Of all the tricks that life can play, it's hard to imagine any stranger than what befell Melinda French. Today she is living in a gargantuan high-tech mansion on the shores of Lake Washington, married to the richest man in America - and giving billions of dollars away. When she married Bill Gates 14 years ago, she bought into a complex bargain. On the one hand, she became half of what has turned out to be the world's premier philanthropic partnership. The Bill & Melinda Gates Foundation has assets of $37.6 billion, making it the world's largest. In that total is $3.4 billion that Warren Buffett has already given, and still to come are nine million Berkshire Hathaway B shares, currently worth $41 billion, that he has pledged to contribute in coming years. Assuming that Berkshire (BRKA, Fortune 500) shares continue to rise and that the Gateses continue to bestow their own wealth on their foundation, Melinda and Bill will very likely give away more than $100 billion in their lifetimes. Already the foundation has disbursed $14.4 billion - more than the Rockefeller Foundation has distributed since its creation in 1913 (even adjusted for inflation).
Wednesday, January 30, 2008
The Credit Crunch Goes Global
It may have begun as a problem with subprime mortgages in the U.S., but markets and lenders throughout the world have been spooked by billions in bad loans and credit instruments.
Tiger's Julian Robertson roars again
As I learned in a series of conversations with Robertson over the past six months, the man once known as "The Wizard of Wall Street" for the incredible success he had running his hedge fund firm Tiger Management has been on a magical run while most of the world wasn't watching. According to returns provided by Robertson exclusively to Fortune, he earned a stunning 76.7% return in 2007 managing a portfolio of his own money. That rivals his best years running his flagship Tiger fund in the 1980s and 1990s, when he was an undisputed Master of the Hedge Fund Universe and grew Tiger from $8 million at its launch to over $22 billion at its peak in 1998.
Since he shut down the Tiger fund on March 30, 2000, according to the records provided to Fortune, Robertson has generated a total return for his own pool of capital of 403.7%. Given that his personal fortune was estimated to be close to $1 billion after he closed Tiger, it's not hard to calculate that he's a much wealthier man today than he was just a few years ago.
Since he shut down the Tiger fund on March 30, 2000, according to the records provided to Fortune, Robertson has generated a total return for his own pool of capital of 403.7%. Given that his personal fortune was estimated to be close to $1 billion after he closed Tiger, it's not hard to calculate that he's a much wealthier man today than he was just a few years ago.
Sunday, January 27, 2008
At 91, the man Warren Buffett famously dubbed a "superinvestor" is still picking unloved stocks.
Walter Schloss has lived through 17 recessions, starting with one when Woodrow Wilson was President. This old-school value investor has made money through many of them. What's ahead for the economy? He doesn't worry about it.
A onetime employee of the grand panjandrum of value, Benjamin Graham, and a man his pal Warren Buffett calls a "superinvestor," Schloss at 91 would rather talk about individual bargains he has spotted. Like the struggling car-wheel maker or the moneylosing furniture supplier.
Bushy-eyebrowed and avuncular, Schloss has a laid-back approach that fast-money traders couldn't comprehend. He has never owned a computer and gets his prices from the morning newspaper. A lot of his financial data come from company reports delivered to him by mail, or from hand-me-down copies of Value Line, the stock information service.
He loves the game. Although he stopped running others' money in 2003--by his account, he averaged a 16% total return after fees during five decades as a stand-alone investment manager, versus 10% for the S&P 500--Schloss today oversees his own multimillion-dollar portfolio with the zeal of a guy a third his age. In a day of computer models that purport to quantify that hideous and mysterious force called risk, listening to Schloss talk of his simple, homespun investing methods is a tonic.
Friday, January 25, 2008
Inside Dealmakers' Brains
Scientists think the new field of neuroeconomics can explain some business behavior, perhaps even distinguish rational from irrational decisions. Are some people's brains hardwired to run companies or to make deals?
Bill Gates Issues Call For Kinder Capitalism
Free enterprise has been good to Bill Gates. But today, the Microsoft Corp. chairman will call for a revision of capitalism.
In a speech at the World Economic Forum in Davos, Switzerland, the software tycoon plans to call for a "creative capitalism" that uses market forces to address poor-country needs that he feels are being ignored.
"We have to find a way to make the aspects of capitalism that serve wealthier people serve poorer people as well," Mr. Gates will tell world leaders at the forum, according to a copy of the speech seen by The Wall Street Journal.
Wednesday, January 16, 2008
The $300 Trillion Time Bomb
If Warren Buffett can't figure out derivatives, can anybody?
For hundreds of years, the way to solve problems in the financial market was clear: Get Wall Street’s titans in one place and knock heads. It took only 24 brokers gathered under a buttonwood tree to form what became the New York Stock Exchange. J. Pierpont Morgan locked several dozen bankers inside his famous library on Madison Avenue to solve the panic of 1907. And in 1998, New York Fed president William McDonough convened representatives from the biggest Wall Street firms, 14 of which then bailed out Long-Term Capital Management.
Less than a decade later, financial markets have become vastly more complex. And they are no longer in the hands of a select few. Markets are tied together in ways that regulators and even Wall Street professionals struggle to comprehend. Bonds are bound to stocks, which are tied to currencies around the world.
The binding threads are derivatives, and the brightest minds on Wall Street worry about how they work—especially as stock markets around the world hit a bump. The term derivatives describes an array of financial contracts whose value is determined by, or derived from, an underlying asset such as a stock or currency. The derivatives market, one of the fastest-growing areas of finance, is estimated at $300 trillion. A subset of that—credit default swaps, which are derivatives based on companies’ creditworthiness—last year reached $26 trillion, twice the size of the U.S. economy.
For hundreds of years, the way to solve problems in the financial market was clear: Get Wall Street’s titans in one place and knock heads. It took only 24 brokers gathered under a buttonwood tree to form what became the New York Stock Exchange. J. Pierpont Morgan locked several dozen bankers inside his famous library on Madison Avenue to solve the panic of 1907. And in 1998, New York Fed president William McDonough convened representatives from the biggest Wall Street firms, 14 of which then bailed out Long-Term Capital Management.
Less than a decade later, financial markets have become vastly more complex. And they are no longer in the hands of a select few. Markets are tied together in ways that regulators and even Wall Street professionals struggle to comprehend. Bonds are bound to stocks, which are tied to currencies around the world.
The binding threads are derivatives, and the brightest minds on Wall Street worry about how they work—especially as stock markets around the world hit a bump. The term derivatives describes an array of financial contracts whose value is determined by, or derived from, an underlying asset such as a stock or currency. The derivatives market, one of the fastest-growing areas of finance, is estimated at $300 trillion. A subset of that—credit default swaps, which are derivatives based on companies’ creditworthiness—last year reached $26 trillion, twice the size of the U.S. economy.
Soros hires BlackRock alumnus as investment chief
George Soros hired money management firm BlackRock Inc's co-founder Keith Anderson as his hedge fund's chief investment officer, selecting the fourth person for the position in eight years.
Anderson, who recently stepped down after nearly two decades with BlackRock (BLK.N: Quote, Profile, Research), will succeed George Soros' son Robert in the job. He will start work on Feb. 20, Robert and his brother Jonathan wrote to shareholders.
Anderson, who recently stepped down after nearly two decades with BlackRock (BLK.N: Quote, Profile, Research), will succeed George Soros' son Robert in the job. He will start work on Feb. 20, Robert and his brother Jonathan wrote to shareholders.
Tuesday, January 15, 2008
Trader Made Billions on Subprime
On Wall Street, the losers in the collapse of the housing market are legion. The biggest winner looks to be John Paulson, a little-known hedge fund manager who smelled trouble two years ago.
Funds he runs were up $15 billion in 2007 on a spectacularly successful bet against the housing market. Mr. Paulson has reaped an estimated $3 billion to $4 billion for himself -- believed to be the largest one-year payday in Wall Street history.
Funds he runs were up $15 billion in 2007 on a spectacularly successful bet against the housing market. Mr. Paulson has reaped an estimated $3 billion to $4 billion for himself -- believed to be the largest one-year payday in Wall Street history.
High price makes wine taste better
RESTAURANTS charging inflated prices for wine could be doing their customers a favour. A study has found that people who pay more for a product do enjoy it more.
The researchers discovered that people given two identical red wines to drink said they got much more pleasure from the one they were told had cost more. Brain scans confirmed that their pleasure centres were activated far more by the higher-priced wine.
The researchers discovered that people given two identical red wines to drink said they got much more pleasure from the one they were told had cost more. Brain scans confirmed that their pleasure centres were activated far more by the higher-priced wine.
Wednesday, January 9, 2008
A Regulator Not Stymied by Red Tape
Shortly before Thanksgiving, Eric R. Dinallo, the insurance regulator for New York State, did something unusual. He called Warren E. Buffett’s right-hand man on insurance, Ajit Jain, and suggested that he start a new company to insure municipal bonds in New York.
Mr. Jain, who oversees one of the biggest insurance portfolios in the business at a subsidiary of Mr. Buffett’s holding company, Berkshire Hathaway, was surprised. He had never heard from an insurance regulator offering a new business idea.
“I thought, gee, I wonder what he’s calling to complain about,” Mr. Jain said in an interview on Tuesday.
Mr. Jain, who oversees one of the biggest insurance portfolios in the business at a subsidiary of Mr. Buffett’s holding company, Berkshire Hathaway, was surprised. He had never heard from an insurance regulator offering a new business idea.
“I thought, gee, I wonder what he’s calling to complain about,” Mr. Jain said in an interview on Tuesday.
Saturday, January 5, 2008
Q&A with Richard Pzena, Pzena Investment Management
IT'S BEEN A DREADFUL YEAR FOR NOTED VALUE MANAGER Rich Pzena, whose funds lost money in 2007, while shares of his newly public management company (ticker: PZN) sank to 12 from more than 22. Blame it in part on the manager's fondness for financial stocks, which had an even more dismal year -- and which account for 40% of Pzena Investment Management's assets. Then there's a shareholder lawsuit, charging Pzena failed to disclose outflows from the John Hancock Classic Value1 Fund (PZFVX), which he also manages, when the firm went public. Pzena says the suit has no merit.
If the present is trying, the manager's long-term record still stands tall. The firm's assets under management grew tenfold, to nearly $29 billion as of the end of the third quarter, from $3 billion in 2002. The $7 billion John Hancock fund is down 13% this year and has seen outflows of $1.6 billion since Sept. 30, but it sports an average annual return of 11% over five years. Bloodied but unbowed, Pzena explains what went wrong in 2007 and why there's good value now in beaten-up financials and big-caps generally.
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