In the spring of 1991, Warren Buffett, the legendary investor and founder of Berkshire Hathaway, gave three lectures at Notre Dame to MBA and undergraduate students where the topic of Donald Trump came up. During those speeches, which you can find on TilsonFunds.com, an audience member asked Buffett where the real-estate developer went wrong at that time in his career. Buffett blamed Trump’s use of leverage, or borrowed money.
“He simply got infatuated with how much money he could borrow, and he did not give enough thought to how much money he could pay back,” Buffett said. In 1991, The Trump Taj Mahal, an Atlantic City casino that opened the year prior, filed for Chapter 11 bankruptcy protection. A year later, The Trump Plaza Hotel would also file for bankruptcy protection.
“It’s interesting why smart people go astray. That’s one of the most interesting things in business. I’ve seen all sorts of people with terrific IQs that end up flopping in Wall Street or business because they beat themselves. They have 500 horsepower engines, and get 50 horsepower out of them. Or, worse than that, they have their foot on the brake and the accelerator at the same time. They really manage to screw themselves up,” Buffett told the students.
Here’s what Buffett said about the now-presumptive Republican nominee twenty-five years ago: Where did Donald Trump go wrong?
“The big problem with Donald Trump was he never went right. He basically overpaid for properties, but he got people to lend him the money. He was terrific at borrowing money. If you look at his assets, and what he paid for them, and what he borrowed to get them, there was never any real equity there. He owes, perhaps, $3.5 billion now, and, if you had to pick a figure as to the value of the assets, it might be more like $2.5 billion. He’s a billion in the hole, which is a lot better than being $100 in the hole because if you’re $100 in the hole, they come and take the TV set. If you’re a billion in the hole, they say ‘hang in there Donald.’
https://www.yahoo.com/finance/news/...on-trump-at-notre-dame-in-1991-134008040.html
“He simply got infatuated with how much money he could borrow, and he did not give enough thought to how much money he could pay back,” Buffett said. In 1991, The Trump Taj Mahal, an Atlantic City casino that opened the year prior, filed for Chapter 11 bankruptcy protection. A year later, The Trump Plaza Hotel would also file for bankruptcy protection.
“It’s interesting why smart people go astray. That’s one of the most interesting things in business. I’ve seen all sorts of people with terrific IQs that end up flopping in Wall Street or business because they beat themselves. They have 500 horsepower engines, and get 50 horsepower out of them. Or, worse than that, they have their foot on the brake and the accelerator at the same time. They really manage to screw themselves up,” Buffett told the students.
Here’s what Buffett said about the now-presumptive Republican nominee twenty-five years ago: Where did Donald Trump go wrong?
“The big problem with Donald Trump was he never went right. He basically overpaid for properties, but he got people to lend him the money. He was terrific at borrowing money. If you look at his assets, and what he paid for them, and what he borrowed to get them, there was never any real equity there. He owes, perhaps, $3.5 billion now, and, if you had to pick a figure as to the value of the assets, it might be more like $2.5 billion. He’s a billion in the hole, which is a lot better than being $100 in the hole because if you’re $100 in the hole, they come and take the TV set. If you’re a billion in the hole, they say ‘hang in there Donald.’
https://www.yahoo.com/finance/news/...on-trump-at-notre-dame-in-1991-134008040.html
