The Important Point: Buffett has called Apple “probably the best business I know in the world.” Despite this, he took gains off the table, offering lessons for individual investors:

1. Portfolio Rebalancing: Buffett’s move reduced Apple’s outsized impact on Berkshire’s value. When one stock dominates your portfolio (20%, 30%, or 50%+), it’s worth asking: How much is too much?

2. Taxes: Buffett noted Berkshire is paying a 21% federal tax on its Apple gains, down from higher historical rates. He thinks higher taxes could return, something individual investors should factor in to their own decisions.

3. Valuation: Apple’s growth has made it expensive across metrics like price-to-earnings and price-to-sales. Buffett’s sale does not mean a lack of confidence in the company, the stock is simply not a discount anymore.

The Bottom Line: Despite a sizable sale, Buffett praised Apple at Berkshire’s 2024 meeting and plans to keep it as Berkshire’s largest position. His decision highlights the importance of strategic portfolio management—not a loss of faith in Apple’s long-term prospects.

Below are a few interesting personal finance pieces from August, plus a quick note about September so far:

The S&P 500 is down about 4% just a few days into September. From an investor perspective, September and October are on average the worst months (but still up 50% of the time).

If you’re investing for the long term, there is nothing to worry about these short-term declines.

Here are a couple charts to help put it in perspective:

• Global Returns – So far this year the US and international markets have done well:

• Best Performing Stocks – Within the US, NVIDIA is the best performer this year (more on NVIDIA below):

• Worst Performing Stocks – On the flip side, Intel (which is in the same industry as our best performer NVIDIA) is the worst performer this year:

• New Jobs – Most people are working in jobs that didn’t exist in 1940.

• Tech Job Postings – Tech job postings are down ~50% since 2020:

• Headcount is Down – With interest rates up, venture capital funding is harder to raise. As a result, startups are running leaner across all stages.

• VCs Love AI – “AI and machine learning startups made up nearly half of all investment, up from 15% in 2017.”

• VC Funding – Venture Capital investment peaked back in 2021.

• Large Companies on AI – Speaking of AI investment, it’s interesting to read what the big companies are saying about that expense:

Housing

• Interest Rates – have dropped to a 15-month low.

• Revised Home Buying/Selling Rules – Starting August 17, new rules were rolled out that slightly changed the way Realtors get paid. Here’s an overview:

• • • How It Worked Before: A 5%–6% fee was typically paid by the home seller and split between the seller’s agent and the buyer’s agent.
  • • For example, if a home sold for $1,000,000 the seller would be responsible for paying $60,000 (6%) to both agents.

• • • How It Works Now: As a buyer, you have to sign a contract with the agent representing you before they show you a property.
  • • The contract outlines the compensation your agent will receive, and is designed to inform buyers that they are responsible for paying their realtor if the seller chooses not to cover the cost.

• Home Sales Are Down – Housing activity is at a low.

• Home Price Appreciation – Prices are up across the country. The Southeast looks to have done the best:

• Is NVIDIA Overvalued? – If you’re interested in the share price of NVIDIA, I highly recommend this article.

• Apple’s Valuation – Apple’s price to sales ratio is quite high.

Quote of the Month

“Rather than spend time trying to add more years to our lives, what we should be doing is adding more life to our years…by doing that, I think it will have the surprising effect of helping us live longer.”

– Ellen Langer

As always, please reach out if you have any questions or would like to connect.

I’d like to inform you of a data breach involving a company called National Public Data.

This company is involved in running background checks, and a few months ago they were hacked. As a result, a significant amount of personal information – including Social Security numbers, addresses, phone numbers, and dates of birth – was stolen and released publicly.

You can read about the hack in this article.

To see if your information was compromised, click here.

Whether your data was affected or not, I recommend placing a freeze on your credit. This is free, won’t affect your credit score, and should only take 10-15 minutes. Just set up an account with Experian, TransUnion, and Equifax.

Here’s a nice explainer from Equifax on how a freeze helps:

Please reach out if you have any questions or need further assistance.

Below are a few interesting personal finance pieces from the past month, starting off the with volatility piece.

• Low Volatility? – Through most of 2024 there had been very little movement in the stock market. That changed around the middle of July.

• But since July 10th, the Nasdaq 100 – an index of large tech companies – has decreased by ~13%, while the S&P 500 is down about 8%. It appears volatility has returned:

• What was A Great Run – As of July 16th, the S&P 500 had risen during 28 of the past 37 weeks.

• Stock Picking is Hard – Over this time, only about 20% of individual stocks have outperformed the S&P 500 index:

• Tons of Funds – Despite the difficulty of being an active investor, many try.

• President vs. Stock Market – With the presidential election coming up, I wanted to share the chart below. The way I interpret it is that the stock market tends to go up over time, regardless of who is in power.

Jobs & Economy

• America’s Female Workforce is Expanding – “The share of women aged 25-54 that are working or looking for work reached an all-time high of 78.1% in May…meaning that women now hold a record 79 million jobs across the US.”

• Q2 GDP – In good news for the US economy, “Gross domestic product — the value of all goods and services produced in the US…rose at an annual rate of 2.8% for April through June.

• Strong Economy – Below is a nice snapshot of US economic indicators. These are great results across the board.

• Soft Landing – This is a big deal. Many predicted that bringing down the inflation rate, and bringing up interest rates, would cause a recession.

• More Good News – This stat is hard to believe: In 2000, 75% of adults held $10,000 or less in wealth.

• Inflation is Down, but Prices Aren’t – “The typical household is spending $925 more a month to purchase the same goods and services as three years ago, according to Moody’s Analytics.”

Housing

• Price Drops – “Roughly one in five (19.8%) homes for sale in June had a price cut — the highest level of any June on record.”

• Closed Homes Sales – The number of homes that sold in June increased in just one metro: San Jose, CA (1.8% growth).

• Interesting Housing Charts – There are a lot of great charts about the housing market in this report from Apollo. If you’re interested in real estate I highly recommend it.

• Commercial Property Foreclosures – A bad sign in the commercial real estate market:

Taxes

• Inherited IRA Rules Clarified – If you inherited an IRA from someone who was not your spouse, you may be familiar with the 10-year rule for required distributions. The IRS has clarified those rules to the following:

• Gas Tax – “California pumps out the highest state gas tax rate of 77.9 cents per gallon (cpg), followed by Illinois (66.5 cpg) and Pennsylvania (62.2 cpg).

• Does Your State Tax Social Security? – While Californians pay a lot of tax on their gasoline, at least the state does not tax Social Security:

“Wealth is like seawater: the more we drink, the thirstier we become.”

– Arthur Schopenhauer

As always, please reach out if you have any questions or would like to connect.

• All Time Highs – The stock market started the year well, rising 14.5% and ending June at an all-time high.

• Slow & Steady – One thing interesting about this market: How slow, steady, and almost boring the upward movement has been.

• Active Managers Underperform – “In the first half of 2024, according to Morningstar, only 18.2% of actively managed mutual funds and exchange-traded funds that compare themselves to the S&P 500 managed to outperform it.”

• Market Cap per Employee – Nvidia stands out in this wild chart. It looks at how much a company is worth (market capitalization) divided by how many people they employ:

• High Expectations – “The top 10 companies in the S&P 500 make up 35% of the market cap but only 23% of earnings…the problem for the S&P 500 today is not only the high concentration but also the record-high bullishness on future earnings from a small group of companies.”

• Silicon Valley Salaries are Shrinking – Despite having the highest tech salaries in the country, Silicon Valley has experienced the biggest drop in pay compared to other tech hubs, falling 15% from 2022 to 2023

• Promotion Recession – “Out of 68 million white collar workers, just 1.3% were promoted in the first quarter, the lowest rate in five years. Employers now hold more leverage, reducing the need to move employees up the ladder in order to retain them.”

• Lots of Construction Spending – As a result of the CHIPS Act, the Inflation Reduction Act, and the Infrastructure Act, construction spending on manufacturing has skyrocketed:

• Mortgage Rate Dispersion – 80% of millennials have a mortgage rate under 5%. Only 52% of Gen Z borrowers can say the same:

• Housing Prices During Recessions – Aside from 2007 – 2009, nationwide home prices have held up well during recessions:

• “Months Supply” – This measure tracks how many months it would take to sell all the homes currently on the market if no new homes were listed for sale. Recently it has moved up, indicating that the supply of homes for sale is trending up:

• Global Housing Prices – Global home prices are up 3% over the past year, and up 6.5% in America.

• American Parents Are Not OK – “American parents appear to be under more financial pressure than usual as inflation and rising childcare costs continue to bite, with less than two-thirds of American parents saying they’re doing “at least okay.”

• Inflation Categories – Where costs are rising and falling:

• The C Word – One of my favorite financial writers, Jonathan Clements, recently learned that he has terminal cancer. He has about 1 year left to live, and at age 61 his take on receiving the news is well worth reading.

• Lazy Work, Good Work – “Productive work today does not look like productive work did for most of history. If your job was to pull a lever, you were only productive if you were pulling the lever. But if your job is to create a marketing campaign, you might be productive sitting quietly with your eyes closed, thinking about design.”

“No one compares themselves [financially] to the average American. It’s who you hang out with”

Michael Batnick
Animal Spirits

As always, please reach out if you have any questions or would like to connect.

• Home Price Growth by Decade – “Through the first 50 months of the 2020s decade, U.S. home prices have risen by 47%. This already surpasses the total national appreciation witnessed throughout both the 1990s and 2010s [full] decades:”

• 1-Year Growth – Home prices have risen 6% over the last year, and hit a record high 8 months in a row.

• Expectations for Future Home Price Appreciation – Probably because home prices have done so well lately, expectations for future appreciation are at the highest level since 2007:

• Million-Dollar Cities – Also as a result of the recent appreciation, there are now 550 U.S. cities where the typical home value is $1 million or more.

• Cost of Living, by County – The most expensive county to live in: San Mateo.

• Monthly Mortgage Payment – Unfortunately, the monthly mortgage payment required to purchase the median U.S. home has doubled since 2021:

• First Time Home Buyers – Even with high interest rates and prices, first-time home buyers remain the majority of buyers, purchasing 58% of all homes.

• Home Sales Slowdown – High housing costs are having an impact on purchase activity. The number of homes that sold in April fell 1.9% as compared to March. That was the second consecutive monthly decline.

• Inflation in…Homeowner’s Insurance? – Over the past 18 months there have been enormous increases to home insurance costs.

• How to Save – Tips to save on your homeowners and auto insurance policy.

• Shelter’s Effect on Inflation – Shelter makes up more than 40% of the core Consumer Price Index (CPI). Not everyone is affected by the change in home-price affordability, or rent increases.

• Stock Markets Are on a Record-Hitting Spree Around the World – Of the 20 biggest stock markets worldwide, 14 are at or near record highs.

• Stocks in an Election Year – The stock market averages an 8.8% gain in an election year for an incumbent president.

• Stocks vs. The President – The market has trended higher during most president’s time in office:

• Utility Stocks Are Hot? – “These dullest of all stocks have suddenly become a bet on the single flashiest area of the market: artificial intelligence. AI requires a lot of computing power, and computers use a lot of electricity.

• Stock Market Trivia – Question: What was the best-performing year for the Dow Jones?

• Investing vs. Geopolitics – Speaking of investing during geopolitical challenges, here’s a chart showing how the stock market did during major events. Generally speaking, it performed well:

• Revenue Growth – Apple’s revenue fell 4% over the last year. This was the 5th negative year-over-year growth rate in the last 6 quarters.

• Stock Buybacks – From Charlie Bilello, “Apple is the undisputed king of buybacks. Over the past decade, it has bought back $625 billion in stock. That’s greater than the market capitalization of 492 companies in the S&P 500.”

“Two people who make the same income today will likely end up in distinctly different places over the years based on their approach to career and money.”

Scott Galloway
The Algebra of Wealth

As always, please reach out if you have any questions or would like to connect.