💰 5 Fact Friday: Buffett's Big Bet + Trump's Crypto Flip

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Hey Money Maniacs,

If you're reading this from home, enjoy the first Friday of summer! And if you're grinding away at work, happy Take Your Dog to Work Day—I hope a furry friend brightens your afternoon.

Last week, you voted on the future of Apple. In yet another close poll, the majority view Apple favorably, voting “Yes, I'm bullish! 🤑”

Now, let’s get into this week’s biggest stories in the world of money. Today’s issue covers:

1. Buffett Doubles Down 👀

2. Concentration Nears Record Levels 🤨

3. Crypto Gets Political 🗳️

4. Hidden Homeownership Costs Spike 📈

5. How To Ask For A Raise (And Get It) 💸

1. Buffett Doubles Down 👀

Warren Buffett is at it again, doubling down on his faith in traditional energy.

Berkshire Hathaway, Buffett’s holding company, has increased its stake in Occidental Petroleum ($OXY) to nearly 29% of the company.

Berkshire also owns $8.5 billion of preferred stock, paying an 8% dividend, and warrants to buy 83.5 million more shares at $59.62 each.

Here's the latest on Buffett’s buying spree:

Over the past week, Berkshire bought 2.95 million shares for about $176 million, bringing its total to approximately 255.3 million shares.

Typically, Berkshire’s moves are disclosed on Form 13F up to 45 days after the end of each quarter. However, because the company owns more than 10% of Occidental, it must file Form 4 within two business days of any trade.

For those who like to follow Buffett’s investments, this is a rare opportunity to do so without waiting months.

Why Occidental?

1. The stock has lagged the S&P 500 over the past 5 years, potentially providing an opening for the legendary value investor.

2. Buffett has praised Occidental's management, particularly CEO Vicki Hollub, for steering the company effectively. Buffett feels she is doing “exactly what [he] would be doing” and “running the company the right way.”

3. Occidental pays a 1.4% dividend yield.

4. The company recently acquired Permian shale oil producer CrownRock for $12 billion, highlighting a wave of consolidation in U.S. oil fields.

But the energy sector isn't without its challenges.

Alternative energy sources are getting cheaper and gaining adoption. As such, there are mixed predictions from the IEA and OPEC about future oil demand.

Still, Buffett’s support is a strong vote of confidence for oil producers.

2. Concentration Nears Record Levels 🤨

According to a recent Morgan Stanley report, stock market concentration in the U.S. has doubled over the past decade. The top 10 companies now make up 28% of total market capitalization, up from 14% in 2014.

This level of concentration rivals highs not seen since the '60s and marks the fastest increase since the '50s.

Why does this matter?

Higher concentration can lead to greater volatility. When a few giants dominate, their performance can significantly sway the market.

Take Nvidia, for instance—it alone accounts for nearly 35% of all S&P 500 gains this year. This kind of outsized influence can throw diversification right out the window.

But Morgan Stanley argues that concentration isn’t all bad. Historically, rising concentration correlates with higher market returns.

So, even though we’re highly concentrated now, this question is: Can we go higher? There are two reasons to believe the answer is yes.

First, at the end of the most recent concentration peak in 1999, valuations were sky-high.

The forward-looking price-to-earnings (P/E) multiples were 65 for Microsoft, 42 for General Electric, and 97 for Cisco. At the end of 2023, the top three stocks had substantially more modest P/Es: Apple at 29, Microsoft at 31, and Alphabet at 21.

Although these multiples are above the S&P 500 average, the economic returns for these businesses are also above average.

Second, from 2014 to 2023, the top 10 stocks averaged 19% of market capitalization but made up 47% of total economic profit. By 2023, the top 10 equities represented 27% of market capitalization and contributed 69% of total economic profit.

So, should you be worried? Not necessarily.

The stock performance of these companies is backed by the strength and profitability of their underlying businesses. While prices are high, they aren't entirely out of line with their economic fundamentals.

Simply put: This is not a bubble.

That being said, the tides will turn one day. Concentration will decline and smaller companies will eventually outperform the mega-caps.

So, if you are becoming concerned or simply looking to limit risk, diversification remains your best friend.

To hedge against increasing concentration, consider:

• Balancing your portfolio with equal-weighted indices

• Buying total market or small-cap indices

• Adding defensive assets like bonds and real estate

These strategies can help you enjoy potential upside while keeping your portfolio’s overall risk in check.

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3. Crypto Gets Political 🗳️

In a surprising turn of events, cryptocurrency has become a hot topic in the 2024 U.S. presidential election.

Former President Donald Trump has completely reversed his stance on the issue, joining Robert Kennedy as a pro-crypto candidate.

While in office, Trump was clear: “I am not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air.”

However, this March, he told CNBC that although he remains a “traditionalist,” crypto has taken on a life of its own, and he’s “not sure [he’d] want to take it away at this point.”

More recently, Trump has fully embraced crypto, calling for “all the remaining Bitcoin to be made in the USA!” This shift has earned him an A rating from Stand with Crypto, a Coinbase-backed crypto advocacy group.

This stance contrasts sharply with President Joe Biden’s administration, which carries a D rating from the same group.

So, why the sudden interest in crypto?

For Trump, it's likely a strategic move to court a new voter base and leverage the decentralized currency for fundraising. His campaign is even accepting crypto donations.

This could be savvy timing, as American sentiment toward crypto warms.

47% of voters now expect some of their investment portfolios to include crypto, up from 40% last year. Nearly one in three voters say that spot Bitcoin ETF approval has made them more interested in investing in crypto.

Meanwhile, in a purported effort to protect consumers, Biden’s administration has taken a more cautious approach. Biden nominated SEC Chair Gary Gensler, who increased crypto enforcement actions by 53% in 2023.

In fact, Bitcoin ETFs were only approved after the SEC lost a key court battle in which its denial was deemed “arbitrary and capricious.”

As cryptocurrency solidifies its prominence and investors rally to support their interests, a new voting bloc may be emerging. This shift could make the upcoming election the first in which crypto plays a pivotal role.

With the candidates taking starkly different stances, the November election could be critical for the future of cryptocurrency regulation and adoption.

4. Hidden Homeownership Costs Spike 📈

Homeownership is often considered the cornerstone of the American Dream, but the ongoing costs can be a nightmare.

A new study by Bankrate reveals that the average annual cost of owning and maintaining a single-family home in the U.S. has surged 26% since 2020, now totaling $1,510 per month.

So, what's driving these costs up?

• Home Prices on the Rise: The median home price in the U.S. has climbed 40% in the past four years. This translates into higher property taxes.

• Inflation Hits Hard: From 2020 to 2024, cumulative inflation has been 21%, pushing up prices for everything from groceries to gas. Homeownership costs haven’t been spared—with higher utility bills, maintenance, and repair costs.

• Insurance Premiums Soar: Rising home values, increasing construction costs, and frequent natural disasters have driven up homeowners insurance premiums.

The Big Picture

Owning a home remains an important way for Americans to build wealth. The challenge is getting in the door, and these rising costs are pushing that dream further out of reach.

If you’re hoping for mortgage rates to fall and bail you out, think again. Minneapolis Fed President Neel Kashkari recently warned that cutting rates now may actually drive home prices higher.

With homeownership costs skyrocketing, the only viable solution for affordable housing is more housing. Unfortunately, if the latest Housing Starts report is any indicator, help isn’t on the way.

5. How To Ask For A Raise (And Get It) 💸

One of the best ways to boost your financial health is to… earn more money. And what’s a simpler method than asking for a raise?

Of course, this works best when you truly deserve one. If you’ve been a strong contributor and haven’t seen a raise in the past year, it’s time to make your move.

Remember: 87% of HR experts report that employee retention is a top concern. Use that leverage to your advantage with these tips:

1) Benchmark Your Salary: Start by researching industry standards using salary indexes like Indeed, Glassdoor, or Payscale. Knowing what others in your role are earning arms you with concrete data.

2) Proactively Fill Needs: Show initiative by identifying and addressing areas where you can contribute more. This demonstrates your commitment to the company’s success and highlights your proactive mindset.

3) Document Your Achievements: Create a list of your accomplishments, focusing on the value you’ve added rather than the tasks you’ve completed. Numbers speak louder than words, so quantify your impact whenever possible.

4) Schedule a One-on-One: Don’t spring this conversation on your boss in the hallway. Schedule a formal meeting to ensure you have their full attention. Approach the topic with confidence and have your compelling reasons ready.

5) Put It in Writing: If your boss isn’t the decision-maker, prepare a written summary of your request and reasoning. This can be forwarded up the chain without losing your key points.

6) Have a Plan B: Be prepared for a possible "no" and have a counteroffer. If a raise isn’t feasible, could you negotiate for other benefits like additional vacation days, a flexible work schedule, or professional development opportunities?

With these strategies in your toolkit, you’re ready to navigate the raise conversation like a pro. Highlight your achievements, know your worth, and don’t be afraid to negotiate.

Here’s to advancing your career and boosting your income!

That’s all for today. For more insights, follow me on Instagram, Twitter, and at TheMoneyManiac.com.

Also, I’d love to hear your feedback. So please reply with comments – I read everything.

Until next time,
Daniel

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.