past baby food, of course, but he mostly eats hamburgers, ice cream and Coke.”

Buffett explained his bizarre but cheap diet in an interview with Fortune: “I checked the actuarial tables, and the lowest death rate is among 6-year-olds. So I decided to eat like a 6-year-old. It’s the safest course I can take.”



Buffett drives the same car for years.

Although some CEOs drive around in multimillion-dollar cars, you’ll likely find Buffett driving something much more modest. In a BBC documentary, his daughter said he bought cars that he could get at reduced prices, like those that were hail-damaged. The cars were fixed and didn’t look hail-damaged and became a regular part of the Buffett lifestyle.

“You’ve got to understand, he keeps cars until I tell him, ‘This is getting embarrassing — time for a new car,'” said his daughter in the documentary.

Buffett also told Forbes in 2014 about his car-buying habits — or lack thereof. “The truth is, I only drive about 3,500 miles a year so I will buy a new car very infrequently,” he said.

Remember this the next you’re in the market for a car: Since cars tend to depreciate quickly, it can be better for your finances if you try to keep your well-working car for as long as possible — or at least opt to buy a used car instead of new.



See the rest of the story at Business Insider

14 more billionaires just joined Warren Buffett and Bill Gates in pledging to give away most of their money

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Melinda Gates and Warren Buffett

Fourteen billionaires and billionaire couples have committed to donating most of their fortunes to philanthropic causes, joining Warren Buffett and Bill Gates in signing the Giving Pledge, the organization announced Tuesday.

The new members of the Giving Pledge— a global organization started by Buffett and Bill and Melinda Gates in 2010 to encourage the world's wealthiest to donate a majority of their riches — hail from eight countries and have built a diverse array of businesses.

They include Dean Metropoulos, the private equity titan; Dagmar Dolby, the wife of the audio-systems giant Ray Dolby; Leonard Ainsworth, the Australian founder of a casino-gaming-machines company; and Sir Stelios Haji-Ioannou, the Cypriot founder of easyJet who lives in Monaco.

"Philanthropy is different around the world, but almost every culture has a long-standing tradition of giving back," Melinda Gates, the co-chair of the Bill & Melinda Gates Foundation, said in the Giving Pledge announcement. "Bill and Warren and I are excited to welcome the new, very international group of philanthropists joining the Giving Pledge, and we look forward to learning from their diverse experiences."

Here are the 14 new members and their home countries, according to the announcement:

1. Leonard Ainsworth — Australia

2. Mohammed Dewji — Tanzania

3. Dagmar Dolby — United States

4. Dong Fangjun — People's Republic of China

5. Anne Grete Eidsvig and Kjell Inge Røkke — Norway

6. Sir Stelios Haji-Ioannou — Monaco, Cyprus

7. Nick and Leslie Hanauer — United States

8. Iza and Samo Login — Slovenia

9. Dean and Marianne Metropoulos — United States

10. Terry and Susan Ragon — United States

11. Nat Simons and Laura Baxter-Simons — United States

12. Robert Frederick Smith — United States

13. Harry Stine — United States

14. You Zhonghui — People's Republic of China

The new additions bring this rarefied philanthropy club's total membership to 168 people from 21 countries.

With fortunes of $73.5 billion and $95.5 billion, respectively, Buffett and Bill Gates are among the richest and most generous people on earth. The Gates' lifetime giving now exceeds $32 billion, while Buffett's exceeds $25 billion, according to Forbes.

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'Without fraud, the math didn't work': Wells Fargo's cutthroat culture was reportedly simmering for decades

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wells fargo

The chicanery and fraud that has engulfed banking giant Wells Fargo in the past year has by now been well documented.

Fabricating customer information and creating thousands of unauthorized customer accounts has resulted in $185 million in fines, the dismissal of roughly 1,000 junior employees, the ouster of CEO John Stumpf and other high-level executives, and a spate of ongoing government investigations.

The company has set aside some $1.7 billion to pay for potential costs surrounding the scandal.

But the pressure-cooker sales environment that produced these results isn't a recent development, and while it grew more pervasive and pernicious under Stumpf, the problems long predated his reign, according to a deep-dive profile by Bethany McLean in Vanity Fair

McLean reveals that the core policies that led Wells Fargo astray have been baked into the system for two decades, and that the fraudulent practices and "gaming" by employees to reach sales goals has been a simmering problem for a long time. Here's McLean:

Almost 15 years before the scandal became front-page news, in 2002, Wells Fargo's internal investigations unit had noticed an uptick in what they called "sales integrity" cases. "Whether real or perceived, team members . . . feel they cannot make sales goals without gaming the system," an investigator wrote in a report dated August 2004. "The incentive to cheat is based on the fear of losing their jobs." The report recommended that Wells consider reducing or eliminating sales goals, as several peer banks had done, and warned that the issue could lead to "loss of business and . . . diminished reputation in the community."There was no follow-up.

Yesenia Guitron, a former personal banker for the company in California's Napa Valley, describes just how maddening and unrealistic the situation had gotten for employees by 2008:

The pressure was intense. There were "morning huddle" meetings to discuss "Daily Solutions," or sales goals for the day, and a manager would do hourly check-ins to see if each banker was making progress toward his or her quota, which in 2008 was eight products per day. (The number was increased in 2010 to 8.5.) "Call nights" were scheduled after the branch closed to "help" bankers who were having trouble meeting their sales goals, which were challenging in St. Helena. According to an analysis that was done for a lawsuit Guitron later filed, there were only about 11,500 potential customers in the area, and 11 other financial institutions. The quotas for the bankers at Guitron's branch totaled 12,000 Daily Solutions each year, including almost 3,000 new checking accounts. Without fraud, the math didn't work.

McLean's full story of the background and run-up to the breaking point is worth a read. Check it out over at Vanity Fair.

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Bidding on a lunch with Warren Buffett quickly hit $1 million

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Warren Buffett

(Reuters) - An auction for well-heeled fans of Warren Buffett to eat lunch with the billionaire in support of a San Francisco charity that helps the homeless and impoverished got off to a fast start, with bidding quickly hitting seven figures.

The top bid was $1 million as of 1 p.m. EDT on Monday, and had been made within two minutes of the auction's Sunday night launch.

Bids often surge near the end of the eBay auction, which concludes on Friday at 10:30 p.m. EDT.

Buffett, the chairman of Berkshire Hathaway Inc, has raised $23.6 million in 17 years of auctions for Glide.

That included $3,456,789 from last year's winner, a woman who chose to remain anonymous, tying a record set in 2012.

Other winners have included Ted Weschler, a hedge fund manager who paid $5.25 million to win two auctions and later became one of Buffett's investing deputies at Berkshire.

Glide uses its $18 million annual budget to provide more than 750,000 free meals, emergency shelter for 8,500 people, 2,600 HIV and Hepatitis C tests and day care and after school programs for nearly 450 children.

Located in San Francisco's Tenderloin district, Glide was co-founded and is led by the Rev. Cecil Williams, the 87-year-old pastor emeritus of the affiliated Glide Memorial United Methodist Church, and his wife Janice Mirikitani.

Buffett got involved with Glide after his first wife, Susan, became a volunteer, and continued after her 2004 death. He remarried in 2006.

warren buffett

He is also donating virtually all of his wealth to several charities. Forbes magazine on Monday estimated his net worth at $74.9 billion.

Buffett will dine with the auction winner and up to seven guests at the Smith & Wollensky steak house in Manhattan. He has said all topics are fair game except where he will invest next.

According to Glide, these bidders won its past auctions:

2000: Pete Budlong, $25,000

2001: Jim Halperin and Scott Tilson, $20,000

2002: Jim Halperin and Scott Tilson, $25,000

2003: David Einhorn, Greenlight Capital, $250,100

2004: Jason Choo, Singapore, $202,100

2005: Anonymous, $351,100

2006: Yongping Duan, California, $620,100

2007: Mohnish Pabrai, Guy Spier, Harina Kapoor, $650,100

2008: Zhao Danyang, Pure Heart Asset Management, China, $2,110,100

2009: Courtenay Wolfe, Salida Capital, Canada, $1,680,300

2010: Ted Weschler, $2,626,311

2011: Ted Weschler, $2,626,411

2012: Anonymous, $3,456,789

2013: Anonymous, $1,000,100

2014: Andy Chua, Singapore, $2,166,766

2015: Zhu Ye, Dalian Zeus Entertainment Co, China, $2,345,678

2016: Anonymous, $3,456,789

 

(Reporting by Jonathan Stempel in New York; Editing by Dan Grebler)

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Billionaires Bill Gates and Warren Buffett like to try out mattresses together

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bill gates warren buffett

Bill Gates and Warren Buffett go way back — 25 years in fact — but only recently did the two billionaires discover their shared joy of trying out furniture.

In his latest Gates Notes blog post, the Microsoft cofounder reiterated how much his friendship with Buffett, the legendary Berkshire Hathaway President and CEO, truly means to him. (He's also made the pointevery yearsince2012.)

In early May, Gates was in Omaha, Nebraska for the annual Berkshire Hathaway shareholders meeting, dubbed "Woodstock for Capitalists."

"Although the Berkshire weekend is always busy," he wrote, "Warren and I usually find time to goof off with a few games of bridge or a golf-cart ride around the showroom."

This year, the two men took a trip to Nebraska Furniture Mart, which Berkshire owns, to roam the aisles and test out some fancy-schmancy bedroom furniture.

"I think this is better than the mattress I sleep on," Gates said of one bed they tried.

Buffett, even more horizontal, agreed.

"I wouldn't fool around with computers if I could be in this position," he said.

Watch the full video here:

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You can have lunch with Warren Buffett — but it will cost you at least $1 million

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Warren Buffett

For the 18th consecutive year, billionaire investor and Berkshire Hathaway (NYSE:BRK-A(NYSE:BRK-B) chairman and CEO Warren Buffett is auctioning off a lunch with himself. The auction went live on eBay on Sunday June 4, and will conclude on Friday, June 9 at 7:30 p.m. PST, at which point a winner can invite up to seven of their closest friends to lunch in New York City with the Oracle of Omaha.

The catch? The bids for the annual Buffett lunch can get big. Really big.

Buffett's annual lunch auction

The annual Buffett lunch auction is held to benefit GLIDE, a San Francisco-based charity that runs several anti-poverty programs. Buffett's late wife, Susie, came up with the idea in 2000, and was involved with the Glide Foundation until her death in 2004.

The auction's prize is a lunch held at the Smith & Wollensky steakhouse in New York City, and the winner can choose to attend the meal solo, or with up to seven guests of their choosing.

While the auction has never exactly resulted in a small donation for its winner, the bids have really skyrocketed in recent years. Last year's winner, who chose to remain anonymous, paid $3.4 million for the privilege. The 2014 and 2015 auctions were won by a Singaporean businessman and a Chinese gaming company, respectively, both of whom paid over $2 million. And Ted Weschler, who is now a Berkshire Hathaway investment manager, won back-to-back auctions in 2010 and 2011, and spent a combined $5.3 million. In all, the auctions have generated nearly $24 million for the Glide Foundation.

If you want to get in on this year's auction, be prepared to donate a similar amount, or perhaps even more. Bids for the 2017 auction exceeded $1 million within a minute after it began, where it remains as I write this on Monday afternoon.

Why pay millions for a single lunch?

It may seem completely ridiculous to you that people are actually paying millions of dollars for a single lunch, but some of them could have good reasons for doing so.

For example, former hedge fund manager Ted Weschler, winner of two Buffett lunch auctions, was subsequently offered a job with Berkshire as an investment manager. And it was reported that his discussions with Buffett during the two lunches he won had a lot to do with it. Now, he and fellow Berkshire investment manager Todd Combs manage a combined $21 billion of Berkshire's capital, and are likely to take over Berkshire's closely followed stock portfolio when Buffett is no longer at the helm.

In addition to the opportunity to pitch yourself, or a certain investment deal, to Warren Buffett, winners could potentially get a large tax deduction for their donation, since it technically constitutes a charitable contribution. The IRS allows taxpayers to deduct up to half of their annual income in charitable donations, so last year's winning bid may have translated to well over $1 million in tax savings for the bidder.

Whatever the reason, if you have deep pockets and want to have a private sit-down with one of the greatest investors of all time, you now have the chance to make it happen.

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Elon Musk once drank 8 cans of Diet Coke and a ton of coffee every day (TSLA)

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Elon Musk

Elon Musk may make batteries for a living, but the billionaire entrepreneur once required a shocking amount of caffeine to stay energized. 

At one point, the Tesla and SpaceX CEO was reportedly consuming eight cans of Diet Coke and several large coffees in a day to keep himself alert and on top of his grueling work schedule, Inc. previously reported.

This was back when Musk was working 100 hours per week during the launch of his companies.

“I got so freaking jacked that I seriously started to feel like I was losing my peripheral vision,” Musk told Inc. He claims his office now has caffeine-free Diet Coke.

Sure, we're all guilty of craving a coffee pick-me-up, but that is a ton of caffeine. 

Most adults can safely consume 400 mg of caffeine each day. Diet Coke has 42 mg of caffeine in each can (more than any other type of Coca-Cola), which means he was consuming 336 mg in just soda drinks.

Adding coffee into the mix likely put him over than 400 mg max. A tall coffee from Starbucks has about 260 mg of caffeine per cup.

Musk isn't alone in his unhealthy eating habits.

Warren Buffett, who is 86 years old, has a McDonald's breakfast sandwich every day. On days when the market is down, Buffett claims he is more frugal and opts for the $2.95 Sausage McMuffin with egg and cheese. On good days, he'll order the bacon, egg, and cheese biscuit for $3.17. Every morning, he tells his current wife, Astrid, to put the exact change in the center cup holder of his car. 

When Buffett arrives at his desk at Berkshire Hathaway in Omaha, he sits down to eat his breakfast with a glass of Coke. He drinks five Cokes per day. 

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How Warren Buffett's Berkshire Hathaway makes most of its money

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From a humble start as a Massachusetts-based textile mill, Warren Buffett built Berkshire Hathaway(NYSE:BRK-A)(NYSE:BRK-B) into one of the world's largest conglomerates. The company now owns an empire of brands that spans from the second-largest U.S. railroad to smaller businesses like Benjamin Moore paints.

Some businesses are real needle-movers, while others are mere afterthoughts that came along for the ride as part of a larger acquisition. Outside its investment profits, only four broad business lines venture into the double-digits as a percentage of its profits.

Understanding Berkshire's income statement

Unlike most companies, Berkshire Hathaway has a substantial investment portfolio that holds stakes in publicly traded companies. Due to the way accounting works, its investment profits are mostly a function of timing, as they flow into the income statement when investments are sold at a gain.

how berkshire hathaway makes its money_C0zg5Yw_large

Last year was a particularly active year for Berkshire's investment portfolio. The company realized gains in Wrigley, Kraft Heinz, Dow, and Procter & Gamble. Naturally, these gains had an outsize impact on its income statement, but it would be folly to assume that they are repeatable, or that investment gains can be predicted for any given year.

For this reason, Berkshire's operating businesses are perhaps more important for understanding how the company makes its money. The four segments below are its most important to its profit and loss in any given year.

The grab bag: $5.6 billion

Last year the manufacturing, service, and retailing businesses took the top spot from Berkshire's insurance units as the leading generator of non-investment profit. This group includes large businesses and familiar names like Lubrizol, Precision Castparts, Fruit of the Loom, Duracell, NetJets, Pampered Chef, and Dairy Queen. I could go on and on...this segment is truly massive!

Collectively, these businesses generated revenue of $120 billion just last year. About 40% of this category's revenue comes from McLane, a distributor that sells goods to grocery stores and the general food service industry, but profit margins are minuscule, making it a considerably smaller source of profit than sales.

Precision Castparts, a manufacturer of complex metal components used primarily in airplanes and power industries, is a leading driver of its profits in the category. It was acquired in 2015, setting the record for the largest acquisition in Berkshire's history. 

Unfortunately, Berkshire shares very little about the individual companies in this group. In the 2016 annual letter to shareholders, Buffett explained that it only discloses the required minimum, for various reasons:

"We have far too many companies in this group to comment on them individually. Moreover, their competitors -- both current and potential -- read this report. In a few of our businesses, we might be disadvantaged if outsiders knew our numbers. Therefore, in certain of our operations that are not of a size material to an evaluation of Berkshire, we only disclose what is required."

Buffett is more than pleased with this group as a whole, noting that the underlying businesses are rather profitable. The group collectively earned 24% after taxes on their net tangible capital, "despite their holding large quantities of excess cash and carrying very little debt," Buffett wrote in his 2016 letter to shareholders. 

The risk business: $5 billion

When Buffett took control of Berkshire Hathaway, he immediately began to redirect the cash generated by its textile mills into new industries with better long-term prospects. Insurance rapidly became a core Berkshire Hathaway business, and to this day, it remains a key source of both revenue and profits.

Insurance profits are generated in two ways: From underwriting profits (earned when premiums exceed losses and expenses) and investment income (earned by investing the float generated by its insurance businesses).

Investment income from a vast stock and bond portfolio generates roughly 73% of its insurers' post-tax income, while underwriting profits make up the other 27%. It is incredibly rare for insurers to be as profitable as Berkshire's, as the industry generally loses money on its underwriting with the hope of making up for underwriting losses with investment gains.

GEICO, for example, has been profitable in every year since 2000 on an underwriting basis. In contrast, its largest competitor, State Farm, has consistently generated billion-dollar underwriting losses. I'd argue that Berkshire's insurance companies are the crown jewels of its operating companies given their robust profitability and the fact they generate more than $105 billion of float that Buffett and his portfolio managers can invest as they please.

The train set: $3.6 billion

Acquired by Berkshire in 2009, BNSF is the second-largest railroad by volume and revenue. It's also a very important driver of profits for Berkshire Hathaway, generating $3.6 billion of profit in 2016, despite a downswing in commodity prices that negatively affected railroad earnings industrywide.

Keep in mind that the railroad's profits are somewhat overstated compared to their actual cash profitability. In the last three years, total free cash flow has tallied to $7.6 billion compared to net income of $13.6 billion.

Railroads require consistent billion-dollar investments to maintain their rails. Thus, less than 60% of its earnings have come out in the form of cash in the last three years. That's neither good nor bad; it's just the reality of the railroad business, and something to keep in mind when comparing its profits in railroads to its capital-light insurance profits, for example.

Berkshire's power plants: $2.3 billion

Berkshire Hathaway Energy is a reliable generator of profit, earning $2.3 billion in 2016 primarily from regulated utilities. Buffett likes the utility industry for the simple fact that it allows Berkshire to deploy billions of dollars in capital expenditures and collect an almost royalty-like stream of income from the power they produce over time.

Most local power markets allow for the existence of a monopoly to produce and sell power to all consumers and businesses in the area. Profits are therefore almost guaranteed. And when you're as cash-rich as Berkshire is -- the company had more than $96 billion of cash last quarter -- having a reliable place to invest billions of dollars at a reasonable rate of return is a very valuable asset.

Jordan Wathen has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.

SEE ALSO: You can have lunch with Warren Buffett — but it will cost you at least $1 million

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Warren Buffett's Berkshire Hathaway gives embattled Canadian lender Home Capital a $1.5 billion lifeline

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(Reuters) - Home Capital Group Inc said billionaire Warren Buffett's Berkshire Hathaway Inc will provide a new C$2 billion ($1.50 billion) line of credit to its unit Home Trust Co, ending the Canadian lender's strategic review process.

Berkshire will also indirectly buy C$400 million of Home Capital's common shares in a private placement through its unit Columbia Insurance Co, Home Capital said on Wednesday.

"Home Capital's strong assets, its ability to originate and underwrite well-performing mortgages, and its leading position in a growing market sector make this a very attractive investment," said Warren Buffett, Berkshire chairman and CEO.

Berkshire will hold an about 38.39 percent equity stake in Home Capital after buying 40 million shares at an average price of about C$10.00 per common share.

Berkshire will make an initial investment of C$153.2 million to buy 16 million common shares and an additional investment of C$246.8 million to purchase 24 million shares through a private placement.

The additional investment is subject to shareholder approval, while the initial investment will not require approval from shareholders.

Canada's biggest non-bank lender also said it will continue to explore further asset sales and financing deals over the next year, but has concluded its strategic review process that began in April.

"This investment from Berkshire not only addresses Home Capital's near-term requirements for additional liquidity and a lower-cost credit agreement, but also facilitates what the Board feels is the best available path to long-term success," Home Capital's Chair Brenda Eprile said.

Berkshire will not be granted any rights to nominate directors to Home Capital board or any governance rights as an equity holder, Home Capital said.

The C$2 billion loan facility, expected to be effective on June 29, will replace the existing one for a similar amount between Home Trust Company and a major institutional investor.

On Tuesday, the company said it would sell a portfolio of commercial mortgage assets valued at C$1.2 billion to bolster its liquidity and trim outstanding debt on a C$2 billion emergency facility it agreed with the Healthcare of Ontario Pension Plan in April.

Last week, Home Capital reached a C$30.5 million settlement with the Ontario Securities Commission, settled a class action lawsuit and accepted responsibility for misleading investors about problems with its mortgage underwriting procedures.

The settlement is expected to help secure long-term financing at sustainable interest rates, investors and analysts said. ($1 = 1.3323 Canadian dollars) (Reporting by Abinaya Vijayaraghavan in Bengaluru; Editing by Sunil Nair and Gopakumar Warrier)

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Warren Buffett lives in a modest house that's worth .001% of his total wealth — here's what it looks like

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Located in a quiet neighborhood of Omaha, Nebraska lies the home of billionaire Warren Buffett. He bought the house for $31,500 in 1958 or about $250,000 in today's dollars. It's now worth an estimated $652,619. He calls it the "third-best investment he's ever made." 

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7 times Warren Buffett didn't follow his own investing advice

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Warren Buffett

Warren Buffett began his investing career early, buying his first stock before he was a teenager. By the time he was in his 20s, he founded Buffett Associates and was on his way to becoming a billionaire.

It’s a success story for the ages, and the self-made Oracle of Omaha is now one of the world’s richest men, with a net worth of more than $74 billion, according to Forbes. Buffett’s success boils down to some fundamental philosophies and rules that he has followed closely over the years.

However, even Warren Buffett's stock portfolio can contain a few clunkers. Buffett is disciplined and methodical, but he has occasionally thrown caution to the wind and strayed from his principles.

The results occasionally have been disastrous, but not always. If you want to get rich, read on to see seven of Buffett’s core investing rules — and what happened when he broke them.

SEE ALSO: 5 of Warren Buffett's most frugal habits

DON'T MISS: 24 mind-blowing facts about Warren Buffett and his $70 billion fortune

Always consult trusted advisers

In 1959, Buffett met Charlie Munger, setting the stage for one of the strongest business partnerships in history. Together, the pair built Berkshire Hathaway, among the most successful companies in the world. Buffett is CEO and chairman of the company, and Munger serves as vice chairman. Munger is a key ingredient in Buffett’s secret investing sauce, and no deal goes through without Munger’s seal of approval.

Well, no deal except for a few. Such rare Warren Buffett mistakes include Buffett’s fateful decision to purchase Energy Future Holdings. Buffett struck the agreement without Munger’s endorsement, and it cost Berkshire Hathaway a staggering $873 million.

“Most of you have never heard of Energy Future Holdings,” Buffett wrote to shareholders in 2014. “Consider yourselves lucky; I certainly wish I hadn’t."

Buffett admitted he made the investment without consulting Munger first. “About $2 billion of the debt was purchased by Berkshire, pursuant to a decision I made without consulting with Charlie," Buffett wrote. "That was a big mistake.”

Energy Future Holdings later filed for bankruptcy in 2014, which Buffett predicted. In the process, the Oracle of Omaha learned an expensive lesson in what happens when he doesn't run things past his right-hand man. You, too, should try to find a trusted advisor on financial matters.



Cash is riskier than the stock market

Many people view stock market investing as risky. But one of the key Warren Buffett lessons is that the real risk often lies in keeping your money in cash. Buffett has stayed true to this rule, even saying "I hate cash" on CNBC.

So, if this is true, why is the Oracle of Omaha keeping nearly $100 billion in cash? Even for one of the world’s richest men, that’s a lot of green, leading to plenty of speculation about why he is breaking his own rule. Investors and Buffett fans wonder if there is a big deal — even a corporate takeover — on the horizon.

If a takeover is in the cards, $100 billion is enough to put giant corporations such as Nike or Costco at risk. For now, the billionaire has been mum about his stockpile of cash, insisting he’s just been keeping the cash until the right large-scale acquisition opportunity comes along.



Don't use undervalued stock to make a purchase

A huge part of Buffett’s success comes from retaining ownership of stock that is undervalued by the markets. He's not a fan of using such stock to purchase other companies.

"Under such circumstances, a marvelous business purchased at a fair sales price becomes a terrible buy. For gold valued as gold cannot be purchased intelligently through the utilization of gold — or even silver — valued as lead," he has said.

Buffett broke this rule when he acquired General Re to expand GEICO’s insurance operations. When Buffett purchased the company, he issued $21.7 billion in stock to pay for it. That might seem like a sweet deal for a company that is now a major part of Berkshire Hathaway’s insurance operation. However, the stock Buffett issued to General Re’s shareholders would now be worth $69.4 billion, according to a report in the Motley Fool. So, if Buffett had kept his Berkshire Hathaway shares and purchased General Re with cash instead, he’d be a lot richer.



See the rest of the story at Business Insider

Warren Buffett's Berkshire Hathaway just made a big bet on real estate (STOR, BRKA, BRKB)

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Berkshire Hathaway CEO Warren Buffett visits the BNSF booth before the Berkshire Hathaway annual meeting in Omaha, Nebraska, U.S. May 6, 2017. REUTERS/Rick Wilking

Store Capital, a real estate investment trust, said Monday that Berkshire Hathaway invested $377 million in the company. 

That amounted to 9.8% of outstanding shares purchased at $20.25 apiece, Store Capital said in a statement. Its shares gained by as much as 11% to $23.10 in premarket trading.  

Store Capital invests in single-tenant real estate for profit. 

"An investment in our company from one of history’s most admired investors represents a vote of confidence in our experienced leadership team and an affirmation of our profit-center real estate investment and management approach," said Christopher Volk, Store Capital's CEO. He was referring to Berkshire Hathaway Chairman Warren Buffett. 

Buffett has said real estate was a solid investment that was less volatile than stock prices and likely to produce gains. In 2016, he said he didn't believe that US real estate was in a bubble

This investment follows Berkshire Hathaway's provision last week of a 2 billion Canadian dollar ($1.51 billion) credit line to Home Capital, Canada's largest non-bank lender that accepted responsibility for misleading investors about problems with how it underwrote mortgages.

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The real estate company Warren Buffett just invested in is soaring (STOR)

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Store Capital's stock price is getting a huge boost from everyone's favorite Nebraskan investor.

Store Capital, a real estate investment trust, announced a $377 million stake by Warren Buffett on Monday. This amounted to 9.8% of the company’s outstanding shares. Store Capital is known for investing in single-tenant real estate.

"An investment in our company from one of history’s most admired investors represents a vote of confidence in our experienced leadership team and an affirmation of our profit-center real estate investment and management approach," said Christopher Holk, Store Capital's CEO. He was referring to Berkshire Hathaway chairman Warren Buffett.

The Warren Buffett effect is probably in play here. Matt Levine, a Bloomberg columnist, put it best in a newsletter following Buffett's C$2 billion credit line to Home Capital last week.

"In its purest form, once you have a reputation as a smart investor, then every time you buy a stock (and announce it publicly), everybody out there will look and say, 'that is a smart investor,' and they will buy the stock, and the stock will go up, and you will make money, and everyone will think you are a smart investor because you made money, and it is a virtuous cycle that you can repeat indefinitely."

Store Capital has not had a great year. The company is down 6.72% so far in 2017, even after the more than 10% boost from Buffett's investment. The company is currently trading at $23.04.

Click here to read more about Store Capital ...

Store Capital

SEE ALSO: Warren Buffett's Berkshire Hathaway just made a big bet on real estate

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