Smart insight and clear visuals that matter – what we’re watching now and how intention and conviction shape our portfolios.
Capitalism never came for Warren Buffett but today he announced another had beaten him, “Father Time always wins,” was his message this morning as he passed the role of Chairman down to his son Howard. Here is the rest of Mr. Buffett’s quote which underscores the class we have come to expect from him over the past many decades, “He {Father Time} has, however, been generous with me. He has given me the opportunity to see Berkshire reach a point where I am more confident than ever about what lies ahead.”
Today, Warren is buying chemical companies, adding Google (one of the firm’s other top holdings) but also piling up cash. His $397.4 billion in cash is enough to buy 476 companies out of the S&P 500 outright. For readers interested in Buffett's broader legacy, we've provided the link to his resignation letter as CEO last Fall in case you want to pass it on to a client or friend who appreciates what Mr. Buffett has done for this country and our global financial markets.
Here is the link to today’s more melancholy announcement: https://www.berkshirehathaway.com/news/sep1826.pdf
Rising Yields are Repricing Risk
The US 10-year yield pushed above 5% this week for the first time since 2023, as mounting inflation concern collided with swelling government and corporate borrowing needs. Yields have kept rising despite Treasury Secretary Scott Bessent taking the unusual step of boosting buybacks of longer-dated bonds as the Trump administration seeks to keep borrowing costs in check. The last time we were here we needed Government backstops to contain a regional bank systemic collapse.
Less than two months before the U.S. midterm elections, the 10-year yield is now more than a full percentage point above its level before the outbreak of the Iran war. The conflict has sparked a surge in oil prices, adding to inflation angst. Those concerns were reinforced by hotter-than-expected consumer-price data for August. The rise in the 10-year yield, a benchmark borrowing cost for global government and corporate debt as well as US mortgages, threatens to slow economic growth and weigh on equities.
The Return of $100 Oil
Oil surged on a recent report that Saudi Arabia may take weeks to reopen a pipeline that’s been key to bypassing the Strait of Hormuz during the US-Iran war. The global benchmark moved back above $100 for the first time since July last week, as sliding inventories and rising Chinese buying tightened the market. Brent crude is up more than 75% this year and the energy shock has provided the impetus for central banks to act. Rate hikes have become increasingly inevitable as US gasoline prices jumped to the highest since May and diesel — the workhorse that fuels everything from power generation and home heating to trucks, tractors and locomotives — rose above $6 a gallon for the first time ever.
How Value Creation Is Changing
Apollo’s analysis separates private equity value creation into revenue growth, margin expansion, and multiple expansion. These distinguish growing sales, earning more profit per dollar from sales, and receiving a higher valuation for a given level of earnings. In Apollo’s breakdown, multiple expansion’s share fell from 40% for 2018–2021 exits to 8% for 2025 exits. The chart breaks down the sources of value creation across those exit periods. For us, the useful question is how much a track record depends on business growth, profitability, or favorable exit valuations. Private equity may be entering an environment where how a manager creates value matters more than simply what the historical return was.
Source: Apollo
Wed, 9/23 @ 9:45 am: U.S. Flash Manufacturing PMI
@ 9:45 am: U.S. Flash Services PMI
Thu, 9/24 @ 8:30 am: Weekly Jobless Claims
@ 10:00 am: New Home Sales
@ 11:00 am: Kansas City Fed Survey
Fri, 9/25 @ 8:30 am: Durable Goods
@ 10:00 am: U. Michigan Final Consumer Survey
Mary Ahn
Investment Research and Portfolio Strategy Manager
Cal Jones, CFA
Managing Director of Fixed Income
Eric Speron, CFA
Managing Director of Equities
Alton Tjahyono, CFA
Sr. Investment Strategist