Wed, Aug 6, 2025|Corey McLaughlin

From 'Weakening' to Worse

Calm, for a day… The labor market is getting worse… Pondering the unexpected… What the world’s best businesses can do… Berkshire Hathaway is still sitting on a cash pile… Why it might pay a dividend soon… Is Berkshire a buy?...

Was that it?...

After trading lower over five of the past six trading days, the benchmark S&P 500 Index gained 0.7% today. It closed higher for the second time over the past three trading days. Volatility – measured by the CBOE Volatility Index – also dropped.

So was that it? Is the recent labor-market-induced volatility finished?

We're not so sure...

First off, the July "nonfarm payrolls" report (which we wrote about here) fits the trend of a generally weakening or "frozen" labor market (with the unemployed having difficulty finding new jobs).

We've been writing about this for a year.

And it looks like things are getting worse...

In today's Select Value Opportunities update, editor Mike Barrett wrote about the latest jobs market data and trends and what he describes as "anomalies that might signal early changes in those trends." Here's more from Mike...

This time, we're looking at the Institute for Supply Management's ("ISM") manufacturing survey results for July. For the fifth consecutive month, its headline index fell below 50, signaling contraction in domestic manufacturing activity.

Notably, its employment index sank to 43.4 – the lowest reading since the early days of the COVID-19 pandemic (July 2020). According to the ISM, manufacturing workforce reductions are accelerating due to the rising economic uncertainty related to tariffs.

Outplacement firm Challenger, Gray & Christmas issued its July report on hirings and firings, and it also wasn't pretty. Year to date, U.S. employers cut 806,383 jobs and only brought on 86,132 new hires... That ratio of cuts-to-hires is a staggering 9.4-to-1. It marks a dramatic rise from the 6.2-to-1 ratio in June.

In other words, the employment downtrend gathered steam last month. And we don't know when it'll ease up.

On September 5, the Bureau of Labor Statistics' next monthly payrolls report comes out. If the current trajectory of the labor market continues, Mike says to expect a Federal Reserve interest-rate cut at its next meeting on September 17 (as the market is expecting) – or maybe even earlier. As Mike wrote...

The employment picture keeps getting worse with every new report, so the Fed has no other choice.

Keep in mind, an emergency Fed meeting and rate cut aren't out of the question. Should incoming data, like the next payrolls report (scheduled for September 5), indicate that employment is continuing to worsen, the Fed could slash rates before September 17.

What could happen next...

If the Fed takes on an "emergency" posture – lowering interest rates in between its regularly scheduled meetings – history paints a mixed picture about what to expect in the market.

One thing's for sure – the move won't be a "savior" for the market. It'll signal that there's trouble with the economy.

While stocks tend to get a short-term jolt from an "emergency" rate cut, six-month and one-year average returns in these scenarios aren't great.

The last time we saw an emergency rate cut was in March 2020 – during the early days of the COVID-19 pandemic.

Stocks didn't bottom until a few weeks after the Fed's emergency 50-basis-point cut. More "help" came after.

After a massive fiscal response and other new monetary-policy "rescues," the major U.S. stock indexes hit new all-time highs before the end of the year.

But that bucked a trend...

Before 2020, the Fed had unleashed an emergency rate cut seven times before, all since 1998. The average one-month return after these cuts was 2.9%. But the six-month and one-year periods averaged losses of 1.5% and roughly 8.9%, respectively.

In short, we could see some more volatility around the next jobs report and Fed meeting.

In the meantime, the world's best businesses are adapting...

This morning, McDonald's (MCD) – a longtime favorite among our editors – shared its quarterly earnings report.

The company topped Wall Street analyst expectations for earnings and revenue. Its shares gained roughly 3% today on the news.

After two straight quarters of same-store sales declines – with low- and middle-income customers visiting less frequently – McDonald's U.S. restaurants grew their sales by 2.5% last quarter. Revenue rose 5%. CEO Chris Kempczinski chalked up the performance to marketing and new menu items.

For example, McDonald's had a marketing effort tied to the Minecraft movie and also launched McCrispy Chicken Strips and other new items. The chain's loyalty program also helped.

As Restaurant Dive reported today...

Kempczinski said the chain's loyalty users visit the chain 26 times in a year, compared to about 10 visits for non loyalty members. The McValue program, including the $5 Meal Deal, has also driven visits.

Together, McValue and loyalty account for 50% of restaurant visits in the U.S., Kempczinski said, with relatively little overlap between the two channels. Kempczinski said McDonald's is looking at its core menu pricing, in concert with franchisees, as it looks to boost frequency among consumers who aren't using its rewards program or its McValue platform.

It's worth noting that McDonald's Chief Financial Officer Ian Borden said visits by low-income customers are still down in general, but more middle- and higher-income Americans are increasing their visits to fast-food restaurants. That could be a signal of the strain on "real incomes" today.

Elsewhere, Berkshire Hathaway is still hoarding cash...

Over the weekend, Warren Buffett's holding company, Berkshire Hathaway (BRK-B), reported its second-quarter results.

From a business perspective, Berkshire's operating earnings (which strip out changes in its stock positions) fell slightly – mostly because of a decline in insurance income. That's notable.

Stansberry's Investment Advisory editor Whitney Tilson has followed Berkshire Hathaway for more than 20 years, and he's a regular attendee at the company's annual meeting in Omaha, Nebraska.

In yesterday's edition of his free daily e-letter, Whitney broke down the company's quarter in full.

Today, we're going to dive into one section of the earnings report – Berkshire's cash hoard – and what might happen to it as Buffett prepares to retire into the Omaha sunset.

At the end of the second quarter, Berkshire Hathaway had $344 billion in cash on hand. That's just below the $347 billion it had at the end of the first quarter.

As Whitney explained, Berkshire's cash position is currently larger than the market cap of 477 of the companies in the S&P 500.

At some point, Berkshire will have to do something with all that cash. But not yet... Berkshire was a net seller of stocks for the 11th straight quarter (that was even during a quarter where the market had a quick 20% correction).

How that cash could be deployed...

With interest rates still elevated, Berkshire seems happy to hold cash and Treasurys for now. Berkshire holds more than $300 billion in Treasury bills and short-term Treasurys, which can generate billions in interest income every quarter.

If Buffett and his team don't see any screaming buys out there, it's a great way to wait out an expensive market. But at some point, we expect Berkshire to find a new position or restart buybacks.

And, as Whitney says, there's another option...

It wouldn't surprise me if Buffett and Abel announce that Berkshire will start returning capital to shareholders via dividends. That could happen at next year's annual meeting.

If so, I think they might do what big-box retailer Costco Wholesale (COST) does: pay a modest ongoing dividend plus occasional large special dividends.

Berkshire has never paid a regular dividend to shareholders. It did pay a one-time dividend in 1967, but Buffett called it a "terrible mistake" and joked that he must have missed the board meeting where the decision was made.

Whitney has long called Berkshire Hathaway "America's No. 1 Retirement Stock." Adding a regular dividend payout to the company's "unique combination of safety, growth, and (at many times) undervaluation" (as Whitney put it) would make the stock even more compelling to income-driven retired investors.

In today's edition of his e-letter, Whitney gave his own estimation for Berkshire's intrinsic value...

Putting it all together... I estimate Berkshire's cash and investments are worth roughly $450,000 and its operating businesses are worth about $299,000. This comes to a total of about $749,000 per A-share, or $499 per B-share.

At current levels, shares are trading at about a 7% discount to Whitney's estimate. Whitney believes Berkshire is a great buy when it trades at a 10% (or greater) discount to his valuation. That's not the case today.

So Berkshire may not be "cheap" enough to be a bargain at the moment, but the stock is still one of Whitney's favorites for long-term-oriented investors.

That's why it's part of the Stansberry's Investment Advisory model portfolio. Subscribers are up around 30% since the team recommended opening a position in November 2023.

While Berkshire is above Whitney's buy-up-to price in the Investment Advisory model portfolio right now, there are about two dozen other positions that are "buys" at current prices, many of which we consider to be the world's most elite businesses.

If you don't have access to our flagship publication already, you can click here to learn more today.

In this week's Diamond's Edge Live, Ten Stock Trader editor Greg Diamond shares the technical analysis patterns you should know... reveals what could happen next with gold's price... and explains why he's continuing to preach "patience" to traders right now...

Click here to watch a replay of this free video – which debuted this morning – on the Stansberry Research YouTube page right now. And if you like what you see, don't forget to subscribe to our channel.

New 52-week highs (as of 8/5/25): Agnico Eagle Mines (AEM), AutoZone (AZO), Barrick Mining (B), Alpha Architect 1-3 Month Box Fund (BOXX), BWX Technologies (BWXT), DXP Enterprises (DXPE), iShares MSCI Spain Fund (EWP), VanEck Gold Miners Fund (GDX), Kinross Gold (KGC), Lincoln Electric (LECO), Lynas Rare Earths (LYSDY), Altria (MO), Newmont (NEM), OR Royalties (OR), O'Reilly Automotive (ORLY), Uranium Energy (UEC), and Wheaton Precious Metals (WPM).

In today's mailbag, thoughts on President Donald Trump's decision to fire the Bureau of Labor Statistics commissioner... and Lewis M. responds to Jim V.'s note in yesterday's mail (about there being no hope for better "official" inflation data)... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"Corey... I don't think it has anything to do with 'Employment' (BLS firing). Me? I think it was to block really bad Inflation Numbers!" – Stansberry Alliance member Bill B.

"In reply to Jim V's response to my original feedback on the fake U.S. inflation rates: I'm ashamed to admit that what he says may currently be correct. The majority of American voters (and non-voters) are "sheeple" (shy sheep people), cowering in response to the crooked status quo.

"If the majority of us (the "disenfranchised" voters) stop accepting the current, flawed, selfish political "swamp creatures" and forgiving their kowtowing to the "Bigs" (Big Biz, Big Med, Big Pharma, Big Ag, Big Gov, Big $, etc.) and their lobbyists, we can easily take back our governments and make all our representatives work for us, as they are supposed to do.

"That would be the ideal situation, as President Lincoln once said, 'government of the people, by the people, for the people'!... Open up your minds and support the truly best candidates, regardless of their political affiliation. May our loving God open our minds and guide our voting hands!" – Subscriber Lewis M.

All the best,

Corey McLaughlin and Nick Koziol
Baltimore, Maryland
August 6, 2025