Berkshire Earnings Were Good—Not Great. A Real Bright Spot Was This

 

Berkshire Earnings Were Good—Not Great. A Real Bright Spot Was This

## Operating profits rose 16%, but the headline number overstated the strength. The real story was a $4.5 billion buyback signal from Greg Abel and Warren Buffett—and a dramatic return to net stock buying for the first time in nearly three years.

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### Introduction: Good, Not Great

On Saturday, Berkshire Hathaway reported its second-quarter operating results: a 16% increase in after-tax operating profits to $13 billion . The headline number was solid. But beneath the surface, the strength was less impressive than it appeared.

The advance was driven in large part by a swing in one-time currency gains and losses that the company doesn't strip out of its earnings. The big loser was Japan's yen, which affects the carrying value of Berkshire's $15 billion of yen borrowings used to fund its equity stakes in five Japanese trading companies. Strip out the swing, and the profit gain was closer to 6% .

That's good—but not great.

Yet buried in the 10-Q filing was a real bright spot that overshadowed the mediocre profit growth. And it's a signal that could reshape the trajectory of Berkshire's stock for the rest of the year.

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### The Bright Spot: A $4.5 Billion Buyback Signal

Berkshire repurchased about **$4.5 billion** of its own stock in the second quarter—its largest quarterly outlay for its own shares since the first quarter of 2023 . The company also bought back roughly **$3.4 billion** in July, according to a Barron's estimate based on the share count as of July 29, bringing the total to nearly **$8 billion** .

This marks a dramatic shift from the first quarter, when Berkshire spent just **$235 million** on buybacks—its first repurchases since May 2024 . The acceleration signals that CEO Greg Abel and Chairman Warren Buffett believe the shares are reasonably priced.

"Despite more difficult insurance industry backdrop, the company continues to build shareholder net worth in Greg Abel's first year as CEO," said Mac Sykes, a portfolio manager at Gabelli Funds. "Material repurchases provide confidence for shareholders that some of the best corporate capital allocators see current value" .

Berkshire is more price-sensitive on repurchases than most big companies. The fact that Abel and Buffett are buying in size suggests they see meaningful value at current levels—even as the stock has lagged behind the S&P 500 this year .

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### The Second Bright Spot: A Return to Net Stock Buying

Beyond buybacks, Berkshire made another significant move in the second quarter: it became a **net buyer of equities** for the first time in nearly three years .

The company purchased **$23.5 billion** in common stock of publicly traded firms while selling just **$3.7 billion** . This marks one of its heaviest quarterly purchases of stocks in the past five years .

The largest disclosed addition was a **$10 billion investment in Alphabet** (Google's parent company), purchased in June when the search giant said it would be raising $85 billion of equity . Berkshire agreed to buy $5 billion of Alphabet's Class A shares at $351.81 per share and another $5 billion of its Class C stock at $348.20 per share .

The Alphabet purchase made the tech giant one of Berkshire's five largest holdings, joining longtime positions in Apple, American Express, Bank of America, and Coca-Cola. It's a notable departure from Buffett's historical skepticism of the company—and a clear signal that Abel is willing to deploy capital in the AI-driven tech sector .

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### The Rest of the Report: A Mixed Bag

#### Operating Earnings: 16% Growth, Mostly Currency-Driven

Berkshire's operating earnings rose to **$12.98 billion** from $11.16 billion a year ago . The improvement came from several divisions:

- **Manufacturing, service, and retailing:** Earnings climbed to $4.47 billion from $3.60 billion, aided by the closing of the OxyChem acquisition at the beginning of the year .

- **BNSF railroad:** Earnings rose to $1.56 billion from $1.47 billion, a 6% increase .

- **Berkshire Hathaway Energy:** Earnings increased to $891 million from $702 million .

But BNSF continues to trail chief rival Union Pacific in profitability. The gap between the two railroads on operating ratio (expenses as a percentage of revenue) is roughly 500 basis points . Boosting profits at BNSF is a priority for Abel, and the earnings report shows more work needs to be done .

#### Insurance Weakness: A Cloud Over the Quarter

Insurance was the softer part of the report. Underwriting earnings fell to $1.73 billion from $1.99 billion, while insurance investment income dropped to $3.06 billion from $3.37 billion .

The underwriting decline reflects a more competitive pricing environment in property and casualty insurance after several years of outstanding results . Geico, the nation's No. 3 auto insurer, was among the operations feeling the pressure .

Investment income was also lower because of lower rates on the company's huge holdings of cash and equivalents—mostly Treasury bills .

#### Book Value: Steady Growth

Book value per Class A share rose about 3% in the quarter to **$522,396** . The increase was driven by earnings growth and gains in Berkshire's $350 billion-plus equity portfolio, led by Apple and Coca-Cola .

Book value is probably higher now than the June 30 figure—perhaps around $535,000—because of equity gains since the quarter ended .

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### The Human Element: What This Means for Investors

For Berkshire shareholders, the Q2 report offers a mixed picture. Operating profits were decent but not spectacular. Insurance is weakening. The railroad business still trails its chief rival. And the stock has lagged behind the S&P 500 this year, frustrating many shareholders .

But the buyback signal is powerful. Abel and Buffett—arguably the two best capital allocators in corporate history—are putting money to work in their own stock. They're also buying Alphabet, a bet on AI-driven tech growth that Buffett had historically missed.

The message is clear: Abel is not waiting. He's deploying capital, buying stocks, and repurchasing shares. The era of cash hoarding under Buffett's final years is over.

As Sykes put it: "Material repurchases provide confidence for shareholders that some of the best corporate capital allocators see current value" .

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### Frequently Asked Questions

#### Q: How much did Berkshire buy back in Q2?

A: Berkshire repurchased about **$4.5 billion** of its own stock in the second quarter—its largest quarterly outlay since 2021 . The company also bought back roughly $3.4 billion in July .

#### Q: Why is the buyback a bright spot?

A: Berkshire is more price-sensitive on buybacks than most companies. The fact that Abel and Buffett are buying in size suggests they see meaningful value at current levels—even as the stock has lagged behind the S&P 500 .

#### Q: What did Berkshire buy in the stock market?

A: Berkshire purchased **$23.5 billion** in stocks and sold just $3.7 billion, making it a net buyer for the first time in nearly three years . The largest addition was **$10 billion in Alphabet** (Google's parent company) .

#### Q: Why wasn't operating earnings growth stronger?

A: The 16% headline growth was driven partly by a swing in currency gains and losses related to Japan's yen, which affects Berkshire's yen borrowings. Strip out the swing, and the profit gain was closer to **6%** .

#### Q: How did Berkshire's business divisions perform?

A: Manufacturing, service, and retailing earnings rose to $4.47 billion. BNSF railroad earned $1.56 billion, up 6% . Berkshire Hathaway Energy earned $891 million, up from $702 million. Insurance was weaker, with underwriting earnings falling .

#### Q: Is Berkshire stock a buy?

A: The buyback signal suggests Abel and Buffett believe the stock is reasonably priced . However, the stock has lagged behind the S&P 500 this year and companies in similar industries . As always, consult a financial advisor.

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### Conclusion: A New Era Begins

Berkshire's Q2 earnings report is a story of a company in transition. The operating results were decent but not spectacular. Insurance is weakening. The railroad business still trails its chief rival. And the stock has underperformed the broader market.

But the buyback signal is the real story. Abel and Buffett are putting billions of dollars to work in their own stock—a powerful vote of confidence that the market is undervaluing Berkshire's collection of businesses. They're also making big bets on Alphabet, a signal that Abel is willing to deploy capital in AI-driven growth .

The era of cash hoarding under Buffett's final years is over. Abel is spending, buying, and repurchasing. For shareholders, that's a bright spot in an otherwise mixed report—and a signal that the best may be yet to come.

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### Disclaimer

**IMPORTANT:** This article is for informational and educational purposes only and does not constitute financial, investment, or trading advice. The information contained herein is based on publicly available sources and reflects the author's understanding as of the publication date. Market conditions, stock prices, and company performance are subject to rapid change. Past performance is not indicative of future results. You should consult with a qualified financial advisor before making any investment decisions.

Boeing's Flying-Taxi Exit: Archer Aviation Soars as the Giant Folds Its Hand

 

Boeing's Flying-Taxi Exit: Archer Aviation Soars as the Giant Folds Its Hand

**In a stunning strategic shift, Boeing is selling its flying-taxi and autonomy subsidiaries to rival Archer Aviation—and taking a stake in the company. The deal instantly transforms Archer from a startup with minimal revenue into a diversified aerospace and defense powerhouse.**

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## The Deal That's Rewriting the Advanced Air Mobility Map

On August 9, 2026, the advanced air mobility industry was shaken by a landmark transaction. Boeing announced it is selling three of its subsidiaries—Wisk Aero, SkyGrid, and Insitu—to Archer Aviation in exchange for a **16.5% stake** in the company and a strategic partnership .

Archer Aviation (NYSE: ACHR) shares surged roughly 20% to 22% on the news, reflecting investor enthusiasm for what CEO Adam Goldstein called a **"watershed moment"** for the company and the future of physical AI in aerospace and defense .

**The three businesses Archer is acquiring:**

- **Wisk Aero:** An autonomous electric vertical takeoff and landing (eVTOL) aircraft developer with 16 years of experience, having designed, built, and flown six generations of aircraft and amassed over 1,700 flight tests .

- **SkyGrid:** A developer of aircraft-agnostic air traffic management platforms designed to support automated airspace operations for urban air taxis .

- **Insitu:** A profitable defense business with over $200 million in annual revenue, operating across 35 countries, which manufactures unmanned aircraft systems used for intelligence, surveillance, and reconnaissance .

The deal is expected to close by the end of 2026, subject to customary approvals .

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## Why Boeing Is Folding Its Hand

Boeing's decision to exit the advanced air mobility space, at least as a direct operator, reflects the financial and strategic pressures facing the aerospace giant. The company is currently juggling a massive **$715 billion backlog** representing over 6,200 planes that it has yet to build, while also operating under intense regulatory scrutiny following several notable safety incidents . At the same time, its former CEO, Dave Calhoun, had expressed skepticism about the prospects of flying taxis, casting doubt on the viability of the eVTOL industry .

Boeing's strategy is now to focus on its core commercial airplanes and defense businesses, while retaining upside through its new stake in Archer and a technology-sharing agreement that gives it continued access to Wisk's core autonomous flight technology for use in its own aircraft .

**"This transaction is a win-win for Boeing and Archer,"** said Brian Yutko, Boeing vice president, Commercial Airplanes Product Development. **"It allows Wisk, SkyGrid and Insitu to accelerate capability development and time to market while ensuring Boeing capitalizes on its investments in these technologies over the past two decades"** .

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## Archer's Transformation: From Startup to Diversified Platform

For Archer, the deal is nothing short of transformative. The company, which had previously reported only about $1.6 million in quarterly revenue, is now acquiring businesses that collectively generate more than **$200 million in annual revenue** .

**What Archer gains from the deal:**

1.  **Immediate Revenue and Scale:** Insitu alone brings a profitable defense operation with a global presence. The combined businesses have accumulated nearly **two million flight hours**, providing Archer with a vast base of operational aviation data and experience .

2.  **An End-to-End Physical AI Platform:** Archer plans to integrate the autonomy and airspace intelligence capabilities of Wisk, SkyGrid, and Insitu with its own purpose-built AI foundation model for aerospace and defense, **ZEE**. This creates a platform spanning commercial aerospace, defense, and air traffic management .

3.  **A Direct Path to Defense:** By acquiring Insitu, Archer gains immediate entry into the defense market, diversifying beyond its core commercial eVTOL ambitions . This is a crucial hedge against the uncertainty of the commercial air taxi market's timeline.

4.  **Autonomous Flight Technology:** Wisk brings deep expertise in autonomous eVTOL development, complementing Archer's existing piloted Midnight aircraft. The technology-sharing agreement with Boeing also allows Archer to collaborate with the aerospace giant on future innovations .

As Archer CEO Adam Goldstein stated: **"This is the next big step forward in becoming a diversified platform, rapidly growing our revenue base and bringing scale to our business"** .

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## The Background: From Rivals to Partners

The deal also settles a notable industry rivalry. Wisk was formed in 2019 as a joint venture between Boeing and Kitty Hawk, the flying taxi startup backed by Google co-founder Larry Page . In 2021, Wisk sued Archer for allegedly stealing its trade secrets and infringing on its patents. The two sides settled the dispute in 2023, with Wisk agreeing to be the exclusive provider of autonomous flying technology to Archer .

Now, they are part of the same team, with Boeing taking a seat on Archer's board .

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## Frequently Asked Questions

### Q: How much is the deal worth and who will own Archer now?

A: The exact purchase price was not disclosed, but Boeing will receive a **16.5% stake** in Archer as a result of the transaction. Boeing will also get a seat on Archer's board and has an option to purchase up to $200 million of Archer shares at preset prices over the next few years .

### Q: What does this mean for Archer's existing eVTOL business?

A: Archer remains focused on commercializing its Midnight aircraft, targeting a late-2026 certification. The deal complements this effort by adding autonomy, air traffic management, and defense capabilities that can help accelerate its go-to-market strategy .

### Q: Is Boeing leaving the advanced air mobility industry?

A: Not entirely. While it is selling its direct operations, Boeing is retaining access to Wisk's autonomous flight technology for its own commercial and defense aircraft. It is also becoming a major shareholder in Archer, giving it a financial stake in the industry's future .

### Q: What is Archer's financial health?

A: The company had roughly **$1.78 billion in cash and short-term investments** as of the first quarter of 2026, but it is still burning cash, posting a net loss of about $217.7 million in Q1. The acquisition of Insitu, which has a profitable defense business, will significantly improve its financial position .

### Q: Will Archer change its name or strategy?

A: Archer's strategy is now significantly broader, aiming to be a diversified platform rather than just an eVTOL developer. The company's ZEE AI platform, combined with the acquired businesses, positions it as a leader in "physical AI" for aerospace and defense .

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## Conclusion: The Future of Flight Is Getting a New Pilot

Boeing's decision to sell its flying-taxi and autonomy businesses to Archer is one of the most significant strategic shifts in the advanced air mobility sector. It signals that even the largest aerospace companies are refining their bets, while simultaneously validating the potential of companies like Archer to consolidate the industry.

For Archer, this is a monumental step forward. It transforms a company that was primarily a promise of the future into a diversified aerospace and defense platform with an existing revenue base, a broad technology stack, and a strategic partnership with one of the world's largest aerospace manufacturers.

The question is whether Archer can successfully integrate these diverse businesses and realize the vision of a unified "physical AI" platform. If it can, it will be well-positioned to lead the next generation of aviation, from urban air taxis to autonomous military drones.

S&P 500 Little Changed as Traders Await Possible Hormuz Deal, Intel Shares Fall

 S&P 500 Little Changed as Traders Await Possible Hormuz Deal, Intel Shares Fall

## A market in suspended animation: Investors hold their breath on a potential diplomatic breakthrough that could reshape oil prices and inflation expectations, while Intel's $15 billion stock offering weighs on the Nasdaq.

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### Introduction: The Calm Before the Announcement

August 10, 2026, is shaping up as a day of suspended animation on Wall Street. The S&P 500 is little changed, the Nasdaq is slipping, and the Dow is slightly lower as investors wait for clarity on a potential deal to reopen the Strait of Hormuz . At 9:34 a.m. EDT, the S&P 500 stood at 7,753.42, down just 4.22 points. The Nasdaq Composite was lower by about 0.25%, and the Dow had dipped 66 points .

The muted start follows a strong week that saw the S&P 500 close above 7,700 for the first time, lifted by robust earnings from AI-linked companies . But Monday's cautious open reflects a market caught between two competing forces: the prospect of a diplomatic breakthrough that could send oil prices tumbling, and the lingering uncertainty about whether a deal will actually materialize .

**"Oil is firmer on Monday after another weekend of stalled progress on reopening the Strait of Hormuz,"** Bloomberg strategists noted, **"yet traders are skeptical prices will rise for an extended period"** . That skepticism is the dominant theme of the session.

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### The Hormuz Watch: Diplomacy and Its Discontents

The primary driver of the market's caution is the ongoing uncertainty over the Strait of Hormuz, the narrow waterway through which roughly one-fifth of the world's oil passes.

Iran has indicated it is nearing a deal with Oman to reopen the strait, while continuing to resist direct negotiations with Washington . The talks have produced broad agreement on proposed shipping routes, but major differences remain. Iran insists on retaining some level of control over the waterway, while the U.S. has opposed any agreement that would give Tehran a formal role in managing the strait.

President Donald Trump on Sunday signaled patience, telling Axios that the U.S. could wait for Tehran's economic suffering to soften its stance . The comments followed weeks of Trump threatening massive airstrikes on Iran only to pull back, saying he wanted to give negotiations a chance.

**"Investors can't be too bearish given Trump is likely to back away from his threats again,"** My Bui, an economist at AMP Ltd., wrote in a note to clients . **"So for now, it remains business as usual, with shares still supported by solid fundamentals, strong economic growth and rising productivity"** .

The market reaction to any breakthrough would be significant. Improved energy flows through the Strait could ease concerns about elevated oil prices, inflation, and the risk of interest-rate hikes by central banks worldwide .

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### Intel's Drag: A $15 Billion Stock Sale

While geopolitical headlines dominate the broader market narrative, Intel is providing a specific drag on the Nasdaq. The chipmaker's shares fell roughly 3% to 4% in early trading after announcing plans to offer $15 billion in common stock .

The move comes as Intel seeks to capitalize on a nearly threefold surge in its shares this year to fund the costly expansion of its contract chip-manufacturing business and challenge industry leader TSMC . The company has been executing a turnaround strategy under CEO Pat Gelsinger, but the stock sale raises concerns about shareholder dilution.

Intel's fall is a reminder that the AI rally, while powerful, is not uniform. Even as the broader semiconductor sector benefits from AI-driven demand, individual companies face their own execution risks and capital needs.

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### The Inflation Data: The Next Catalyst

While Hormuz developments are the focus on Monday, investors are already looking ahead to a crucial week of inflation data. The Consumer Price Index report, due Wednesday, is expected to show continued cooling in core inflation . The Producer Price Index follows on Thursday .

The data is critical because it will shape expectations for the Federal Reserve's September meeting. After the soft July jobs report, traders trimmed the likelihood of a rate hike at the Fed's September meeting to roughly 43%, down from 64% a week ago . But a hot CPI print could quickly reverse that shift.

**"The jobs data helped ease concerns about a rise in interest rates,"** said Kohei Onishi, a senior investment strategist at Mitsubishi UFJ Morgan Stanley . **"That's prompting investors to rebuild positions in technology stocks"** .

The Fed's next move is further complicated by the central bank's communication strategy. Chair Kevin Warsh has deliberately reduced forward guidance, leaving markets to interpret each new data point without his usual signals.

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### The Broader Market: A Record High and a Cautious Open

Despite Monday's muted open, the S&P 500 ended at a record high on Friday, while the Dow also touched all-time highs last week . The gains have lifted the benchmark index more than 13% this year, easing some concerns that heavy AI spending may not generate adequate returns .

The market's resilience reflects the strength of corporate earnings, particularly from AI-linked companies . The S&P 500's blend of technology and traditional industries has allowed it to capture the AI upside while maintaining some defensive characteristics.

But the week ahead will test that resilience. The combination of Hormuz uncertainty, inflation data, and Intel's stock sale creates a volatile setup.

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### Frequently Asked Questions

#### Q: Why is the S&P 500 little changed on Monday?

A: The S&P 500 is little changed as investors await clarity on a potential deal to reopen the Strait of Hormuz. The prospect of a breakthrough has kept markets in a holding pattern, while the absence of a deal prevents a rally .

#### Q: What is the Strait of Hormuz and why does it matter?

A: The Strait of Hormuz is a narrow waterway through which roughly one-fifth of the world's oil passes. Its closure during the U.S.-Iran war sent oil prices soaring. A deal to reopen it would flood the market with oil, lowering prices and reducing inflationary pressure.

#### Q: Why did Intel stock fall?

A: Intel fell roughly 3-4% after announcing plans to offer $15 billion in common stock. The move raises concerns about shareholder dilution, even as the company seeks to fund its contract chip-manufacturing expansion .

#### Q: What is the probability of a September rate hike?

A: After the soft July jobs report, traders trimmed the likelihood of a September rate hike to roughly 43%, down from 64% a week ago . The final decision will depend on Wednesday's CPI report.

#### Q: How has the S&P 500 performed this year?

A: The S&P 500 is up more than 13% in 2026, driven by strong corporate earnings, particularly from AI-linked companies .

#### Q: What are the key data releases this week?

A: The Consumer Price Index report is due Wednesday, followed by the Producer Price Index on Thursday . Both will shape expectations for the Fed's September meeting.

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### Conclusion: A Market at the Mercy of Geopolitics

August 10, 2026, is a day of suspended animation on Wall Street. The S&P 500 is little changed, the Nasdaq is slipping, and the Dow is slightly lower as investors wait for clarity on a potential deal to reopen the Strait of Hormuz .

The market's muted reaction reflects the two forces shaping the investment landscape: the prospect of a diplomatic breakthrough that could send oil prices tumbling, and the lingering uncertainty about whether a deal will actually materialize .

**"Oil is firmer on Monday after another weekend of stalled progress on reopening the Strait of Hormuz,"** Bloomberg strategists noted, **"yet traders are skeptical prices will rise for an extended period"** .

That skepticism is the dominant theme of the session. The fate of the Hormuz talks, the direction of inflation, and the Fed's next move will determine whether the market's pause is a breather or a turning point.

For now, investors are waiting. The clock is ticking.

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### Disclaimer

**IMPORTANT:** This article is for informational and educational purposes only and does not constitute financial, investment, or trading advice. The information contained herein is based on publicly available sources and reflects the author's understanding as of the publication date. Market conditions, geopolitical developments, and economic data are subject to rapid change. Past performance is not indicative of future results. You should consult with a qualified financial advisor before making any investment decisions.

For Retirees, Staying in the Stock Market Is Critical. How Much Exposure Is the Make-or-Break Question

For Retirees, Staying in the Stock Market Is Critical. How Much Exposure Is the Make-or-Break Question

## Market timing isn't the retiree's friend, but neither is a 100 % stock portfolio. Here's how to find the balance that protects your nest egg without sacrificing growth.

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### Introduction: The $1 Million Question

Imagine two retirees. Both start with $1 million and withdraw $50,000 a year. One faces a bear market in the early years of retirement. The other enjoys strong returns first. After 30 years, the first retiree is broke. The second has more than $3 million .

The difference isn't strategy—it's **sequence-of-returns risk**. And it's the single most important factor in determining whether a retiree's stock market exposure is a blessing or a curse.

The question of how much equity exposure retirees should maintain is the make-or-break decision in retirement planning. Too little, and you risk running out of money because your portfolio can't keep pace with inflation. Too much, and a market downturn in the wrong year can permanently derail your retirement .

Here's what the experts say about finding the right balance.

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## The Case for Staying Invested

### The S&P 500 Does the Heavy Lifting

The S&P 500 is one of the most resilient instruments available to long-term investors . The index gives you exposure to the largest U.S. companies and automatically rebalances as winners thrive and laggards get replaced.

If AI someday delivers on its promises, the S&P 500 is positioned to capture the upside, because the companies developing, monetizing, and purchasing AI are all included in its holdings. In contrast, if AI disappoints over the coming years, the index's diversification insulates your portfolio from feeling downside pressure in concentrated doses .

The index has survived the dot-com bubble, the 2008 financial crisis, a global pandemic, and every macro-driven scare in between . Retirees who stayed the course and invested in broad index funds through these cycles didn't just recover—they managed to compound their wealth.

**The lesson:** Time in the market—not timing the market—is the key pillar supporting wealth preservation at a stage when capital protection matters most .

### Pulling Out Is a Bigger Risk Than Staying

Simply taking all your money out of the market can result in missing out on gains if the market doesn't crash as you might expect it to. Crashes can come without a whole lot of warning. Even if valuations are high, there's no way to know whether a correction or crash will come in a few weeks, months, or years .

One of the biggest dangers for retirees is becoming too conservative too early and failing to maintain purchasing power . Inflation can quietly erode a cash-heavy portfolio, leaving retirees with less buying power over time.

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## The Case for Reducing Exposure

### The Math of Losses Is Brutal

The math of market losses is unforgiving. If you lose 50%, the market has to double just to get back to even. The deeper the hole, the steeper the climb—and the climb gets steeper at an accelerating rate as the drawdown grows .

For a retiree, this matters in a way it doesn't for a younger investor, because the retiree is taking distributions during the recovery. Every dollar pulled out during the recovery is a dollar that doesn't participate in the rebound. A portfolio that drops 30% and then withdraws 4% annually through the recovery period doesn't actually break even at a 43% rally. It needs significantly more .

### The "Just Ride It Out" Fallacy

The buy-and-hold camp is right about one thing: the vast majority of people who try to time markets fail badly. The average retail equity investor underperforms the S&P 500 by something like three to four percentage points annually .

However, the "just ride it out" argument assumes the investor's time horizon matches the bear market's recovery period. For a 30-year-old, that's a safe assumption. For someone in their 70s taking distributions from the portfolio, it isn't .

**The S&P 500 took roughly 13 years to recover its 2000 peak in real terms** . A retiree who started drawing from their portfolio in 2000 faced a devastating outcome—the S&P 500 eventually caught up to the expected 8% return, but the retiree who took distributions during the decline lost close to three-quarters of the wealth the plan was supposed to provide .

### Sequence-of-Returns Risk Is Real

The research from Fidelity illustrates the danger with a scenario involving two hypothetical retirees who each start with $1 million and withdraw $50,000 every year :

- The retiree who encounters strong returns early and a bear market later finishes with **more than $3 million** after 30 years of withdrawals.

- The retiree who faces negative returns first and then recovers sees the **entire portfolio depleted by year 27**.

Those forced withdrawals require selling shares at depressed prices, which permanently reduces the capital available to benefit from any eventual market rebound .

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## Finding the Right Balance: How Much Is Too Much?

### The "100 Minus Your Age" Rule

A traditional rule of thumb for the retirement corpus was that the stock part of your portfolio should equal 100 minus the retiree's age. For example, if an investor retires at 60, 40% of total savings would go to stocks and the rest to bonds .

However, the traditional 60% stocks / 40% bonds portfolio has suffered in recent years because stocks and bonds have both suffered together occasionally rather than complementing each other . Higher inflation has been one of the main reasons, as rising interest rates hurt both bond prices and growth stocks .

### What Fidelity Recommends

Fidelity's first-quarter 2026 retirement analysis indicates that half of Fidelity 401(k) participants aged 70 and older hold more equities than the firm recommends . Among savers aged 65 to 69, close to four in 10 also carry stock allocations above the levels Fidelity considers appropriate .

A 70-year-old retiree whose portfolio mirrors the **Fidelity Freedom 2020 Fund** would hold approximately **50% of total assets in equities** . Carrying a significantly higher stock percentage means accepting more market risk than the fund's design considers suitable for that particular retirement stage .

### The Korean Expert's View

A professor in South Korea, where a surge in older investors has fueled the stock market rally, cautioned that retirees should limit stock investments to around **30 to 40 percent** of retirement assets . Unlike younger salaried workers, older investors have fewer opportunities to recover from large losses .

### The Dividend ETF Alternative

For retirees who want to stay invested but reduce risk, dividend-focused ETFs offer a compelling alternative. The Schwab U.S. Dividend Equity ETF yields about **3.3% to 3.7%**, offers a P/E ratio of just **16** (versus the S&P 500's 25), and holds a diversified mix of defensive stocks like Coca-Cola, Chevron, and Bristol Myers Squibb .

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## A Balanced Approach: The Three-Part Foundation

Fidelity recommends that retirement finances be built on a **three-part foundation** balancing short-term reserves, guaranteed income sources, and growth-oriented investment accounts :

| Component | Purpose | Recommended Allocation |

|-----------|---------|----------------------|

| **Short-term savings** | Cover immediate expenses | 1-2 years of living expenses |

| **Guaranteed income** | Cover essential expenses | Social Security, annuities, pensions |

| **Growth portfolio** | Fund discretionary spending & long-term growth | Balance based on risk tolerance |

**The withdrawal rule:** The firm recommends withdrawing no more than **4% to 5% of total portfolio value in the first year** of retirement, adjusting for inflation each subsequent year .

### A Moderate-Risk ETF Portfolio

For moderate-risk investors, a diversified portfolio might look like :

| Allocation | Investment Type | Example ETFs |

|------------|-----------------|--------------|

| **20%** | Dividend stocks | VIG, NOBL (dividend aristocrats) |

| **20%** | U.S. stocks | VTI (total market), QQQ (tech-heavy) |

| **20%** | Short-term bonds | MINT, JPST (yielding ~4.25%) |

| **20%** | International markets | Emerging markets, developed ex-US |

| **20%** | Diversified or alternative | Gold, infrastructure, REITs |

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## Frequently Asked Questions

### Q: Should retirees be 100% in stocks?

No. Most experts recommend limiting stock exposure to **30-60% of retirement assets**, depending on age and risk tolerance. A 70-year-old retiree should hold roughly 50% in equities . Carrying a significantly higher stock percentage means accepting more market risk than is suitable for that retirement stage .

### Q: What is the biggest risk for retirees in the stock market?

**Sequence-of-returns risk** is the most significant danger. This occurs when retirees withdraw from a declining portfolio in the early years after they stop working, permanently locking in losses . A retiree who faces negative returns first and then recovers can see their entire portfolio depleted, while a retiree who enjoys strong returns early and a bear market later finishes with substantial wealth .

### Q: What's the safest withdrawal rate for retirees?

Morningstar's 2026 retirement income research pegs the baseline safe withdrawal rate at **3.9%**, slightly below the long-cited 4% guideline . Portfolios with heavier equity concentrations generally support lower safe withdrawal rates because additional volatility amplifies sequence-of-returns exposure .

### Q: Is the S&P 500 too tech-heavy for retirees?

**Roughly 38%** of the S&P 500's holdings are in the tech sector, and all of its top 10 holdings are involved in tech and have exposure to artificial intelligence . If the AI bubble bursts, the fund could have tremendous downside risk. The communication services sector adds another 10% of tech-related stocks like Alphabet and Meta .

### Q: Should retirees pull money out of the stock market?

No. Taking all your money out of the market can result in missing out on gains if the market doesn't crash as expected . The better approach is to **reduce risk**—pivot out of expensive stocks into more modestly valued investments, increase dividend exposure, and maintain a balanced portfolio .

### Q: How much should retirees withdraw each year?

Fidelity recommends withdrawing **no more than 4% to 5% of total portfolio value** in the first year of retirement, adjusting for inflation each subsequent year . This assumes a 30-year or longer retirement for someone who stops working at age 65 .

---

## Conclusion: The Make-or-Break Decision

For retirees, staying in the stock market is critical—but how much exposure you maintain is the make-or-break question. Too little, and inflation will erode your purchasing power. Too much, and a market downturn early in your retirement could permanently derail your plan .

The sweet spot for most retirees appears to be **30-60% in equities**, with the balance in bonds, dividend-focused investments, and short-term reserves . This approach provides enough growth to keep pace with inflation while reducing the devastating impact of sequence-of-returns risk.

As one expert put it: **"Capital preservation isn't optional once you've stopped earning income. It's the single most important variable in the equation"** .

Whether you're already retired or planning for retirement, the message is clear: stay invested, but stay diversified. Your future self will thank you.

Giant U.S. Company Cancels Major Employment Perk for New Staff

 Giant U.S. Company Cancels Major Employment Perk for New Staff

**PwC has canceled its signature end-of-summer internship trip to Disney World for its 2026 class, marking a significant shift in how the Big Four firm approaches early-career talent. The move follows a similar decision by EY and reflects broader changes in the professional services industry as AI reshapes entry-level work.**

---

## What PwC Canceled

PwC has confirmed it has canceled its annual end-of-summer trip to Disney World for interns who received full-time job offers. The multi-day event, known as **Impact**, had been a staple of the firm's summer internship program for roughly 15 of the last 20 years .

The trip was typically held in mid-August and featured entertainment, keynote speeches, career-development panels, free food and accommodation, and access to the Disney World Resort . For thousands of interns, it was the capstone of their summer experience—a celebration of their transition from intern to full-time staff.

Instead of the Orlando trip, at least some interns were told their programs would wrap up with office-based events. One tax intern said the plan was a team dinner at an Italian restaurant .

## Why the Change?

A PwC spokesperson told Business Insider that while the celebration was no longer happening, the firm continued to make "significant investments" in its early-talent programs. The company said it is shifting resources toward experiences that give interns more time with colleagues and clients, rather than a resort trip .

The official explanation is: "We're intentionally focusing our programs on experiences that provide more time with colleagues, greater exposure to clients, and stronger opportunities to build relationships within the offices and teams where interns begin their careers" .

**But the broader context suggests a structural shift, not a one-off budget decision.**

### EY Also Canceled Its Disney Trip

PwC isn't alone in this. Ernst & Young also canceled its annual Disney trip for summer 2026 interns, according to Going Concern, which has tracked Big Four intern programs for years. EY also reportedly cut its internship down to six weeks, did not pay interns for the July 4th week, and canceled intern gifts .

The pattern across two of the four largest accounting firms in the same summer suggests something structural is happening.

### The AI Factor

The growing use of AI is prompting professional-services firms to reconsider how they recruit and train junior staff. Some Big Four firms have shifted intern training to focus less on the technical aspects of the profession and more on critical thinking, data analysis, and drawing conclusions .

As AI increasingly performs some of the data-heavy tasks traditionally assigned to entry-level workers, the traditional "learn on the job" model is under strain. PwC has also signaled it plans to reduce its hiring of entry-level workers in the U.S. by a third over the next three years, with an internal presentation linking the decision to "transformation efforts, the impact of AI, and further AC integration" .

## The Mixed Reaction

Interns had mixed views about the cancellation. One was disappointed, saying that although PwC had organized some happy hours and office-based events, they were "nothing compared to what Impact would have been."

On the other hand, another intern said: "Honestly, I don't mind! Many current interns went a year and a half ago during Destination CPA" .

## The Bigger Picture: Big Four Intern Perks Are Shrinking

The Disney cancellation isn't a standalone decision. It's part of a broader pattern across Big Four accounting and consulting firms:

**KPMG** announced it would lay off 10% of its U.S. audit partners after failing to secure enough voluntary retirements, citing new AI audit tools that introduced redundancy in managers .

**Deloitte** has cut back benefits for employees, reducing paid time off by 5-10 days, freezing its pension plan, cutting paid family leave in half to 8 weeks, and ending a $50,000 family planning benefit .

**EY** has offshored large numbers of support roles for "cost management" and, as noted, canceled its Disney trip .

**PwC** has reduced the number of locations where entry-level consultants can start their careers, from 72 to 13, to bring junior consultants closer together during their first years at the firm .

**The bottom line:** The era of Big Four internships as lavish, perk-filled experiences is fading. As AI handles more of the data-heavy work that once filled a junior employee's first two years, firms are reconsidering the cost-benefit of large-scale celebrations and entry-level hiring volumes. The Disney trip was a symbol of the old model—and its cancellation is a sign of the new one.

---

## Frequently Asked Questions

### Q: Did PwC cancel the Disney trip for all interns?

A: Yes. PwC canceled the "Impact" event, its signature end-of-summer trip to Disney World, for its 2026 summer intern class .

### Q: What is replacing the Disney trip?

A: PwC is replacing the resort trip with office-based events and team dinners. One intern reported their program would end with a team dinner at an Italian restaurant .

### Q: Did EY also cancel its Disney trip?

A: Yes. Ernst & Young also canceled its annual Disney trip for summer 2026 interns .

### Q: Why are Big Four firms cutting intern perks?

A: The changes reflect broader shifts in the professional services industry. AI is taking over data-heavy entry-level work, prompting firms to reconsider hiring volumes, training approaches, and the cost-benefit of large-scale celebrations .

### Q: What other changes are Big Four firms making?

A: PwC plans to reduce U.S. entry-level hiring by a third over three years . Deloitte has cut PTO, frozen pensions, and reduced family leave . KPMG has conducted layoffs . EY has offshored support roles .

---

## Disclaimer

**IMPORTANT:** This article is for informational and educational purposes only. The information contained herein is based on publicly available sources and reflects the author's understanding as of the publication date. Company policies, internship programs, and hiring practices are subject to change. You should consult with the relevant firms directly for the most current information. This is not financial, investment, or professional advice.

The Great Fed Debate: Why a Hoover Institution Fellow Says the Economy Is Still Resilient Despite the Jobs Miss

 

The Great Fed Debate: Why a Hoover Institution Fellow Says the Economy Is Still Resilient Despite the Jobs Miss

## Productivity is rising, private sector jobs keep growing, and one influential economist argues the Fed's "full employment" mandate has already been met—which means rate hikes are coming.

---

### Introduction: A "Dream" Scenario That Looks Like a Headache

Last week's jobs report was a genuine surprise. The U.S. economy unexpectedly shed 23,000 jobs in July—the first negative print since the pandemic, with May and June revisions cutting a combined 103,000 jobs . Yet the unemployment rate fell to 4.1%, driven by a drop in labor force participation.

To some, this looks like a weakening labor market. To others—including a prominent Hoover Institution fellow—it looks like an economy that has already reached "full employment," and the Fed's next move is clear.

**"The Fed has met its full employment mandate,"** one economist told CNBC, arguing that the weak headline number masks a labor market that is still fundamentally strong. The argument rests on several pillars: productivity is rising, private sector job growth remains positive, and wage pressures are moderating. If inflation stays above target, the Federal Reserve will have no choice but to raise rates by year-end.

---

### The Jobs Report: A "Statistical Mirage"

The July jobs report is a study in contradictions. The headline payroll number was weak, but the unemployment rate fell. The labor force participation rate dropped, but prime-age participation actually ticked up. The revisions to May and June were significant—a combined 103,000 jobs cut—but the three-month average is still positive.

For economists who believe the labor market is healthier than the headline suggests, the key data points are:

1. **Private sector job growth remains positive.** While the headline -23,000 figure got the attention, the private sector still added jobs. The weakness was concentrated in government and leisure and hospitality sectors.

2. **Prime-age participation is rising.** The participation rate for workers 25-54 actually increased, suggesting the core workforce is still engaged.

3. **Wage growth is moderating, not collapsing.** Average hourly earnings rose 3.2% year-over-year—still positive, but cooling enough to ease inflation concerns.

**"The unemployment rate fell for the wrong reasons,"** one analyst noted. "But if you look at the underlying data, the labor market is not in crisis."

---

### The Inflation Problem: Stubborn and Unrelenting

The argument for rate hikes rests on a simple reality: inflation has been above the Federal Reserve's 2% target for more than five years. The Fed's preferred inflation gauge, the Personal Consumption Expenditures (PCE) index, rose 3.7% year-over-year in June. Core PCE remained at 3.3%.

The dissenters at the July FOMC meeting made the case clearly. Three policymakers—Beth Hammack of Cleveland, Neel Kashkari of Minneapolis, and Lorie Logan of Dallas—voted for a rate hike, arguing that the Fed's patience has become a liability.

**"Inflation has remained stubbornly above 2 percent for more than five years, and I am not confident it will return to our objective on its own,"** Hammack said. She noted that businesses in her district are describing "pricing pressures as broadening rather than fading, and consumers are expressing despair over persistently higher prices."

The dissenters' argument is straightforward: it's better to tighten incrementally now than to wait and be forced into sharper action later.

---

### The Productivity and Wage Equation

The "resilient economy" argument hinges on two key trends: **rising productivity and moderating wage growth**.

Productivity has been growing at a steady clip, driven by AI and automation investments. The surge in AI capital spending has boosted output per worker, allowing companies to maintain profitability even as labor costs rise.

At the same time, wage growth is moderating. Average hourly earnings rose just 3.2% year-over-year, the smallest annual increase since late 2024. If wage growth continues to cool, it could ease inflation pressures without requiring aggressive Fed rate hikes.

The problem is timing. The Fed's mandate is to maintain price stability, and inflation has overshot its target for more than five years. As one Hoover Institution fellow put it: "The Fed's full employment mandate has been met. The remaining task is price stability."

---

### The Political Reality: Trump, Warsh, and the Fed's Independence

The Fed's rate decision is further complicated by political dynamics. Chair Kevin Warsh was appointed by President Trump, who has repeatedly called for lower rates. At Warsh's swearing-in ceremony, Trump publicly stated his hope for rate cuts, saying "You get the interest rates down, everybody's going to be very, very happy."

Warsh has worked to burnish his independence credentials, telling Senator Elizabeth Warren that he would "absolutely not" be the president's "sock puppet." But critics argue that the Fed's credibility is being tested by its failure to act on inflation.

**"Warsh can talk tough on inflation without acting only for so long,"** one analyst noted. "The bond market is challenging the credibility of the Fed's mission statement to control inflation."

---

### What the Experts Are Saying

The debate over the Fed's next move has divided Wall Street:

| Analyst | View |

|---------|------|

| **Hoover Institution Fellow** | "Fed has met full employment mandate. Rate hikes by year-end are warranted." |

| **Bloomberg Economics** | "Weak jobs report gives Fed room to hold, but inflation data will decide." |

| **Morgan Stanley** | "September rate hike remains very much on the table." |

| **Moody's Analytics** | "More uncertainty and volatility in rates due to Warsh's communication strategy." |

The market is leaning toward a hawkish outcome. After the July meeting, about **63% of traders** were betting on a 25-basis-point hike in September, up from roughly 57% before the announcement.

---

### Frequently Asked Questions

**Q: Why do some economists think the Fed has already met its "full employment" mandate?**

A: Despite the weak headline jobs number, private sector job growth remains positive, prime-age participation is rising, and wage growth is moderating. The unemployment rate fell to 4.1%, and many economists consider 4% to be the "natural rate" of unemployment.

**Q: What is the argument for rate hikes?**

A: Inflation has been above the Fed's 2% target for more than five years. The dissenters at the July FOMC meeting argued that the Fed's patience has become a liability and that it's better to tighten incrementally now than to wait and be forced into sharper action later.

**Q: Why does productivity matter for the Fed's decision?**

A: Rising productivity allows companies to maintain profitability even as labor costs rise, which can help contain inflation without requiring aggressive rate hikes. If productivity continues to grow, the Fed may have more room to hold rates steady.

**Q: What is the probability of a September rate hike?**

A: After the July jobs report, the probability fell to roughly 45-55%. The final decision will depend on the July CPI report, due Wednesday, August 12.

**Q: What does this mean for American consumers?**

A: If the Fed raises rates, it will increase borrowing costs for mortgages, auto loans, and credit cards. However, higher rates are intended to control inflation, which would help preserve purchasing power over the long term.

---

### Conclusion: A Fed at a Crossroads

The July jobs report has deepened the debate at the Federal Reserve. The headline payroll number was weak, but the underlying data suggests the labor market is still fundamentally sound. Productivity is rising. Private sector jobs are still being added. The economy remains resilient.

But inflation is still above target. The dissenters at the July meeting argue that the Fed's patience has become a liability. And the bond market is pricing in a September rate hike.

**"The Fed has met its full employment mandate,"** one economist argued. "The remaining task is price stability."

---

### Disclaimer

**IMPORTANT:** This article is for informational and educational purposes only and does not constitute financial, investment, or professional advice. The information contained herein is based on publicly available sources as of August 9, 2026. Federal Reserve policy, economic data, and market expectations are subject to rapid change. The views expressed in this article are those of the author and do not necessarily reflect the views of any organization. You should consult with a qualified financial advisor before making any investment decisions.

Dave Ramsey's Blunt Advice on a Major 401(k), IRA Decision

Dave Ramsey's Blunt Advice on a Major 401(k), IRA Decision

## The personal finance guru warns that one common mistake could cost you a million dollars in retirement.

---

### The Decision That Could Cost You a Million

For years, Dave Ramsey has been telling Americans how to think about debt, household budgets, and the long road toward a financially secure retirement. But when it comes to one of the most consequential decisions in retirement planning—whether to choose a Roth or traditional 401(k)—Ramsey is unequivocal .

"The Roth absolutely mathematically kicks the traditional [IRA's] butt," Ramsey said in a recent video that went viral . His reasoning is straightforward: on a traditional 401(k), you get a tax break on the money you put in, but you pay taxes on **everything** you withdraw—contributions *and* growth . With a Roth, you pay taxes on your contributions up front, but every dollar of growth comes out tax-free .

Ramsey illustrated the math with a simple example: if you invest $200 a month from age 25 to 65, a traditional 401(k) would give you a tax break on about $96,000 in contributions—but you'd pay taxes on the entire $2.5 million balance when you withdraw it . With a Roth, you pay taxes on the $96,000 upfront and nothing on the $2.5 million of growth . As Ramsey put it, you're trading a small tax break today for a massive tax bill tomorrow .

**The numbers are stark.** A 40-year-old maxing out a traditional 401(k) would save taxes on roughly $600,000 in contributions—but would owe taxes on $2.5 million in growth, a tax exposure Ramsey pegs at $700,000 to $800,000 . "A guy that makes a million-dollar mistake, you don't keep," he said, advising a caller to fire her financial advisor who recommended the traditional route .

---

### The Strategy: Use Both, In the Right Order

Ramsey's framework isn't simply "Roth or nothing." He recommends a specific sequence designed to maximize both employer matches and tax-free growth:

> **"Start by contributing enough to your 401(k) to get the full employer match, then max out a Roth IRA for tax-free growth. After that, you can return to your 401(k) to increase contributions"** .

Here's why this sequence works:

1.  **The 401(k) match is free money.** Passing it up means leaving compensation on the table .

2.  **Roth IRA contributions are capped** (at $7,500 in 2026), so it's a "use it or lose it" opportunity .

3.  **Roth IRAs offer more investment choices** than employer plans .

4.  **After maxing the Roth IRA, you can return to the 401(k)** to reach Ramsey's recommended 15% savings rate .

Ramsey calls the Roth IRA the "rock star" of retirement accounts . And the numbers back him up: 67% of all IRA contributions now go to Roths, driven by younger workers seeking tax-free growth .

---

### The Pitfalls That Undermine Retirement Savings

Ramsey has also identified three behaviors that can sabotage even the best retirement plan :

1.  **Treating debt payments as normal.** Carrying credit card debt at 20%+ interest drains cash that could otherwise compound inside a retirement account . "Debt is the single largest blocker to building real wealth," Ramsey says .

2.  **Letting lifestyle creep run unchecked.** Home upgrades, frequent travel, and impulse purchases push monthly expenses higher than workers projected during their planning years .

3.  **Procrastinating savings while relying on Social Security.** Delaying contributions and assuming Social Security will fill the gaps leaves retirees financially exposed . At age 50, Ramsey says, you should have roughly six times your annual income saved .

---

### A 401(k) Alone Isn't Enough

Ramsey warns that a 401(k) alone often won't cut it . For one thing, 401(k)s have contribution limits; if 15% of your income exceeds the annual cap, you'll need another vehicle . Employer plans also offer "a limited menu of investment options," Ramsey writes .

Survey data backs up his point: 74% of millionaires said they invested outside their workplace retirement plan . "This isn't an either/or situation—it's both/and," Ramsey writes .

---

### Frequently Asked Questions

#### Q: Should I choose a Roth or traditional 401(k)?

Ramsey is unequivocal: if your employer offers a Roth option, choose it . You pay taxes on your contributions now, but every dollar of growth comes out tax-free . The tax deduction on a traditional 401(k) applies only to what you put in; the growth is taxed later .

#### Q: What if my employer doesn't offer a Roth 401(k)?

Ramsey recommends contributing enough to get the full employer match, then maxing out a Roth IRA, then returning to the 401(k) for additional contributions .

#### Q: Is a Roth IRA better than a 401(k)?

They serve different purposes. The Roth IRA offers tax-free growth and more investment choices, but has lower contribution limits. Ramsey's strategy is to use both: get the 401(k) match, max the Roth IRA, then add more to the 401(k) .

#### Q: Should I pause 401(k) contributions to pay off debt?

Ramsey says no—at least not completely. Pausing contributions forfeits employer matches and misses out on compound growth . The better approach is to contribute enough for the full match while aggressively paying down high-interest debt .

#### Q: What's the 15% rule?

Ramsey recommends investing 15% of your gross household income into retirement . If 15% exceeds the 401(k) contribution limit, use a Roth IRA or other accounts for the remainder .

#### Q: Can I switch from a traditional to a Roth 401(k)?

Yes. You can convert existing traditional 401(k) funds to a Roth, but you'll owe taxes on the amount converted . Ramsey advises consulting a tax professional for the specifics .

---

### Conclusion: The Roth Advantage

Dave Ramsey's blunt advice on 401(k) and IRA decisions boils down to a simple principle: pay taxes on the seed, not the harvest. By choosing a Roth 401(k) over a traditional one, you're trading a modest tax break today for tax-free growth that could save you hundreds of thousands—or even millions—in retirement .

But the decision doesn't stop there. Ramsey's recommended sequence—get the employer match, max the Roth IRA, then return to the 401(k)—ensures you capture free money, tax-free growth, and maximum contribution capacity .

The takeaway is clear: a 401(k) alone isn't enough . To retire well, you need a strategy that combines employer plans, individual Roth accounts, disciplined saving, and—above all—avoiding the debt trap that Ramse warns will "smack you in the head" if you carry it into retirement .