Warren Buffett Finally Explains Why Being Cheap Leads to Happiness
After a certain point, money won't make you happier -- in fact, it's more likely to cause unhappiness than improve your quality of life
WARREN BUFFETT'S HOUSE IN OMAHA (BOUGHT IN 1958).
Every year, thousands of investors flock to Omaha to hear the wisdom of Warren Buffett and Charlie Munger. For as long as six hours, with only one break for lunch, the two business legends take questions from investors, the press, and analysts.
Appropriately for a shareholder meeting, the focus is the business of Berkshire Hathaway (NYSE:BRK-A) (NYSE:BRK-B) but it's not the only topic they discuss. This year, Buffett discussed frugality, happiness and money in response to a question from a shareholder from Chicago.
Following are my notes on the Chicago shareholder's question, along with responses from Buffett and Munger.
Warren, has your personal frugality helped shareholders? Charlie, do you think Warren's frugality has hurt shareholders?Warren: First of all, let's ask who's the more frugal.
Charlie: On personal consumption, Warren is more frugal. Warren lives in the same house he bought for a very modest price and has lived there for a very long time.Warren: I bought it in 1958 and you moved into yours in 1960. He designed his own house. He did not pay an architect, right?Charlie: I paid $1,900 [for the architect], which was 30% of the market rate.Warren: There are things money can't buy. I don't think standard of living equates with cost of living beyond a certain point. Good housing, good health, good food, good transport. There's a point you start getting inverse correlation between wealth and quality of life. My life couldn't be happier. In fact, it'd be worse if I had six or eight houses. So, I have everything I need to have, and I don't need any more because it doesn't make a difference after a point. When you get to 10 times or 100 times or 1,000 times, it doesn't make a difference [in quality of life].Charlie: Frugality is basically how Berkshire happened. I look out over this audience and I see a lot of understated, frugal people. We collect you people.Warren: Forget about it this weekend! (laughs) The more you buy, the more you save at these prices, folks! (laughs)
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- Jun 8, 2014 at 8:31AM
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Why Wells Fargo Stock Fell 13% in September
A fraud and an unfortunate response.
IMAGE SOURCE: THE MOTLEY FOOL.
September was a month to forget for Wells Fargo (NYSE:WFC). After it was revealed on Sept. 8 that the bank had opened as many as 2 million fake accounts for customers, shares of Wells Fargo began a descent that's still under way, culminating in a 13% drop last month.
Tempest in a tea pot?
It initially seemed as if the issue would be more of a tempest in a teapot as opposed to a substantive problem for the nation's third-biggest bank by assets. I say that because the fine that Wells Fargo had to pay regulators for its misdeeds amounted to only $185 million.
That's a lot of money, but for Wells Fargo, it equates to less than 4% of its quarterly earnings. In the three months ended June 30, for instance, the bank earned $5.6 billion. A couple hundred million dollars is just a drop in the bucket compared to this.
However, the size of the fine belies the magnitude of damage done to Wells Fargo's reputation. Every day over the past three weeks, the media has been filled with reports that make Wells Fargo look even worse. The most damning information that's come to light concerns allegations that whistle-blowers at the bank were fired for reporting the fraud sooner. All told, 5,300 people lost their jobs, though presumably only a small fraction of them were whistle-blowers.
Going from bad to worse
The appearance on Capital Hill of Wells Fargo chairman and CEO John Stumpf only made things worse. Called to testify before the Senate and House banking committees, Stumpf was pilloried by lawmakers.
Senators and representatives were furious not only over the fraud itself, but also over the way Stumpf blamed the bank's low-level employees for it and defended the executive in charge of the unit where it occurred over a five-year period -- and perhaps longer -- from 2011 to 2015.
Senator Elizabeth Warren was particularly hostile:
Warren: Since this massive years-long scam came to light, you have said repeatedly "I am accountable," but what have you actually done to hold yourself accountable? Have you resigned?Stumpf: No, I've not.Warren: Have you returned one nickel of the millions that you earned while this scam was going on?Stumpf: The board will take care of that.Warren: I will take that as a "no."
Does this change the investing thesis?
Despite all this, one could argue, as I have, that the thesis underlying Wells Fargo's stock hasn't materially changed. It's still one of the most efficient and profitable banks in the country. And it's still one of the best when it comes to managing credit risk, the most important responsibility of a bank.
Additionally, while the headlines have been horrible for Wells Fargo, there was no reason to believe that its retail customers -- those impacted by the scam -- would leave the bank. Betrayal of trust aside, previous studies have shown that changing banks is such a hassle that most people will avoid doing so.
But this argument doesn't apply with equal force to larger, commercial customers. Both the States of California and Illinois have, at least temporarily, severed certain ties with Wells Fargo. For its part, Illinois has suspended investments in Wells Fargo debt securities and stopped using the bank as a broker/dealer for investment purchases for one year, according to The Wall Street Journal.
This is an issue that investors should watch closely. They should also watch to see what happens with the litany of public and private lawsuits that have already been initiated in response to the fraud. These should be easily absorbed by Wells Fargo's massive earnings, but taken together with further customer defections, the situation could continue to deteriorate for the bank.
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David and Tom just revealed what they believe are the ten best stocks for investors to buy right now… and Apple wasn't one of them! That's right -- they think these 10 stocks are even better buys.
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The author(s) may have a position in any stocks mentioned. The Motley Fool owns and recommends shares of Apple.
The author(s) may have a position in any stocks mentioned. The Motley Fool owns and recommends shares of Apple.
John Maxfield owns shares of Wells Fargo. The Motley Fool owns shares of and recommends Wells Fargo. The Motley Fool has the following options: short October 2016 $50 calls on Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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