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- Warren Buffett Is Trying to Tell Us Something About the Economy with Berkshire Hathaway’s Earnings and the $147 Billion of Cash on Hand
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Todays Open Interest Change
One of the biggest companies behind the remote work revolution is having its employees head back to the office. Staff who live within 50 miles of a Zoom Video (ZM) workplace must now be there at least two days per week, further cementing an industry shift towards hybrid models of work. It's also big news for a company that beat Microsoft Skype (MSFT), Cisco Webex (CSCO) and Google Meet (GOOG, GOOGL) at their own game, and led the word "Zoom" to be synonymous with video-calling for entire industries.
Quote: "We believe that a structured hybrid approach - meaning employees that live near an office need to be onsite two days a week to interact with their teams - is most effective for Zoom," a company spokesperson told Business Insider. "As a company, we are in a better position to use our own technologies, continue to innovate, and support our global customers. We'll continue to leverage the entire Zoom platform to keep our employees and dispersed teams connected and working efficiently."
Two themes are playing out in the latest development. One is the loss of market share and the supercharged growth of companies that benefited from pandemic-driven trends (Zoom's stock is down 88% from an all-time high of $559 in October 2020). The other is a force that could help tap the brakes on the commercial real estate meltdown. While office attendance appears to have stabilized, the latest study from McKinsey shows that it's still 30% below pre-pandemic levels.
On the economy: The latest nonfarm payrolls figures on Friday showed that the great hiring boom in the aftermath of the pandemic continues to moderate. The Labor Department reported that 187K jobs were added in July (fewer than the 200K expected, and lower than the 312K average seen in Q1), and revised down its most recent May and June estimates by a combined 49K. That could help turn the tide in favor of employers once again, and tip the scale towards setups like hybrid work or even more time in the office. Take the WSB survey. (2 comments)
Berkshire Hathaway's (BRK.B, BRK.A) Q2 operating earnings rose 6.6% Y/Y, driven by strong gains in its insurance segment, both in underwriting and investment income. Moreover, the investing giant's cash, cash equivalents and short-term U.S. securities swelled to $147.4B at June 30, up from $130.6B at March 31. About 78% of Berkshire's $353.4B of equity holdings were concentrated in five companies as of June 30, out of which its Apple (AAPL) stake outshone the rest. SA analyst A.J. Button said the earnings report featured much to celebrate, saying Berkshire is still a worthy investment despite being near an all-time high. (138 comments)
Placing the blame squarely on the Teamsters, cash-strapped Yellow Corp (YELL) has filed for bankruptcy, leading its stock to sink over 25% in premarket trading. The trucker now expects to enter into a debtor-in-possession financing facility, which will be used to support its businesses throughout the sale process. Yellow has more than 100K creditors, the biggest of which include BNSF Railway (BRK.B), Amazon (AMZN) and Home Depot (HD). Meanwhile, retail investors have been cashing in on Yellow's woes in an old-fashioned meme-stock rally that pushed its shares up 400% since its operations were shuttered. (6 comments)
Only a tiny fraction of adults in the U.S. are using prescription weight loss drugs, but nearly half of Americans are looking forward to taking them. The results from a Kaiser Family Foundation survey demonstrate public awareness regarding this new class of medications, which are rapidly gaining popularity and show the market opportunity for companies like Novo Nordisk (NVO) and Eli Lilly (LLY). Despite being more effective than older medications, these weekly injections can put strains on a budget, with respondents citing concerns over payer coverage and the mode of administration. Note that this class of drugs is also being scrutinized over reports of suicidal behavior linked to them. (200 comments)
In Asia, Japan +0.3%. Hong Kong -0.1%. China -0.6%. India +0.4%.
In Europe, at midday, London -0.6%. Paris -0.4%. Frankfurt -0.6%.
Futures at 7:00, Dow +0.1%. S&P +0.2%. Nasdaq +0.4%. Crude -1.1% to $81.93. Gold -0.3% to $1,969.70. Bitcoin +0.2% to $29,075.
Ten-year Treasury Yield +4 bps to 4.10%.
Today's Economic Calendar
What else is happening...
BofA reviews stocks most loved and shunned by hedge funds.
FDA clears pill for postpartum depression, but not for major depression.
RTX's (RTX) Pratt & Whitney jet engine recall hits airline schedules.
Texas power prices surge as scorching heat pushes demand higher.
J.P. Morgan no longer sees recession in 2023 amid healthy growth.
Analysts see further gains for oil prices after latest production curbs.
Nikola (NKLA) slides after investors digest CEO exit, Q2 earnings.
Pollo Tropical owner Fiesta Restaurant (FRGI) may be sold for $225M.
Earnings watch: Disney (DIS), Palantir (PLTR), Alibaba (BABA) and more.
2023 shapes up to be biggest year for biopharma M&A since COVID.