Warren Buffett's $325B Cash Warning

MARKETS
YEAR-TO-DATE

HEADLINES
What You Need To Know

The Fed approved another interest rate cut, lowering it by 0.25% to a target range of 4.50%-4.75%. This marks the second rate cut in a row, though this one was less aggressive than September’s half-point drop. Fed Chair Jerome Powell explained they’re aiming for a “recalibration,” trying to bring inflation down while supporting job growth. After the announcement, stocks rallied, with the Nasdaq up 1.5%, and Treasury yields dipped. Looking ahead, President-elect Donald Trump’s upcoming term could shake things up for future rate cuts, but Powell reassured everyone that the Fed plans to stay independent from any political influence.

Crypto kept climbing on Sunday, with Bitcoin hitting a historic $80,000 for the first time ever, up 4.5% to $79,800. Ether passed the $3,000 mark and settled at $3,203, while smaller coins saw even bigger surges. XRP was up 11%, Cardano’s DeFi token jumped 40%, and Dogecoin and Shiba Inu rose 17% and 31%. Investors seem excited about President-elect Trump’s crypto-friendly approach, with talk of a possible national Bitcoin reserve and keeping Bitcoin mining in the U.S. There’s a lot of hope for a new regulatory era, especially for Ether and other coins that could see benefits down the line, like changes to how Bitcoin ETFs handle staking rewards.

Berkshire Hathaway’s cash stockpile hit a record $325.2 billion in Q3, as Warren Buffett continued selling major stakes in Apple and Bank of America without repurchasing any Berkshire shares. This marks the fourth quarter of reduced Apple holdings, and since July, Berkshire has pocketed over $10 billion from selling Bank of America stock. In total, Berkshire offloaded $36.1 billion in stock during the quarter. Despite slowing buybacks, Berkshire’s Class A shares have gained 25% this year, surpassing the S&P 500. Buffett’s cautious approach comes amid economic optimism, though he’s hinted that concerns over rising deficits and potential tax hikes are factors in his selling strategy.

Nvidia is joining the Dow Jones Industrial Average and replaced Intel in a move that shows just how big AI has become in the tech world. Nvidia will officially be part of the Dow as Intel steps out. Nvidia’s stock has skyrocketed over 170% this year thanks to high demand for its AI chips from big players like Microsoft, Meta, and Amazon. Meanwhile, Intel has been facing tough times, losing market share and cutting thousands of jobs. Nvidia’s addition means four of the six trillion-dollar tech companies are now in the Dow, highlighting the index’s shift to embrace tech giants leading the AI wave.

UPCOMING
What You Need To Watch

This Wednesday’s CPI report is a big one to watch. Last month, inflation ran hotter than expected, keeping pressure on the Fed despite recent rate cuts. If this report shows inflation is still high, it could cool off the market’s bullish mood. But a softer CPI could signal we’re on track for more rate cuts and positive momentum.

The Producer Price Index (PPI) report drops Thursday, giving insight into inflation from the seller’s side. Last month’s PPI came in hot, signaling that wholesale costs are still much higher than before. If this trend continues, sellers may struggle to lower prices for consumers, keeping inflation a concern despite recent rate cuts.

It’s a big week for earnings, with Shopify, Spotify, and Home Depot reporting Tuesday, Disney on Thursday, and Alibaba on Friday. These reports will reveal insights into consumer spending, streaming trends, and e-commerce strength.

On Wednesday, Senate Republicans will elect a new Majority Leader to succeed Mitch McConnell, who is stepping down after nearly two decades in leadership. President-elect Donald Trump has been advocating for Florida Senator Rick Scott behind the scenes, and Elon Musk has publicly endorsed Senator Scott.

TIP
REINVEST DIVIDENDS

One of the simplest ways to grow your investments faster? Reinvest your dividends. Instead of taking the cash when a company pays you, use those payouts to buy more shares. Over time, this small habit can make a huge difference, thanks to the power of compounding. You’re essentially earning money on your earnings, which can really add up! For example, let’s say you invest $10,000 in a company that pays a 3% dividend. In the first year, you’d earn $300 in dividends. If you reinvest that $300 rather than taking it as cash, it buys more shares, which then generate their own dividends. The next year, you’re not just earning dividends on your original $10,000 but on the extra shares you bought with last year’s dividends. As this cycle continues, the compounding effect kicks in, allowing your investment to grow faster over time. Most brokerages make it easy with automatic reinvestment options, so you can set it and forget it. And if you’re using an IRA or other tax-advantaged account, reinvesting means you won’t be taxed on those gains each year, letting your money grow even more efficiently.

CHART
How To Make Money

The power of compounding is one of the most valuable forces in investing. Imagine putting $100,000 into the S&P 500 and leaving it to grow for 30 years. With an average annual return of 10%, that initial investment could grow to over $2 million. Compounding works by reinvesting returns, so each year’s gains build on the last, creating exponential growth over time. The longer your money stays invested, the more powerful compounding becomes, turning steady returns into substantial wealth. This example shows that patience in the market can be one of the best ways to build lasting financial security.

TERM
Asset Allocation

Asset allocation is a strategy of dividing your investments across different asset classes like stocks, bonds, and real estate to help balance risk and reward based on your goals and risk tolerance. For example, an investor in their 30s might allocate 70% to stocks for growth, 20% to bonds for stability, and 10% to real estate for diversification. This mix adjusts as you get closer to your goals, aiming to protect gains while capturing potential growth. With smart asset allocation, you’re not betting everything on one outcome; instead, you’re building a diversified approach to weather market ups and downs.

Actions
Steps to Level Up

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