🎙️ Prime Targets

When you buy Berkshire Hathaway stock, what are you really getting?

The former Rhode Island textile manufacturer is now a ~$950 billion behemoth. America’s largest non-technology company includes a lot of insurance, energy, and railroads, a growing hoard of cash, and stocks like Apple, Coca-Cola, American Express, and Chevron.

Check it all out in the breakdown below.

— Matthew & Shawn

Here’s today’s rundown:

Today, we'll discuss the biggest stories in markets:

• Startups run leaner as failures rise

• Financial fraud grows nationwide

This, and more, in just 5 minutes to read.

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In The News

😬 Startups Are Running Leaner as Failures Rise

Folks, the great startup squeeze is upon us. But as you’ll see below, it’s not necessarily bad. 

Over the past year, the number of startups shuttering operations has grown by about 60% while startup bankruptcies have soared — now seven times higher than in 2019. 

No more easy capital: The seismic shift is mostly a story about the broader economic climate. Central banks tightened monetary policy in 2022 to combat inflation, driving interest rates to levels not seen in years. That’s impacted the startup world, of course, where easy capital had long been the lifeblood of innovation, growth, and rewarding exits. 

• For many start-ups, funding has all but dried up.
  

• That’s the case for most industries not in the AI space, which is still seeing healthy investment inflows amid the broader AI exuberance. AI and machine learning startups raised about $27 billion last quarter alone, or nearly half of all venture capital funding. 

Workforce reduction: Many companies have scrambled to adapt. They turn to cost-cutting measures, often focusing on the largest expense: their workforce. 

• Average headcounts are down across startups.
  

• Look at seed-stage firms, which have seen their average workforce shrink from about seven employees to just five. At mature startups, the difference is even more stark: Companies that closed Series C funding rounds in the first half of 2024 did so with teams that were, on average, 43% smaller than those of companies at the same stage just a year earlier.

Less hiring: For startups and bigger firms, the workforce reduction trend has been driven more by hiring freezes than widespread layoffs. 

• The first four months of 2024 saw the lowest number of new hires for those months in the past four years. January, a busy month for recruitment as companies gear up for the year ahead, had its lowest number of new hires this decade. It suggests that many startups want to maintain their current workforce size rather than downsize.

Why it matters:

Most notably, the promise of rapid growth, existing opportunities, and big paydays is behind us. Now, high expectations have been tempered. It’s a more cautious, resource-constrained environment. 

For founders and investors, the challenge lies in finding ways to sustain innovation and growth with smaller teams and tighter budgets. Startups are embracing the mantra “doing more with less.” 

Hey, in a few years, we could find out that the shift drives more sustainable business models and a renewed focus on core value propositions because it's worth noting that periods of economic pressure have historically also bred innovation and resilience. 

In the end, the startups that emerge from this "squeeze" may be leaner, more adaptable, and better positioned.

Read more

More Headlines

📉 Pandemic darlings that never came back

💡 Howard Marks: The riskiest things

✈️ Private jet flights are down 15% in two years as Covid-era demand wanes

📺 Streamflation: Why streaming is getting more expensive for consumers

📈 Gold set for fresh highs ahead of Fed rate decision

🌃 The countries with the most skyscrapers in 2024

🖥️ AMD is going after Nvidia with a $5 billion acquisition

🚨 The Rise of Financial Frauds Across the U.S.

Meet Annette Manes, an 83-year-old widowed social worker tricked by con artists impersonating JPMorgan Chase's fraud department and U.S. agents into handing over about $1.4 million of her savings. It’s a tragic story of financial fraud that began in October 2022 and lasted 279 days before her son, Peter, was alerted and stopped the scam. 

By then, it was far too late. 

The scammers withdrew tons of cash from her accounts and opened credit cards in her name. They saddled her with over $100,000 in credit card debt. Now 85, her nest egg is gone. 

Growing issue: The fraud embodies a broader trend across the U.S. There’s been a 255% increase in annual fraud losses suffered by people over 60 in the past three years. AARP estimates annual fraud losses by people over 60 are now around $28 billion.

• Unknown to her family, Annette had accumulated over $1 million in savings over her lifetime through frugal living and careful saving. But the wealth made her a prime target for scammers who prey on retirees.
  

• This doesn’t happen with only obscure banks. The con spanned multiple financial institutions, including the nation's three largest consumer banks and major credit card issuers.

Annette's son, a Yale physician, only learned of the situation when he received a message from adult protective services at a conference in Singapore. Since then, Peter has been able to recover only about $25,000 of the funds.

Even with several red flags, including dramatic changes in spending and large cash withdrawals, the banks didn’t intervene or alert law enforcement.

"I guess I was expecting a greater level of protection. I realized there was almost none,” the victim’s son told Bloomberg.

Why it matters:

The case highlights the vulnerability of elderly Americans with wealth and raises questions about banks' responsibilities in detecting and preventing fraud. The scale of the problem is enormous and only growing rapidly.

The financial and emotional costs on victims and their families can be devastating. Experts say current systems and regulations are inadequate to protect elderly Americans.

So, what can be done? For starters, banks are trying to improve protocols for detecting and responding to suspicious activity, including sudden changes in spending or large withdrawals.

• Some institutions must add transaction verification steps and implement more fraud detection technology to identify unusual patterns across multiple accounts and institutions.
  

• JPMorgan Chase said, "We're sorry Ms. Manes fell victim to a highly sophisticated scam. We are helping law enforcement with their investigation and continue to educate our customers about scams and how to avoid them.”

Then, there’s the thing all of us can try to do at home: Encourage more open discussions about finances and how to keep on top of them.

Read more

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Quick Poll

On Friday, we asked: Do you own Walmart or Ulta stock? Why or why not?

— Wrote one Walmart shareholder: “Main holding for the last 10 years. I’m long an increasingly poorer consumer.” Another: “You can hardly go wrong with the best!”

— As for Ulta, one investor cloned the Oracle. “Because Buffet bought it.”

— Said another Ulta shareholder: “Beat Mr. Buffett to it! I did an intrinsic value analysis long ago, set the alert, and it was triggered. Then, I asked my sister-in-law, who shops there, if anything had changed or what she thought of the store now. She said, ‘fine.’ I asked my daughters who preferred Sephora and really inquired why they liked it better. I asked a few more friends, ‘What am I missing?’ and then pulled the trigger! It was refreshing to see the GOAT and/or Todd/Ted see the retailer similarly.”

See you next time!

That's it for today on We Study Markets!

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