Tag Archive | "warren buffett"

How long before the US produces its first trillionaire?

How long before the US produces its first trillionaire?

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Not too long.

Ultimately, the answer as to when America will witness its first trillionaire appear is dependent on variables such as inflation, tax rates and overall economic growth. These are ingredients that are conducive to wealth retention and creation.

Therefore, if the United States averages 3 percent annual inflation, and the richest American’s fortunes keep up with Bill Gates’, whose estimated net worth is currently $56 billion, America would have a trillionaire in 98 years.

But assuming the richest American’s fortune not only matches the rate of inflation, but outpaces it by an additional 3 percent a year, America can produce a trillionaire in 50 years’ time.

That might seem like a long time, and it probably is because this estimate is too conservative considering how fast the super-rich have been getting super-richer.

Gauging how quickly the richest American’s net worth is increasing is a tricky exercise as it has mostly meant tracking the worth of just one individual – Bill Gates – the past 15 years.

His worth has sunk and risen along with the price of Microsoft’s stock, but at an average pace of growth, between 4 and 9 percent per year, the richest American could possess a trillion sometime between 2050 and 2085, presuming no major changes to the tax code and a healthy economy.

It seems far more likely that the first person to make the 13-digit dollar mark will come from a country more conducive to wealth concentration.

This would be a country with higher growth rates, rapidly expanding industries, fewer business regulations, and lower taxes.

So guess who?

For the past two years, Mexican business magnate Carlos Slim Helu has beaten Gates and Warren Buffett for the title of world’s richest man.

This article is a 60-second reduction of the original found here.

Obama to propose “Buffett Tax” on millionaires

Obama to propose “Buffett Tax” on millionaires

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This is a 60 second summary of the article here and here.

Courtesy Reuters

No its not a tax on people who don’t finish their leftovers at the buffet table.

In a nod to investor extraordinaire Warren Buffett (rhymes with Muppet and spelt with two “T”s), beleaguered U.S. President Barack Obama will propose a tax on millionaires named after the third richest man in the world. Read the full story

Can you really invest like Warren Buffett?

Can you really invest like Warren Buffett?

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Da man knows how to have some fun. Photo: Aaron Friedman

But can you dream about investing like Warren Buffett? Sure you can, but it will always come to just that: A dream.

Firstly, Buffett has extraordinary access that ordinary investors don’t.

Last week, in his latest deal, Buffett invested S$6 billion of Berkshire Hathaway’s money in Bank of America. (Buffett is the chairman and CEO of Berkshire Hathaway.)

The Bank of America deal started with a phone call from Buffett’s assistant to the office of Bank of America CEO Brian Moynihan last Wednesday.

Moynihan took the call and Buffett offered to make the investment.

Your average Bank of America shareholder wouldn’t have access to the CEO. Or even his assistant. (By Thursday morning, Bank of America‚Äôs trading floor in New York erupted with cheers of the news.)

Therefore, this isn’t an ordinary investment because an ordinary investor only gets to buy common stock.

Buffett’s S$6 billion is buying him 50,000 shares of a special class of so-called “preferred stock,” which will pay him a 6 percent dividend, or S$360 million a year.

In comparison, Bank of America’s common shareholders get a quarterly dividend of one cent a share. Therefore, if you owned S$6 billion of ordinary Bank of America common stock at its current price of about S$9.60 a share, you’d be getting a paltry S$30 million a year in dividends – less than 10 percent of what Buffett will get.

Moreover, Bank of America can buy back Buffett’s investment at any time for a 5 percent premium.

You could, however, get a bigger dividend by buying Bank of America’s preferred stock. But you couldn’t get the warrants, which are the best part of Buffett’s deal.

The warrants give Berkshire the right to buy 700 million shares of Bank of America stock at S$8.57 a share at any time over the next 10 years. Imagine if share prices were to rise significantly in the future, Berkshire will still be offered the stock at S$8.57 a share.

There are lots of ways to think about how much these warrants are worth, but the value is pegged at somewhere around S$3.6 billion. That’s S$3.6 billion that Bank of America handed Buffett.

And lastly, wherever Buffett invests, stock prices shoot up.

When news broke that Buffett had invested in Bank of America, the stock shot up more than 25 percent.

The Bank of America share is worth about $9.80 around this time, which means that the value of Buffett’s warrants have increased due to his own initial investment in the stock.

Regular investors, on the other hand, cannot confer any credibility upon any institution the way Buffett can.

Therefore, because Buffett can give a company something that ordinary investors can’t, he cannot be paid ordinarily as well.

Which is why you cannot invest like Buffett.

This article is a 60-reduction of the original published here on Aug. 30.