They're counting pennies and buying on sale
ANDREW FARRELL
Wednesday, November 05, 2008
Warren Buffet bought his Omaha, Neb., home in 1958 for $31,500 (U.S.). Today, Mr. Buffett is about $50-billion richer, but he still lives in the same place.
The penny-pinching nature of America's second-wealthiest man is legendary. He drives a Cadillac. He prefers burgers and Cherry Cokes to a pricy steak. When a waiter once tried to pour him some rare vintage wine, Mr. Buffett covered his glass and said “No thanks, I'll take the cash.”
He isn't the only frugal billionaire. While big spenders like Oracle's Larry Ellison grab headlines for antics like buying the longest yacht in world, the thrifty rich lie low – and spend little in comparison. Expect converts: A recent survey of 439 high-net-worth families by wealth-research firm Prince & Associates found 59 per cent are cutting back their spending.
In pictures: The thrifty billionaires
Yet such reductions may actually be hard for John Caudwell, whom we valued at $2.3-billion this March. He cuts his own hair and buys his clothes off the rack.
“I don't need Saville Row suits,” he told a Forbes reporter last year. “I don't need to spend money to bolster my own esteem.”
The same goes for India's Azim Premji, who turned his dad's cooking-oil business into technology giant Wipro. Worth some $12.7-billion, he still drove a Ford Escort for eight years before trading it in for a new Toyota Corolla. He usually walks to work from his nearby home.
Mr. Premji often stays at budget hotels when travelling in India and reportedly wears non-branded suits and flies economy. Paper plates were used at a luncheon in honour of his son Rishad's wedding a few years ago.
Ingvar Kamprad is the seventh-wealthiest man in the world, but you wouldn't know it if you met him. The IKEA founder, worth an estimated $31-billion, usually wears denim shirts and decorates his home with his company's low-cost furnishings. He drives a 1993 Volvo.
“How the hell can I ask people who work for me to travel cheaply if I am travelling in luxury?” says Mr. Kamprad. “Best to stay in touch with the real world.”
This kind of toned-down spending may grow more pronounced among many of the world's billionaires. While they have plenty of money on paper, their net worth is often tied up in investments. To make even bigger bets, they might leverage their assets. During times of market turmoil like these, their liquidity can dry up very quickly.
Aubrey McClendon was forced to sell a gigantic stake in his company, Chesapeake Energy, because of margin calls. Fellow American billionaire Sumner Redstone recently sold $400-million in Viacom and CBS shares to keep his creditors at bay.
Russian billionaires, who gained a reputation for unbridled extravagance in recent years, have been even harder hit. Oleg Deripaska, Alisher Usmanov and Suleiman Kerimov all recently faced margin calls – and sharp hits to their wealth.
While these billionaires scramble to raise cash, Mr. Buffett is sitting on a pile of it. In the past couple months, his Berkshire Hathaway put $3-billion into General Electric and $5-billion into Goldman Sachs.
Mr. Buffett received sweetheart terms in both deals because he's one of the few people with billions to invest in this tough market. Good advice for anyone, billionaire or not: Count your pennies and buy on sale.
In pictures: The thrifty billionaires
© Copyright The Globe and Mail
Thursday, November 6, 2008
Warren Buffet bought his Omaha, Neb., home in 1958 for $31,500 (U.S.).
European stock markets traded sharply lower Thursday
European stock markets traded sharply lower Thursday following overnight losses in Asia, as investors fretted about the global economy ahead of expected interest rate reductions later from the European Central Bank and the Bank of England.
The FTSE 100 index of leading British shares was down 180.42 points, or 4.0 percent, at 4,350.31, while Germany's DAX was 214.99, or 4.2 percent, lower at 4,951.88. France's CAC-40 was down 145.06 points, or 4.0 percent, at 3,473.05.
Europe's losses echoed those seen on Wall Street Wednesday and in Asia overnight. The Dow Jones industrial average fell 486.01, or 5.1 percent, to 9,139.27, while the Standard & Poor's 500 index shed more than 5 percent.
It's not expected to get much better later, with stock futures down. Dow futures were down 107 points, or 1.1 percent, at 9,070, while S&P futures were 12.9 points, or 1.4 percent, lower at 945.1.
Bush Goes Full Speed Ahead On Bailout
Lame Duck Administration Eager To Pump Money Into Struggling Financial System
(CBS/AP) At a time when most administrations are slowing down, the Bush White House appears to be speeding up - at least when it comes to getting the $700 billion financial rescue program up and running.
Treasury Secretary Henry Paulson, President Bush's point man on the gigantic program, is pushing his staff to do everything possible to show markets that the government is getting the money out the door to bolster the financial system and get banks to resume more normal lending.
On Wednesday, one day after Sen. Barack Obama won the presidency, the Treasury Department detailed how it planned to borrow a record $550 billion before the end of this year to back the bailout. Treasury said it would sell $55 billion in bonds next week, including a reintroduction of the three-year note - all part of a massive borrowing effort required because of the cost of the bailout and a budget deficit that some believe could hit nearly $1 trillion next year.
The government's surging financing needs are a stark reminder of the challenges awaiting Obama even as the current administration moves to implement its rescue program and the Fed fine-tunes its approach to the crisis.
The financial turmoil flared anew Wednesday with the Dow Jones industrial average plunging 486.01 points, or more than 5 percent, as investors absorbed more bad economic news with a report on the manufacturing sector showing that the segment of the economy where most Americans work had dipped into recession territory in October.
The selling carried over to Asia, where Japan's Nikkei stock average retreated 5.7 percent and Hong Kong's Hang Seng Index lost 6.7 percent in early trading Thursday.
Investors were braced for more bad news Thursday with the number of newly laid-off workers filing claims for unemployment benefits expected to remain around 480,000, a level that usually signals a recession.
Economists expect a separate report will show productivity slowed to a weak 0.8 percent rate of gain in the third quarter, far below the 2.8 percent increase in the second quarter. And they were looking for the slowdown in productivity to be accompanied by a rise in labor pressures with unit labor costs climbing at a rate of 2.8 percent, compared with the 0.5 percent rate of decline turned in during the second quarter.
And those reports were coming one day before the government was scheduled to report on unemployment for October, a report expected to show that the jobless rate shot up to 6.3 percent last month as businesses cut 200,000 workers from their payrolls, the 10th straight month of joblessness since January.
The government said last week that the overall economy, as measured by the gross domestic product, fell at an annual rate of 0.3 percent in the July-September quarter, reflecting the biggest drop in consumer spending in 28 years. Analysts are forecasting that GDP will fall by an even larger amount of around 2 percent in the current quarter. That would meet the classic definition of a recession of two consecutive quarters of declining GDP.
Mark Zandi, chief economist at Moody's Economy.com, said he thinks GDP will keep shrinking through the first half of next year, pushing the unemployment rate up to 8 percent before a solid rebound can begin.
Zandi expects this downturn to produce the most severe unemployment since the 1981-82 recession, when the jobless rate jumped to 10.8 percent, the highest since the 1930s.
"I think we are through the worst of the financial panic, but I expect the recession will last through next summer," Zandi said.
On Wednesday, the Federal Reserve said it will slightly boost the interest rates it pays banks on their required reserves and the excess reserves they choose to deposit with the Fed. The rescue bill authorized the central bank to start paying interest rates to commercial banks on the reserves. Policymakers hope the move will further bolster the banks' reserves.
In other developments, the Bush administration is hopeful that world leaders, at a summit in Washington next week, will adopt an action plan singling out some short-term steps that could be taken to deal with the current financial crisis as well as prevent similar problems from happening again.
The plan could include measures aimed at promoting more openness - or transparency - in financial markets, improving "risk management," the procedures that financial institutions follow to detect and protect themselves against risky investment decisions, and bolstering accounting rules, administration officials said Wednesday while briefing reporters on the White House's Nov. 15 summit.
While the White House also believes leaders will be able to find some common ground for fighting the worst financial crisis to jolt the global economy in more than a half century, there is little appetite in the waning days of the administration for overhauling financial regulations.
Europeans - led by British Prime Minister Gordon Brown and French President Nicolas Sarkozy are seeking ambitious regulatory reforms coordinated among countries to prevent a repeat of similar housing, credit and financial debacles that are now imperiling the economies of the United States and the world.
Instead, the Bush administration predicts world leaders will come together on broad principles of reform to better protect against future financial crises, promote regulatory cooperation among countries and identify the root causes of the crises at hand.
"We are working in a cooperative spirit, trying to find the path forward together," White House press secretary Dana Perino said this week.
Leaders of the world's top 20 economic powers have been invited to the summit, which will include a dinner at the White House next Friday and talks next Saturday. Besides the United States, France and Britain, other member countries include Germany and Japan as well as major developing countries such as China, Brazil and India.
The administration has been in consultations with President-elect Barack Obama's team and is seeking their input regarding the summit, officials said. Before Tuesday's election, it was reported that neither Obama, nor his Republican rival at the time, John McCain, would attend the economic summit.
© MMVIII, CBS Interactive Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.
The FTSE 100 index of leading British shares was down 180.42 points, or 4.0 percent, at 4,350.31, while Germany's DAX was 214.99, or 4.2 percent, lower at 4,951.88. France's CAC-40 was down 145.06 points, or 4.0 percent, at 3,473.05.
Europe's losses echoed those seen on Wall Street Wednesday and in Asia overnight. The Dow Jones industrial average fell 486.01, or 5.1 percent, to 9,139.27, while the Standard & Poor's 500 index shed more than 5 percent.
It's not expected to get much better later, with stock futures down. Dow futures were down 107 points, or 1.1 percent, at 9,070, while S&P futures were 12.9 points, or 1.4 percent, lower at 945.1.
Bush Goes Full Speed Ahead On Bailout
Lame Duck Administration Eager To Pump Money Into Struggling Financial System
(CBS/AP) At a time when most administrations are slowing down, the Bush White House appears to be speeding up - at least when it comes to getting the $700 billion financial rescue program up and running.
Treasury Secretary Henry Paulson, President Bush's point man on the gigantic program, is pushing his staff to do everything possible to show markets that the government is getting the money out the door to bolster the financial system and get banks to resume more normal lending.
On Wednesday, one day after Sen. Barack Obama won the presidency, the Treasury Department detailed how it planned to borrow a record $550 billion before the end of this year to back the bailout. Treasury said it would sell $55 billion in bonds next week, including a reintroduction of the three-year note - all part of a massive borrowing effort required because of the cost of the bailout and a budget deficit that some believe could hit nearly $1 trillion next year.
The government's surging financing needs are a stark reminder of the challenges awaiting Obama even as the current administration moves to implement its rescue program and the Fed fine-tunes its approach to the crisis.
The financial turmoil flared anew Wednesday with the Dow Jones industrial average plunging 486.01 points, or more than 5 percent, as investors absorbed more bad economic news with a report on the manufacturing sector showing that the segment of the economy where most Americans work had dipped into recession territory in October.
The selling carried over to Asia, where Japan's Nikkei stock average retreated 5.7 percent and Hong Kong's Hang Seng Index lost 6.7 percent in early trading Thursday.
Investors were braced for more bad news Thursday with the number of newly laid-off workers filing claims for unemployment benefits expected to remain around 480,000, a level that usually signals a recession.
Economists expect a separate report will show productivity slowed to a weak 0.8 percent rate of gain in the third quarter, far below the 2.8 percent increase in the second quarter. And they were looking for the slowdown in productivity to be accompanied by a rise in labor pressures with unit labor costs climbing at a rate of 2.8 percent, compared with the 0.5 percent rate of decline turned in during the second quarter.
And those reports were coming one day before the government was scheduled to report on unemployment for October, a report expected to show that the jobless rate shot up to 6.3 percent last month as businesses cut 200,000 workers from their payrolls, the 10th straight month of joblessness since January.
The government said last week that the overall economy, as measured by the gross domestic product, fell at an annual rate of 0.3 percent in the July-September quarter, reflecting the biggest drop in consumer spending in 28 years. Analysts are forecasting that GDP will fall by an even larger amount of around 2 percent in the current quarter. That would meet the classic definition of a recession of two consecutive quarters of declining GDP.
Mark Zandi, chief economist at Moody's Economy.com, said he thinks GDP will keep shrinking through the first half of next year, pushing the unemployment rate up to 8 percent before a solid rebound can begin.
Zandi expects this downturn to produce the most severe unemployment since the 1981-82 recession, when the jobless rate jumped to 10.8 percent, the highest since the 1930s.
"I think we are through the worst of the financial panic, but I expect the recession will last through next summer," Zandi said.
On Wednesday, the Federal Reserve said it will slightly boost the interest rates it pays banks on their required reserves and the excess reserves they choose to deposit with the Fed. The rescue bill authorized the central bank to start paying interest rates to commercial banks on the reserves. Policymakers hope the move will further bolster the banks' reserves.
In other developments, the Bush administration is hopeful that world leaders, at a summit in Washington next week, will adopt an action plan singling out some short-term steps that could be taken to deal with the current financial crisis as well as prevent similar problems from happening again.
The plan could include measures aimed at promoting more openness - or transparency - in financial markets, improving "risk management," the procedures that financial institutions follow to detect and protect themselves against risky investment decisions, and bolstering accounting rules, administration officials said Wednesday while briefing reporters on the White House's Nov. 15 summit.
While the White House also believes leaders will be able to find some common ground for fighting the worst financial crisis to jolt the global economy in more than a half century, there is little appetite in the waning days of the administration for overhauling financial regulations.
Europeans - led by British Prime Minister Gordon Brown and French President Nicolas Sarkozy are seeking ambitious regulatory reforms coordinated among countries to prevent a repeat of similar housing, credit and financial debacles that are now imperiling the economies of the United States and the world.
Instead, the Bush administration predicts world leaders will come together on broad principles of reform to better protect against future financial crises, promote regulatory cooperation among countries and identify the root causes of the crises at hand.
"We are working in a cooperative spirit, trying to find the path forward together," White House press secretary Dana Perino said this week.
Leaders of the world's top 20 economic powers have been invited to the summit, which will include a dinner at the White House next Friday and talks next Saturday. Besides the United States, France and Britain, other member countries include Germany and Japan as well as major developing countries such as China, Brazil and India.
The administration has been in consultations with President-elect Barack Obama's team and is seeking their input regarding the summit, officials said. Before Tuesday's election, it was reported that neither Obama, nor his Republican rival at the time, John McCain, would attend the economic summit.
© MMVIII, CBS Interactive Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.
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