Warren Buffett sticks to business, avoids politics in his annual letter

Billionaire investor Warren Buffett always draws a big audience with his annual letter to Berkshire Hathaway shareholders but this year’s edition doesn’t break much new ground.

The letter released describes the performance of the more than 90 companies that Berkshire owns. Aside from that, Buffett largely used the rest of the letter to reiterate points he has made before about the economy and investment fees.

The outspoken 86-year-old has been known for his fierce criticism of Donald Trump but left politics out of his annual letter despite the Republican taking the White House.

During a speech supporting Hillary Clinton on the campaign trial in August he called for Trump to release his tax returns – and did so himself several months later. He said: “You’re only afraid if you’ve got something to be afraid about.

“He’s not afraid because of the IRS. He’s afraid because of [the voters],” he added.

Here are some highlights of what Berkshire’s 86-year-old chairman and CEO did say and some of the top things investors wish he had addressed:

Rosy outlook

Buffett reiterated his long-term outlook for a prosperous America but he mostly steered clear of politics this year.

“I’ll repeat what I’ve both said in the past and expect to say in future years: Babies born in America today are the luckiest crop in history,” wrote Buffett, who has said he thinks the economy will be OK under President Donald Trump. Buffett is a longtime Democrat.

Without mentioning Trump’s immigration policies, Buffett did note that “a tide of talented and ambitious immigrants” played a significant role in the country’s prosperity.

Fee fortunes

Buffett used the letter to again explain the advantages of low-cost index funds. He said he estimates that wealthy investors who use high-priced advisers have wasted more than $100bn over the past decade.

“The bottom line: when trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsized profits, not the clients,” Buffett wrote. “Both large and small investors should stick with low-cost index funds.”

And it can be extremely difficult for investors to determine whether a money manager has the rare ability to outperform the stock market. So Buffett said most investors are better off not trying.

“The problem simply is that the great majority of managers who attempt to over-perform will fail. The probability is also very high that the person soliciting your funds will not be the exception who does well,” Buffett said.

Investing insight

Investment manager Cole Smead said he felt that Buffett spent too much of the letter extolling Berkshire’s virtues instead of talking about how he’d approach investing the company’s $86bn cash or what went wrong with the failed $143bn bid for Unilever that Berkshire took part in with 3G Capital.

​Smead said Buffett and his investing partner, 93-year-old Charlie Munger, seem concerned about their legacies and how Berkshire is perceived.

“This letter was more about Warren and Charlie’s epitaph even more so than prior letters,” said Smead, who is with Seattle-based Smead Capital Management.

Smead said he wished Buffett had devoted more of the letter to discussing the current investment environment. Even though Buffett won’t discuss what he might buy, Smead said he could have talked more about what he doesn’t like in the market today.

Avoiding airlines

Buffett raised eyebrows last fall when he invested more than $9bn in airline stocks after years of urging investors to stay away from the airline sector.

Berkshire is now one of the biggest shareholders in American Airlines, Delta Air Lines, United Continental and Southwest, but he has offered little explanation for his change of heart other than to say airlines are better businesses after all the consolidation in the industry.

But back in 2008, Buffett used his letter to label airlines as the worst kind of business because they grow rapidly and require significant investments to grow but earn little.

“Think airlines. Here a durable competitive advantage has proven elusive ever since the days of the Wright Brothers,” Buffett wrote. “Indeed, if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favour by shooting Orville down.”

AP

I swear I want to say this to them

Customer: *sees me in uniform* *makes eye contact* *sees me talking to customer* Sir do you work here ?

Me: no sir I don’t, this is just one of my hobbies, I like to dress up and pretend I’m an employee of this company for no pay, you can find me here every Sunday except on Fridays I work at target, Saturdays Walmart, and on Monday thru Thursday its either Best Buy or Publix McDonald’s or Red lobster depending on how I feel.

Man Group shakes off end of Trump Bump as funds jump

The bump from Trump is over, but hedge fund and quant expert Man Group is still buoyant.

Funds under management jumped 10% to nearly $89 billion (£70 billion) in the first quarter as investors ploughed into Man’s “long only” and fund of funds instruments.

Chief executive Luke Ellis has just closed his takeover of Aalto and says more deals could follow. He says he intends to be picky and won’t be short of opportunities.

Markets soared on Trump’s election but have stumbled lately.

Ellis said: “The Trump shake-up is over. The whole idea about Trump was that he was going to change a load of things, there’d be some big winners and some big losers. The world has gone back to business as usual.”

Man Group eschews index trackers, leaving that to Vanguard and BlackRock. Ellis said good active managers will in the end beat the index. “Trackers are a perfectly sensible thing to invest in but we want to be very active,” he said.

The “global environment” creates the potential for “alpha opportunities”, said Ellis. His quant funds — stock picking made by maths boffins — had a tough quarter. Three of the main quant funds in the AHL arm — Dimension, Alpha and Diversified — all recorded a loss in the three months.

Man Group shares jumped 8p, nearly 6%, to 148.8p as the City cheered the rising assets.

Decoding Tesla’s Secret Formula

Elon Musk has inherited Steve Jobs’ mantle as the cult favorite CEO. And his electric car company has grabbed Apple’s creative crown. Our September issue gives you an inside look at the world’s most innovative company. read »

 

Newcomer Fever-Tree tops Britvic with £1.8bn value

Posh tonic maker Fever-Tree has overtaken Britvic as the UK’s most valuable soft drinks firm as its stunning stock market run shows no sign of slowing.

Bullish remarks today from analysts at Berenberg helped the 12-year-old company’s shares flow 1.7% higher to 1594p, valuing it at more than £1.8 billion, despite profits of just £34 million last year. It floated in 2014 at 134p a share.

Britvic, maker of Robinsons squash and Tango fizzy drinks whose annual profits top £150 million, is worth £1.75 billion after a small share price fall today. Rivals Irn-Bru maker AG Barr and Vimto owner Nichols are valued at just over £700 million.

Fever-Tree was founded by Charles Rolls and Tim Warrillow, who started the company with £1 million Rolls made from turning around Plymouth Gin.

Rolls’ 15% stake is now worth £270 million, while Warrillow’s 7% stake is valued at £120 million.

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Jaeger collapses into administration putting 700 jobs at risk

The fashion chain Jaeger collapsed into administration yesterday, putting 700 high street jobs at risk. The group’s directors have appointed AlixPartners to oversee the process following failed attempts by the company’s private equity owner, Better Capital, to sell the struggling business.

Jaeger – which employs around 680 staff across 46 stores, 63 concessions, its London head office and a logistics centre in Kings Lynn – had been on the market for around £30m.

However, no buyer materialised and last week Better Capital sold Jaeger’s debt to a company understood to be controlled by the retail billionaire Philip Day, who heads up Edinburgh Woollen Mill.

Jaeger was founded as Dr Jaeger’s Woollen System Co Ltd by businessman Lewis Tomalin and says its clothes have been worn by famous figures from explorer Ernest Shackleton to Marilyn Monroe.

Insiders now expect most of Jaeger’s stores to close down, although the brand is likely to survive as part of the Edinburgh Woollen Mill stable, which also includes Jane Norman, Peacocks and Austin Reed.

Joint administrator Peter Saville, of AlixPartners, said: “Regrettably despite an extensive sales process it has not been possible to identify a purchaser for the business. Our focus now is in identifying an appropriate route forward and work with all stakeholders to do this. We will ensure that we communicate further as this process unfolds.”

Better Capital, which is headed up by private equity baron Jon Moulton, acquired Jaeger for £19.5m in 2012, but the firm has struggled under difficult conditions for high-street fashion retailers.

Last year the firm said that total annual sales fell from £84.2m to £78.4 m, while it booked a pre-tax loss of £5.4m, according to accounts filed at Companies House.

PA

European Central Bank chief Draghi stays positive on negative rates

Negative interest rates are working despite the squeeze on banking profits, Europe’s most powerful central banker insisted on Thursday.

European Central Bank president Mario Draghi defended the controversial policy in a Frankfurt speech Thursday, claiming negative rates “have turned out to be powerful in terms of easing financial conditions”.

The ECB first cut its deposit rate below zero in 2014, effectively charging banks to park cash at the ECB overnight.

The rate has since been cut further to minus 0.4%, along with a package of other stimulus measures including an €80 billion (£68 billion) a month money-printing programme, to ward off deflation.

Draghi said: “The potential negative side-effects have so far been limited. As household deposit rates have been sticky at zero, banks’ net interest rate margins have fallen somewhat.

“But the impact on bank profitability has been offset by the positive effects of easier financial conditions on the volume of lending, and the reduction in loan-loss provisions, as monetary policy has lifted economic prospects.”

Women still much less likely to start a business than men, study reveals

Men are still significantly more likely than women to want to set up their own business, and the vast majority of females say that they’re discouraged from doing so because of a lack of inspiring role models.

A study by NatWest shows that while overall interest in starting a new business has been increasing this year, having fallen to a historic low in the run up to and aftermath of the Brexit vote, the gender gap remains notable.

Sixteen per cent of men say that they want to start their own business compared to 12 per cent of women, and caution appears to be the overriding factor holding women back.

Only 18 per cent say that they think the time is right to launch a business now, compared to 24 per cent of men. A total of 58 per cent of women cite a fear of failure as the reason they’re not launching their own company, compared to 50 per cent of men.

The findings chime with an earlier extensive study also conducted by NatWest and published in February, showing that businesses set up by women contributed £3.5bn to the UK economy and created 77,000 jobs in 2015, but that the proportion of the UK’s female working population starting a business was below 5 per cent.

That places Britain behind countries including Canada, the US and the Netherlands.

In 2015, 126,000 businesses were created by women – a stark rise from the 58,000 created in 2006 – but down from the 139,000 in 2013, NatWest said at the time.

Other experts and HR professionals have said that there’s limited infrastructure in place to specifically support women who want to launch a start-up.

The NatWest survey released on Thursday found that only 37 per cent of women said that they knew where they could source information and advice about starting their own company, and that over two thirds of women said they would be more encouraged to take the first step if they had inspiring female role models, access to a network of local female entrepreneurs, and information targeted at women’s specific circumstances.

Once in business, though, 30 per cent of female entrepreneurs said that they feel like they have the skills needed to succeed, compared to just 22 per cent of men.

Secrets of my Success: Lionsgate UK and Europe chief executive Zygi Kamasa

Zygi Kamasa, 47, is the CEO of film and TV distributor Lionsgate in the UK and Europe, with recent big hits including La La Land, The Hunger Games franchise and Salmon Fishing in the Yemen.

What do you do?

I oversee the 14 or 15 movies we make each year, and the people behind them. Each movie takes up to 18 months to film and complete post-production. Yesterday, for example, I was giving notes in post-production on a British movie that we’ll release at the end of this year, then I watched a cut of a current edit, before having a call with Rupert Everett, who’s directed a movie about Oscar Wilde, about re-shooting the ending. Then I worked on plans for the premiere and PR of Their Finest, which is coming out this month with Bill Nighy, Gemma Arterton and Jeremy Irons. So far, I’ve overseen the release of probably 300 films in the cinema and had 30 or 40 number one hits at the UK box office.

How did you get here?

I’ve always been entrepreneurial. I started a computer business in my last year of university, and by graduation I had 12 people working for me. But I was always trying to find a way into the movies. Growing up with four older sisters meant I saw films like The Omen and Taxi Driver and The Godfather way too young, aged 12 or 13, and I was captivated. So I sold the computer business’s assets to a bigger firm, and moved into film making. For my first two (low-budget, independent) movies, which had Simon Callow and Linda Bellingham in them, I sold investors the opportunity to appear as extras for £1000 and a tax break. A kind of early crowdfunding. They did very well, and I then co-founded a film distribution company, Redbus Film. Director Gurinder Chadha came to talk to us about a small film for the Indian community; we thought the idea was charming but didn’t expect it a big success. That was Bend it like Beckham, which became a worldwide hit and established us in the business.” [Redbus was bought by Lionsgate for $35 million in 2005 and became Lionsgate UK.]

How do you spot a hit?

So much film and TV is made today, you have to have something that’s truly original. As a one-liner, to La La Land you’d say: “no chance”: it was a contemporary musical with no well-known songs. But it was the reinvention of the musical, and the filmmaker kept talking to me about the ending. You can follow your dreams but you don’t always get what you want from life. We knew it would work.

What’s been the worst moment in your career?

For every La la Land, there are movies where you put in the same effort, love, 18 months of work, spend an awful lot of money, and they just tank. In the early days as Redbus, we lost hundreds of thousands of pounds on a movie, and I couldn’t pay the staff bills that month. We were facing bankruptcy at one point, but we carried on and eventually Bend it Like Beckham paid everything off. More recently, our biggest flop has been a movie called The Spirit. It had Samuel L Jackson and Scarlett Johanssen in it, but it absolutely died in the box office. People hated it; it was a hugely expensive mistake.

What would you tell your 18-year-old self?

Believe in your instinct. Don’t be swayed by other people’s voices. Not just in the creative arts, but as an entrepreneur too: if you believe that you can start something, do it.

How do you manage your work-life balance?

I’m married with two kids, aged 14 and 11, so I try to be flexible. I spend a lot of time working from my office at home in Radlett, Hertfordshire, so I can see my family. Then I’m often on phone to LA at 11pm. You can’t dedicate six or seven days a week to work, you have to work to live.

Any tips?

Be original. Don’t try to be derivative and say “I’ve got a movie that’s just like La la land.” In fact, I’ve been sent about 20 musicals scripts in the past few months — but they’re the last thing I want. We’ve done that. Invent something new, be fresh and daring.

Subway 'worker' reveals how to get free food and what options to avoid

A Reddit user who claims to be an employee at a Subway store in the US has posted an expose of the sandwich chain, revealing how to get free food and what products should be avoided.

The user, who calls himself Nope_Nope_Nope, says that he works the night shift as a “Sandwich Artist” at a store on the East Coast of America. He says that he’s been employed for a year and that, based on his experience, customers should be wary of three sandwich ingredients: meatballs, roastbeef and cheese.

“Early mornings, ask if the meatballs are fresh. You’ll be told yes no matter what, but if they have to go check it’s actually a guaranteed no… they’re checking to see if they can pass as fresh. Trust me, meatballs are annoying to prep, we know damn well if they’re fresh or not without needing to check,” he wrote.

“Otherwise just be careful about the roastbeef, because that tends to go bad the quickest […]. If the American cheese cambro (container) is almost empty, there’s a good chance the cheese is soggy. Not a big issue, but… still there,” he added.

The redditor also revealed that if you complain, you’re most likely to get a free sandwich.

“Look really distressed and disgusted with how they’re making your sandwich, Order something, and take it to your seat, open it, walk back and tell them it’s not made right,” the alleged employee advised.

Alternatively customers can get a freebie or discounts by being “extremely nice”.

The individual also revealed the unsanitary conditions of the cutting boards, which are only cleaned twice a month at the branch where he works.

“I also know how dirty our cutting boards are… Let me sum it up for you, the deli-paper your sandwich is made on (just from coming into contact with the cutting board) should be considered a health biological hazard,” he said.

Despite some of the negative comments, the alleged employee still said he “actually really enjoys” working for the company.

He said that, based on his experience, tuna sandwiches were the chain’s most popular product, while his own favourite was the foot-long ‘Spicy Italian’ on the Italian herb and cheese bread, with double meats, onions and bell-peppers then toasted.

“Extra oil, two lines of vinegar, and if I’m feeling saucy, chipotle southwest and an avocado,“ he added.

Although the worker did not verify his identity, he shared a picture of his Subway name tag and uniform to boost his credentials.

Subway was not immediately available for comment when contacted by The Independent.

The fast food chain was recently slammed in the UK for seeking to pay young “apprentices” just £3.50 per hour. Successful candidates were offered just £119 per week for five 8pm to 5pm shifts, including weekends.

In the US, an investigation by the Canadian Broadcasting Corporation (CBC) released in March revealed that Subway’s oven roasted chicken is actually only 53.6 per cent chicken, and the chicken strips are only 42.8 per cent chicken. The company at the time denied the claims.

15 things you should never do at the office holiday party

Don’t flirt.

Don’t look bored.

Don’t gossip or bad mouth your colleagues.

Don’t dress inappropriately.

Don’t forget to acknowledge those who planned the party.