Berkshire Hathaway Reduces its Wells Fargo Stake

Warren Buffet’s Berkshire Hathaway Inc. is reducing its position in Wells Fargo and Co. to below 10 percent. The company sold 7.13 million of its shares in Wells Fargo and intended to sell 1.87 million shares more soon.

The company said in a statement, “These sales are not being made because of investment or valuation considerations. Rather, they are solely motivated by the desire to return to a percentage ownership below the 10 percent notification threshold.”

The 10% threshold is significant as remaining above it would disallow Berkshire from engaging in significant transactions with Wells Fargo.

Berkshire said in a statement, “After several months of discussions with representatives of the Federal Reserve, we have concluded that the commitments that would be required of us by the Federal Reserve to retain ownership of 10 percent or more of Wells Fargo’s outstanding common stock would materially restrict our commercial activity with Wells Fargo. Therefore, it would be simpler to keep our ownership below 10 percent.”

The Federal Reserve has special oversight in situations when investors take significant investments in banks. The idea is to prevent a controlling influence on the bank.

Mark Folk, a spokesman for Wells Fargo, said, “We appreciate the confidence that Berkshire Hathaway has placed in Wells Fargo over the years, both as our largest shareholder and a very valued customer. We look forward to continuing our relationship with them.”

Berkshire has been an investor in Wells Fargo since 1989. Should the bank repurchases its stock, it will sell some of its position to make sure it is slightly below 10 percent. A recent filing before the sale shows that Berkshire owns 504.3 million shares worth more than $27 billion. Also, Warren Buffet, as an individual investor, owns 2.01 million Wells Fargo shares.

Berkshire has gained $500 million from this sale of its Wells Fargo stake. Berkshire will continue to be the bank’s largest shareholder. In the past, Wells Fargo played the role of underwriter when Berkshire issued debt for investors. The bank also has a significant banking relationship with other Berkshire affiliated firms. This includes services in lending, insurance, and investment banking.

In 2016, Wells Fargo was involved in a scandal wherein it opened accounts for customers without asking their permission. In response to the accounts scandal, it will take back $75 million of compensation from the executives involved in the scandal, which includes former CEO John Stumpf and former community banking chief, Carrie Tolstedt.

Buffett said in a TV interview that the bank made a “huge mistake” by not fixing the situation immediately which led to the scandal getting out of hand and their reputation taking a hit.
According to analysts polled by Thomson Reuters, Wells Fargo is forecasted to report a fall in its 1st quarter profit.

Berkshire Hathaway also invests in other financial services firms such as their 16.8% stake in American Express Co., 2.9% stake in Goldman Sachs Group Inc., and a 6% stake in U.S. Bancorp.

US Mint Coin Will Feature an African American Lady Liberty

Ever since the US coins were made by the United States Mint, the Lady Liberty was always represented by a white woman. Now, Mint is all set to release a commemorative gold coin that will portray Lady Liberty as a black woman. This is a very welcome move that emphasizes the importance of inclusion in America. The new coin will be released for the celebration of the 225th anniversary of the coin production of Mint. This announcement is made by the Treasury department and Mint.

The new memorial coin that weighs one ounce is made of 24-karat gold. You can purchase this coin starting from April 6th. The encapsulated coin will be placed inside a black wood case that is custom designed. Mint has announced that these coins will be released once every two years. This is a part of memorial coins that are designed to represent the ethnic and cultural diversity of the United States. To represent other cultures, coins in the future will feature Lady Liberty as Hispanic, Asian and Indian. A similar series featuring the same designs in .999 silver will also be made available for sale soon.

This announcement by the US Mint couldn’t come at a better time. It is one of the important cultural moments in the history of the United States. The president-elect Donald Trump won the election where the debates focused mostly on immigrants and their culture. Just a week before the president is scheduled to take the office, the inclusion of an African-American woman in the US Mint coin design reinforces the importance of the non-white community in the United States.

Lady Liberty is an undeniable symbol of America. She was presented as a gift in 1886 by France. The statue of the Lady Liberty is erected in the New York Harbor. The lady is a typical white European woman with a lamp, calling the refugees. The deputy director of US Mint, Rhett Jeppson said that their intention was to honor the heritage and tradition of America. He insisted that they wanted to create a conversation about liberty and freedom. The US Mint wanted to change the representation of Lady Liberty as the nation evolves.

These memorial coins are not made for regular use. They are made in limited editions and collectors love them. The coins sell for a price much greater than the face value as they are made of gold. The value of the coins is equivalent to the value of gold used in the coins.

The obverse side of the coin was designed by Justin Kunz which depicts an African-American Lady Liberty with a crown of stars. The reverse side of the coin shows a majestic flying eagle. The profit generated by selling these coins will be added to the Treasury. Mint is planning to produce 100,000 gold coins and it will also produce 100,000 silver coins called as medals. These new coins are in the production stage while the other coins in the series are in the design phase.

[Top]

Florida Youth Relied on Payday Loans During the Holidays

Miami Beach, Florida

The holiday season may be over, but the negative buzz of Christmas will linger on for months.

Prior to the Christmas break, there were many reports, studies and op-eds warning about the dangers of spending too much money, taking on too much debt and even turning to the likes of payday loans, pawn shops and other types of alternative financial services that inject your wallet with some money.

Did we listen? It turns out that one specific age group failed to pay attention to the warnings. The demographic? Generation Y consumers, otherwise known as those between 25 and 34 years of age.

According to a new report published by Finder, the number of 25-34-year-olds searching for Florida payday loans in December 2016 increased compared to the same time a year ago. The report noticed that this age bracket witnessed a 16.85 percent jump on payday loan pages. This suggests that members of Generation Y are having a difficult time adapting to life outside of their childhood home.

At the same time, their young counterparts aren’t too interested in short-term, high-interest loans. The same report noted that search volumes for payday loans among those between 18 and 24 fell by nearly 21 percent. This could be good news and a sign that younger consumers are wary of such products.

The other two main age groups were a mixed bag. Florida consumers between 35 and 44 years of age posted a 12 percent increase in payday loan traffic. Meanwhile, Floridian’s between 45 and 54 recorded a 13 percent dip in payday loan search volumes.

Researchers conclude that the main factor between youth and older people is the paucity of a credit history. Indeed, those between 18 and 24 may have been interested in obtaining a payday loan, but since they don’t have much of a credit score, they wouldn’t be able to successfully apply for one. If they are approved for a payday loan then the exorbitant interest rates may have deterred them.

Florida has been working diligently to rein in the payday loan industry. In fact, it has some of the strictest rules and regulations on the books in the world today. Under the current law, the government limits fees under a $500 payday loan to a ten percent monthly fee and a 20 percent establishment fee.

Florida officials have argued that payday loans can harm the most vulnerable in society and send millions of low- and middle-income households into pecuniary despair and fiscal debt traps. The government has taken great pride in installing rules that would make the United States and the United Kingdom blush.

The subject of payday loans has been a controversial one all over the world.

Critics purport that payday loans take advantage of desperate consumers who do not have an emergency fund, a proper bank account and awareness of their rights. Proponents say that payday loans are necessary because there are millions of people who are unbanked or underbanked and need access to alternative forms of credit since they can’t receive traditional types of credit from financial institutions.

[Top]

China Hopes To Make Its Point at World Economic Forum in Davos, Switzerland

The World Economic Forum (WEF) annual meeting is scheduled to commence from January 17th to 20th in Davos, Switzerland. Many powerful business, political and creative agents will participate in the meeting and share their views in this much awaited economic meeting. The well known intellectual and corporate masterminds of the USA will represent the country at the meeting. This meeting is now crucial as it marks the last week of the president Obama’s administration.

China is hoping to take this opportunity to put down a marker to be identified as the most powerful sovereign agent. China has pinned its hopes to this economic meeting because it is the best opportunity to represent the views of China without any interruption from Donald Trump. The president of China, Xi Jinping, has prepared to attend the meeting and it is the first time that a Chinese leader is attending the annual economic conference. There are lots of expectations that the Chinese president will discuss globalization issues and request for a change in the world order.

The discussion about the presence of Xi started early in May. However, the world economy has undergone two important decisions – Brexit vote and election of Donald Trump. There is a lot of weight on the shoulders of Xi now as he is determined to represent China as one of the responsible countries in tackling climate changes to free trades.

The Chinese president will give a keynote speech about the efforts taken by Beijing to negotiate new trade deals without a greater limitation imposed by the USA. In this year, China is expected to rise as a leader taking up the role of promoting globalization trends, taking the word in the path of economic recovery. According to Sun Ding, a prominent commentator, the role of China becomes even more important as the western countries now follow self-centered approach, preferring more isolation.

Currently, China is not economically and politically strong enough to overrule the USA to become the global phenomenon. However, in Davos, Xi will work hard to present the vision of the Chinese to restore political and economic order in the world. Klaus Schwab, the executive chairman and founder of the economic forum said that globalization is not the sole reason for the increasing demand for identity politics. He commented that technology advancements have made several workers obsolete. He said that the Fourth Industrial Revolution is fast approaching and the only way to survive is to educate and train people to face the new challenges.

Artificial intelligence is at a rapidly developing phase and this can threaten several white collar jobs all over the world. More than 70 countries will be represented in the conference and the US will be represented by Vice President Joe Biden and John Kerry, the Secretary of State. The experts would discuss how Donald Trump will use his property tycoon knowledge to head the United States. If the USA wants to support isolationism in the present economic conditions, China is prepared to put itself to fill the void. The Trump administration will be represented by Anthony Scaramucci in Davos.

[Top]

Ethics Experts Are Not Satisfied With Conflicts Plan Of Trump

Ever since Donald Trump was elected as the next President of the United States, the future of his Trump organization was under scrutiny. Trump owns a massive empire with undisclosed assets and revenue. The constitution of the United States requires the President of the United States to be free himself from all other revenue generated jobs. The emoluments clause specifically applies to the President so that foreign companies and governments can’t interfere in American politics. In the past, wealthy presidents have gone on record to create a blind trust to relinquish all ties with their business empire.

The President-elect has taken a new approach where he simply transfers decision-making powers to his sons Don and Eric instead of creating a blind trust. This has invoked concerns among the ethics experts who fear the worst. A lawyer for the Trump organization, Sheri.A. Dillon presented the conflict plan that will be imposed to alienate Trump from his business empire. Both the former White House ethics lawyers for Obama and George W. Bush commented that Trump’s plan is inadequate in every aspect.

The lawyer assured that Donald Trump will isolate himself from the management of the Trump organization for the benefit of the people. This is an absurd claim because stepping back is insufficient as it is required anyway. The lawyer quoted that the conflicts of interests laws are not applicable for the president or vice president. Trump is not required to isolate from his financial assets, but he is doing so anyway voluntarily. However, the emoluments clause is certainly applicable to the president. The founders wanted to make sure that foreign governments and organizations don’t meddle with the internal American politics by offering financial benefits to the president.

During the past four decades, presidents operating organizations created a blind trust agreement as they completely severed themselves from the business operations. The attorney of Trump organization said that it is not possible to un-know what Trump actually knows. She added that it is not possible to create a blind trust for operating businesses. This is true, but knowing information about the financial position of the company is bound to create conflicts of interest.

The various business and investments assets of Trump organization will be conveyed to a trust before January 20th. The trust agreement allows Trump to relinquish his management and leadership authority to his sons Eric, Donald Jr and Allan Weisselberg. An ethics adviser will become a part of the management team to ensure that future actions, transactions and deals raise no conflicts interest. Donald Trump and his daughter Ivanka will resign from all positions held with the Trump organization.

In Trump’s case, it is truly impossible to divest his business totally. Also, it is impossible to avoid conflicts of interests because Trump organization receives numerous foreign payments. The cost of avoiding conflicts of interest becomes huge if the official is entrusted with the highest authority. As the lawyer pointed out, it is not practical to expect Donald Trump to dissolve his business completely for becoming the President.

[Top]