💰 5 Fact Friday: Sausage Sales Signal What, Exactly?

STOCKS
1. Berkshire Joins The 4-Comma Club 🏆

Warren Buffett’s Berkshire Hathaway just became the first non-tech U.S. company to reach a $1 trillion market cap, a milestone typically reserved for Silicon Valley’s finest.

$BRK.B has surged 29% in 2024, outpacing the S&P 500’s 18% gain and signaling that old-school investing is far from obsolete.

Buffett, who is celebrating his 94th birthday today, has been shifting gears lately. He’s sold half of his Apple ($AAPL) stake and reduced Berkshire’s holdings in Bank of America ($BAC) by $5 billion.

At the same time, he’s been raising Berkshire’s cash reserves to a record $277 billion, with $234.6 billion stashed in short-term Treasuries—more than even the U.S. Federal Reserve holds.

But don’t think Buffett’s gone full doomsday prepper.

Berkshire has also been making fresh bets, picking up shares in Ulta Beauty ($ULTA) and Heico ($HEI), showing that the Oracle of Omaha still sees opportunities in today’s market.

The Takeaway

Buffett’s playbook is as relevant as ever: focus on intrinsic value, maintain a strong cash position, and don’t chase trends.

As Berkshire joins the trillion-dollar club, it’s clear that you don’t have to be a revolutionary technologist to get rich. Patience, discipline, and business fundamentals can still go a long way.

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INVESTING
2. The Real Cost Of Bad Timing 🚨

Index funds are the closest thing to a "sure bet" in investing, but many investors still manage to fumble the ball.

The primary culprit?

Poor timing.

A recent study by Morningstar reveals that over the past decade, the average investor earned 6.3% annually, while their funds delivered 7.3%. This 1% gap—equating to a 15% shortfall—stems from buying high and selling low, usually driven by emotion over strategy.

Volatility can make the problem even worse.

During the Covid Crash of 2020, for example, investors faced a staggering 2% gap in returns, largely due to panic selling. Meanwhile, high-volatility sector ETFs see an average annual gap of 2.6% as investors attempt to time the market (but often miss the mark).

How can you avoid this fate?

Stick to broadly diversified, low-cost index funds, and resist the urge to chase trends or react to market swings. Consistent strategies like dollar-cost averaging can also smooth out the bumps, helping you capture more of your investments’ true potential.

If you do feel the need to speculate, limit it to a small portion of your portfolio—no more than 5%.

Remember, slow and steady wins the race, especially when it comes to long-term investing.

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STOCKS
3. When 122% Growth Still Disappoints 📉

Nvidia isn’t just another tech stock—it’s the crown jewel of the AI revolution, and its quarterly earnings are a must-watch event. (Just ask Lauren to pass the Party Beer.)

This time around, Nvidia delivered what most companies can only dream of: 122% year-over-year revenue growth, Q2 profit of $16.6 billion, and a jaw-dropping $50 billion share buyback.

So, why did the stock take a 7% tumble after hours?

For one, $NVDA is priced to perfection. Up 150% year-to-date, the market expected the company to blow past its already high expectations. Meeting the bar, but not smashing it, left traders less than thrilled.

But this dip is actually a healthy sign for the market.

In a speculative bubble, even modest wins send stocks soaring. Nvidia’s slip suggests investors are pausing to weigh the fundamentals.

With a lofty P/E ratio of 47x compared to the S&P 500’s 23x, Nvidia’s valuation has been driven by its extraordinary growth. Quarter-over-quarter growth slowing to 15% (from 88% last year) raises questions about whether this rocket ship is finally descending.

In the end, this kind of pullback is constructive. It shows that the market is taking a more measured approach, weighing Nvidia’s stellar performance against its long-term prospects.

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INVESTING
4. Military Budgets Fuel Defense Stocks 🚀

Global defense spending is soaring, and defense contractors are cashing in.

NATO’s budget has more than doubled over the past decade and global spending jumped 7% last year to $2.43 trillion.

As a result, the top 15 aerospace and defense companies are expected to generate $52 billion in free cash flow by 2026—nearly double their 2021 (pre-war) levels.

This surge in cash is driving significant share buybacks and dividends, with U.S. giants like Lockheed Martin and RTX leading the charge. In fact, 2023 marked the best year for defense buybacks in the U.S. and Europe over the past five years, according to Bank of America.

Unsurprisingly, revenue growth and shareholder distributions have been kind to defense stocks.

The Euro Stoxx Aerospace and Defense index has doubled since Russia's invasion of Ukraine, while the Global X Defense Tech ETF ($SHLD) is up nearly 34% year-to-date.

With no signs of de-escalation in Ukraine, Palestine, or Taiwan, this rearmament trend could be one to keep an eye on.

However, Byron Callan of Capital Alpha Partners warns that defense is a cyclical business. While demand is strong now, political shifts can quickly change the landscape.

MANIAC PICKS

Flying this Labor Day weekend? Prepare for crowded airports and long lines. The TSA expects a record-breaking 17 million travelers to hit the skies.

Sports betting is draining savings, with vulnerable households seeing a 14% drop in investment deposits—losing $2 in investments for every $1 bet.

Super Micro stock dropped 19% after Hindenburg accused the company of accounting manipulation. The company delayed its annual report filing following the short seller’s claims.

NFL owners approve private equity investment, allowing PE firms to buy stakes in teams without voting power—a major shift in sports ownership.

Private markets have outperformed stocks in every downturn of the past 15 years. Fortify your portfolio with private equity, venture capital, and art.*

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ECONOMY
5. What Sausage Sales Say About Inflation 🌭 

Last week, Fed Chair Jerome Powell all but declared victory over inflation at the Jackson Hole summit. He’s now more focused on risks to the labor market, like rising unemployment.

But sausage sales tell a different story.

As grocery prices climb, consumers are “trading down” from pricier proteins like steak and chicken, leading to a surge in sausage demand—a real-world sign of tightening belts.

Even Walmart, which recently reported strong earnings, noted that higher-income shoppers are flocking to its stores, hunting for deals.

Interestingly, this shift isn’t fully captured by traditional inflation metrics. The Fed’s preferred gauge, the PCE, accounts for consumers swapping high-cost items for cheaper alternatives.

But this “substitution effect” can mask the financial strain many are feeling.

Since it’s not the desired items but the ones actually purchased that factor into inflation calculations, these compromises might paint an overly rosy picture.

While the Fed sees progress, these behaviors suggest that consumers are still grappling with the pinch of inflation.

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