Berkshire Hathaway Puts Cash to Work, Zuck Defends AI in New Manifesto

**Zaid Admani** (0:00)
Public.com presents The Rundown, your daily market update in 10 minutes. My name is Zaid Admani, and today is Monday, August 10th. In today's episode, we'll break down why stocks are back at record highs and what to look forward to this week. We'll also tell you how Berkshire Hathaway's new CEO, Greg Abel, is starting to spend the company's massive cash pile. We'll also dig into Metta's latest AI pivot and why Zuck is going all in on open weight models. Then stick around to the end of the show to find out why Americans basically take over Europe every summer. We got a great show for you today.
Let's go.
Stocks are coming off a winning week. The S&P 500 jumped 3.6% while the NASDAQ jumped 5.2%, both indices having their best week since April. Now what's funny here is that the Radley got a boost on Friday thanks to a poor jobs report. Friday's jobs report showed the US economy lost 23,000 jobs in July, while economists were expecting a gain of roughly 80 to 90,000 jobs. On top of that, May and June were also revised down by 103,000 jobs. But despite the poor numbers, Wall Street was celebrating this report because a cooling labor market means the Fed probably won't hike rates anytime soon. Traders are now putting in odds of a September rate hike around 45% down from 64% a week ago. But you know, I think the main reason that stocks are back at all time highs right now is because of earnings. This earnings season has been absolutely insane. More than 440 S&P 500 companies have reported earnings so far and 86% of those companies have beaten estimates. And overall earnings are running roughly 50% higher than they were a year ago, which is the strongest earnings growth since the pandemic recovery in 2021 AI and energy companies are doing a lot of heavy lifting here, but even if you strip out some of the unusually large gains at Alphabet and Amazon, earnings growth is still tracking close to 29%. So I think the strong earnings numbers are the main story here. Now we are getting close to the end of earnings season, but there's still some heavy hitters left like Nvidia, which reports in a couple of weeks. So can't wait to see what they have to say. Now, as for this week, we are getting a July CPI report on Wednesday. That should give us more information on what inflation is doing. So we'll be keeping an eye on that, along with what's happening in the Middle East and oil prices. Oil is creeping back up again, as the Strait of Hormuz deal with Iran keeps almost happening, but never actually happening. So there continues to be a lot of uncertainty there. We're gonna stay on top of all this, along with everything else happening in the market. So definitely get subscribed to the podcast and tune in every day to stay in the loop.
Let's run through some headlines, starting with Berkshire Hathaway. Berkshire Hathaway reported earnings over the weekend, and the big takeaway is that new CEO Greg Abel is finally starting to spend some of that massive pile of cash that Warren Buffett left behind. Berkshire ended June with around $365 billion in cash and treasury bills. That's down from the nearly $400 billion they had three months earlier. In fact, this was the first quarterly decline in Berkshire's cash pile in nearly four years. And Greg Abel is putting this money to work in different ways. For one, Berkshire bought about $23.5 billion worth of stocks during the quarter and sold just $3.7 billion worth of stock. That means that Berkshire was a net buyer of stocks for the first time after 14 straight quarters of being a net seller. On top of that, they spent roughly $4.5 billion buying back their own stock compared to just $235 million in Q1. So after years of Warren Buffett telling investors that he couldn't find many bargains in the market, Greg Abel takes over and starts hitting the buy button immediately. I think the buybacks might be the most interesting part because it's a sign that Berkshire thinks that their stock is undervalued. And here's the thing, Berkshire stock has lagged the market. Their stock is up only 3% this year compared with a roughly 13% gain for the S&P 500 Now outside of the investing stuff, the actual business had a decent quarter as well. Operating earnings jumped 16% to nearly $13 billion with strong results from manufacturing, energy and BNSF Railroad. Insurance was a weak spot though with Geico underwriting profits dropping about 45%.
So I wonder if that means that our insurance premiums are about to go up soon. Overall though, the takeaway here is that Greg Abel is going to be more aggressive than Warren Buffett when it comes to investing. You know, he's kind of acting like a teenager who got keys to his dad's Ferrari and he's driving it 100 miles per hour down the highway. And here's the thing, Berkshire still has $365 billion in cash. So we'll see what Greg Abel decides to do over the next few quarters. And here's what I wonder, is Berkshire Stock underperforming because it doesn't have the Warren Buffett premium anymore? It used to be cool to say that you were a Berkshire shareholder, but now that Warren Buffett is no longer running the show, is it still cool to say that? I know it's silly, but I think that might be playing a factor on why Berkshire Stock might be underperforming the rest of the market. I could be way wrong though. Let me know in the comments on what you guys think.