💰 5 Fact Friday: How Starbucks Turned $113M Into $20B

MARKETS
1. Buying The Dip Pays Off, Again 💸

Last week, we discussed the market jitters that sent Wall Street into a tailspin. But fast forward a few days, and that volatility already feels like ancient history.

The dip was as brief as it was sharp. Now, all major indices have climbed back above their August 2nd levels.

What fueled this rapid rebound? A mix of easing recession fears and “Goldilocks” economic data (not too hot, not too cold) has breathed new life into the market.

After the yen carry trade unwind and Buffett’s big sell-off sent shockwaves, the S&P 500 snapped back 6.5% in just six days. Meanwhile, the VIX—Wall Street’s “fear gauge”—plummeted 61%, marking its fastest decline ever.

This rollercoaster ride highlights a key investing principle: market volatility is the price of admission for long-term growth.

Since 1928, the median intra-year drawdown is -13%, making August’s ~10% decline nothing out of the ordinary.

The recent surge has rewarded those who “bought the dip,” but before you bet the farm on the next pullback, here are three considerations:

1. Stick to the Fundamentals: Buying the dip works if the underlying assets are solid—but don’t confuse a discount with a bargain.

2. Not Every Dip Rebounds: After the dot-com bubble, investors who bought at the peak waited seven years just to break even.

3. Dollar-Cost Averaging: Investors who steadily bought through the 2000 tech crash saw positive returns in less than 4.5 years. This approach shaved 2.5 years off the wait and captured an extra 34% in returns.

The Takeaway

Short-term noise can shake markets, but sticking to long-term strategies remains the best approach for riding out volatility. And if seeing red makes you queasy, avoid peeking at your brokerage account during these dips.

Fun fact: Studies show that investors who check their balances less often tend to do better in the long run.

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ECONOMY
2. Annual Inflation Dips, Cumulative Inflation Rips 🛒

After months of speculation, the Fed might finally be ready to ease up on rates. The latest economic data delivered exactly what the market was hoping for—a “soft landing” signal.

The Producer Price Index (PPI), which tracks wholesale inflation, rose just 0.1% in July—below forecasts and well off its June levels. Meanwhile, the Consumer Price Index (CPI) showed annual inflation easing to 2.9%, slightly better than expected.

Translation: inflation is cooling, but not crashing.

On the employment side, jobless claims came in slightly below expectations. Plus, there are indications that the recent rise in unemployment is tied to a growing labor force more than job losses.

What does this all mean?

With both inflation and unemployment appearing stable, the Fed may have a green light for a September rate cut. Traders are now debating not if, but how much, with discussions centered on a 0.25% versus a 0.50% reduction.

But let’s not pop the champagne just yet.

Even though inflation is cooling, prices remain stubbornly high.

Over the last four years, cumulative inflation has risen to 17.2%—the highest level in over 30 years. Compare that to a four-year inflation rate of just 6% in 2019 and under 7% as recently as 2021.

So, while markets might cheer the Fed’s “victory,” it’s easy to see why many Americans are still feeling the pinch. Groceries, financing, and housing remain painfully unaffordable, driving consumer sentiment to an 8-month low.

Know The Community: Poll Question 💬

I want to make sure 5 Fact Friday is hitting the mark for YOU! To do that, I’ll be running polls each week to learn how I can improve.

Here are the top 3 results from last week’s poll:

Where do you typically get your financial news and advice?
1. Financial news websites (45%)
2. Social media
3. Television

Vote in today’s poll and help me help you! 👇️

INVESTING
3. Betting On A Consumer Comeback 🛍️

The “Great Rotation” from big tech to small caps began about a month ago, but now, the focus may be turning toward consumer goods.

Recently, some heavy hitters revealed adjustments to their portfolios that align with this shift. Here’s what’s happening:

• Warren Buffet’s Berkshire Hathaway initiated a $270M position in Ulta Beauty ($ULTA)

• Bill Ackman’s Pershing Square bought $230M worth of Nike ($NKE)

• Seth Klarman’s Baupost Group dipped $35M into Capri Holdings ($CPRI), which owns brands like Versace, Jimmy Choo, and Michael Kors

These are all small “starter positions”—more like testing the waters than diving in headfirst.

Still, they hint at a hypothesis: with interest rates likely to ease, consumers might finally get some breathing room—and consumer-facing companies could be the real winners.

It’s early, but this is a trend worth keeping an eye on. When rates drop, we could see more capital shift from tech giants to companies catering directly to consumer wallets.

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STOCKS
4. Google Faces Breakup Talk 💣

Google’s dominance in search is under fire.

After being found guilty of anticompetitive behavior, the company is now staring down the barrel of a potential breakup by the Department of Justice (DOJ). If it happens, this would be the biggest antitrust action since the Microsoft saga more than 20 years ago.

Back then, Microsoft spent a decade under restrictive DOJ oversight, forced to accommodate third-party developers and limit its ability to bundle software. The DOJ could take a similar approach here—or go even further.

So, what’s on the table?

The DOJ is reportedly considering:

• Splitting Google into separate entities for search, ads, and operating systems

• Breaking off pieces of the ecosystem, like Chrome or Android

• Requiring Google to share data with rivals

• Ending deals that make Google the default search engine on devices like iPhones

Tech giants like Amazon and Meta are watching closely, knowing Google’s fate could set a precedent for their own battles down the road.

For shareholders, the outcome is unclear. A breakup could unlock hidden value in Google’s sprawling business, but it could also lead to a drawn-out, expensive court fight with years of uncertainty.

From an investor’s perspective, breaking up Google could spark the emergence of smaller, nimbler companies that are focused on bringing new ideas to the market. Think more growth and innovation, and less financial engineering.

What would that innovation look like? It could be anything from greater privacy controls (DuckDuckGo) to AI-powered search (Perplexity).

Until we find out for sure, the massive profits tech giants enjoy today could be at risk. Valuations could compress, and the long tech trade—a favorite among growth investors—might start losing its shine.

The DOJ’s mandate is to maintain competitive markets, protect consumer interests, and foster an environment where innovation thrives. Notice that nowhere in there does it say “maximize shareholder value.”

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STOCKS
5. How Starbucks Turned $113M Into $20B ☕

Back in June, I asked if CEO pay had gone too far, with the median S&P 500 CEO earning over 200x the median employee salary. An overwhelming 62% of you said, “Yes!”

Well, Wall Street might have other ideas.

Brian Niccol, the CEO who led Chipotle to a stunning 765% gain in under seven years, has been poached by Starbucks—where shares have climbed just 52% in the same period.

Niccol’s move comes as the coffee giant grapples with two consecutive quarters of declining same-store sales, leaving investors eager for a revival. And they’re willing to pay top dollar to get it done.

Niccol’s compensation package?

A hefty $113 million, including a $10 million signing bonus, $75 million in stock grants, and a base salary of $1.6 million per year. Oh, and he doesn’t even have to move to Seattle—Starbucks reportedly agreed to let him run the show from sunny California.

So, is one man worth that kind of cash?

Investors seem to think so. Since the announcement on Monday, Starbucks stock has soared 23%, adding over $20 billion in market cap to its valuation.

Meanwhile, Chipotle shed nearly $3 billion as shareholders brace for challenges after Niccol’s departure next month.

The expectations are sky-high, but if Niccol can even just meet them, he will have justified his nine-figure payday. Here’s to hoping this turnaround doesn’t leave us paying more for less… again.

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