Buffett Assails Money-Manager Fees as Berkshire Reports Profit Rise

Billionaire also declares victory in his $1 million bet with another asset manager that low-cost index funds would out earn hedge funds over a decade

 Warren Buffett intensified his attacks on Wall Street money managers Saturday, saying that investors wasted more than $100 billion over the last decade on expensive advice.
.. “The bottom line,” Mr. Buffett wrote, is that “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.”
.. Book value, a measure of assets minus liabilities that is Mr. Buffett’s preferred yardstick for measuring net worth, rose 10.7% in 2016, compared with a 12% total return in the S&P 500, including dividends.

.. Berkshire’s BNSF railroad subsidiary. Net earnings at Berkshire’s railroad fell 16% in 2016 due largely to a drop in coal demand.
.. Ajit Jain, widely considered to be one of the leading candidates to take the Berkshire CEO job when Mr. Buffett is no longer on the scene
.. Berkshire, he said, is still willing to buy back its shares if prices fall below 120% of book value.
.. Mr. Buffett praised some companies, including Bank of America Corp., for buying back shares. “Some people have come close to calling [buybacks] un-American—characterizing them as corporate misdeeds that divert funds needed for productive endeavors,” Mr. Buffett said. “That simply isn’t the case.”
.. Berkshire has warrants to buy 700 million shares of Bank of America at $7.14 apiece. The stock closed Friday at $24.23, so Mr. Buffett is looking at a paper gain of about $12 billion.
.. He attributed America’s “miraculous” economic growth to “human ingenuity, a market system, a tide of talented and ambitious immigrants, and the rule of law.”
.. He instead saved his sharpest comments for pricey money managers who pledge to beat the market, saying that in his lifetime he has identified “ten or so professionals” who can do so successfully.
.. “If 1,000 managers make a market prediction at the beginning of a year, it’s very likely that the calls of at least one will be correct for nine consecutive years,” he wrote.
.. In 2007 Mr. Buffett bet $1 million that his chosen index fund, the Vanguard 500 Index Fund Admiral Shares, would outperform hedge funds over the next decade.
.. Mr. Buffett in his letter Saturday praised Vanguard founder Jack Bogle as a “hero.”
.. “If a statue is ever erected to honor the person who has done the most for American investors, the handsdown choice should be Jack Bogle.”

The Outlook for Coal: 1000 more job losses in Appalachia

Rob Godby researches energy and public policy at the University of Wyoming.

.. So what President Trump has really promised to do is really enable all fossil fuels in the country. And, in fact, you know, you really can’t enable both natural gas and coal simultaneously because they’re are substitutes. You know, one has to give for the other.

.. So really when you talk about coal, what you’re talking about is more inter-region competition. So Appalachia has had a lot of challenges. It’s competing not only against cheaper natural gas, but also cheap coal from other regions of the country – in particular Wyoming, but also the interior areas of the United States from Illinois all the way south to the Gulf.

.. SHAPIRO: What would be the best-case scenario for the American coal industry at this point?

.. So we’re thinking that there may be about a 5 percent rebound in coal production in the next couple of years. But the way that impacts the areas is really different.

.. So, for example, in Appalachia, you’re still looking at a coal production decline. Most of that production increase is going to occur in the West, and that probably will occur in Wyoming. So you might see about 600 new jobs, maybe more in the West, particularly in Wyoming. And you might see about a thousand more job losses in Appalachia. And the interior might get 150, 200 new jobs if you kind of look at these projections broadly.

TVA CEO: Clean Power Plan compliance, natural gas part of future strategy

President-elect Donald Trump campaigned on promises to revitalize the coal industry, but economic forces may be a bigger hurdle than regulation. According to the Times Free Press, the Clean Power Plan and the power sector’s slow transition to decarbonization aligns with TVA’s long-term strategy.

“We have been following a path that is consistent with the direction of the Clean Power Plan, but we’ve been following it based on what’s the best for our customers, and they happen to line up,” Johnson said. “We really have been following the plan that says if we modernize the fleet as we diversify, what is the best economic and rate path to follow? And that’s really what we will continue to do in every decision we make.”

Part of that plan includes an increasing reliance on natural gas, according to TVA’s IRP.

If prices remain under $4/MMBtu through 2030 and under $6/MMBtu after that, they would be “well in the money in the generation space,” he told Reuters. The utility’s future strategy leans heavily on natural gas as it moves away from coal plants.