• Stocks: Indexes started the day on a high note, but the rally quickly fizzled as bonds sank and oil prices climbed. The Nasdaq rose this week while the S&P 500 fell over the last five days, but the Dow in particular has been feeling the pain lately—it sank for a third-straight week.
• Bonds: Yields rose a bit today, with the spread between 10-year Treasury and 2-year Treasury yields continuing to narrow, bringing the yield curve dangerously close to flattening.
• Currencies: The US dollar climbed to a seven-week high as traders continue to bet on another Fed rate hike next month. Bitcoin jumped back above $80,000 as traders looked past the fumbled Clarity Act.

INVESTING

Illustration: Morning Brew Inc., Photos: Getty Images

After more than six decades at Berkshire Hathaway, Warren Buffett has gotten his fill.

Today, Buffett stepped down as chairman of his famed company, announcing that he would be replaced by his son Howie Buffett. And while the Oracle of Omaha officially vacated his role as CEO of Berkshire in January, today’s exit marks Buffett’s final departure from top leadership at the firm.

“Father Time always wins,” Buffett wrote in a letter to shareholders today; with the titan turning 96 this year, it’s hard to argue with that.

Now you see me

Although he’ll no longer lead at Berkshire, Buffett probably won’t go quietly into retirement. (Look no further than his former business partner Charlie Munger, who was making cracks on crypto all the way to his casket.)

But as the Oracle scales back, investors are scrambling to anoint a new seer. So, who could take Warren Buffett’s place at the crystal ball?

The next in line. Greg Abel is a natural choice to watch, as Buffett’s successor. A longtime Berkshire leader, Abel headed up Berkshire Hathaway Energy before gaining the top spot.

• His view: Keep strong continuity with what made Buffett’s Berkshire great—durable moats and patient stewardship of investments.
• Blind spots: Though he was named as CEO successor more than four years ago, Abel is still unproven. And his work so far hasn’t shown clairvoyance: Berkshire has underperformed the market since he took the helm.

The renegade. As founder of ARK Invest, Cathie Wood made a name for herself on disruption. The tech-forward investor has made aggressive bets on emerging tech—like an early championing of Tesla—and her firm has also become a heavy hitter in ETF performance.

• Her view: Run towards danger, then ride the wave.
• Blind spots: While Wood was once praised for going all-in on tech innovators, critics hold her risky approach responsible for some of her fund’s biggest flops.

The doom diviner. Michael Burry came to influence by predicting disaster. Best known as the progenitor of The Big Short, Burry accurately forecast 2008’s housing crash—earning a nod from Buffett himself, who called him an industry Cassandra.

• His view: Although he closed his hedge fund last November, Burry is still in on short selling. He’s recently been shorting Nvidia.
• Blind spots: Because he predicted the 2008 crash, Burry is ready to predict the next crash. Critics say he projects storm clouds more than most (recently foreseeing a 1987-style stock crash, for example).

No crystal ball

Buffett occupied an idiosyncratic place in investing: one that paired smart stewardship with a long-term view, and approachable picks that favored value over flash.

Perhaps no portfolio manager can truly take up his mantle. But savvy investors who know where to look in a post-Oracle age—along with which spots to keep an eye on—can emerge with their own solid succession plan.—GR

      

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Stocks

🟢 What’s up

• Robinhood, Coinbase, and Strategy climbed 9.12%, 11.66%, and 16.39%, respectively, as Bitcoin surged past $80,000.
• Macom Technology Solutions jumped 4.83% following a BMO upgrade that cited strong demand from AI data centers.
• Sandisk rallied 10.99% ahead of its addition to the S&P 100 next week.

🔴 What’s down

• Nike dropped 2.34% on reports that star spokesman Kylian Mbappé left for sportswear brand On.
• SpaceX fell 1.36% after delaying its next Starship test flight to Sept. 28.
• Netflix dropped 4.67% on a Wells Fargo downgrade that cited weaker viewer engagement and concerns about its upcoming content lineup.
• Xenon Pharmaceuticals sank 30.69% after pausing enrollment in trials of its experimental treatments for major depressive disorder and bipolar depression.
• Nucor lost 6.32% and Steel Dynamics fell 4.11% on third-quarter profit forecasts that came in below Wall Street expectations.

Hike of the day

Tokyo tightens

Illustration: Morning Brew Inc., Photos: Adobe Stock

Just two days after the Fed raised rates, Japan followed suit. The Bank of Japan lifted its benchmark rate to 1.25%—the highest level in more than 30 years—as policymakers try to prevent inflation from overshooting the country’s 2% target. Japan’s annual inflation rate for August held at 1.9%.

That’s a big deal for a country that spent years with ultra-low or negative rates. Cheap borrowing made the yen a favorite funding currency for the so-called carry trade, where investors borrowed in yen and put the money into higher-yielding assets like US Treasurys and stocks.

As Japanese rates rise, those trades become less attractive. At the same time, better yields at home give Japanese investors more reason to keep their money there instead of sending it overseas.

That matters when Japan holds roughly $2.5 trillion in US financial assets—about half of the country’s overseas portfolio—and is the largest foreign holder of US Treasurys. Any pullback in demand could add pressure to bond yields, which are already hovering near multi-decade highs and weighing on stocks.

Plus, a plot twist: In theory, a rate hike should also help strengthen the yen, which would be especially welcome after Tokyo and Washington jointly intervened this summer to support the currency. In reality, the yen fell today after two BoJ officials dissented from the decision, which made investors dial back their expectations for how quickly rates will rise from here.—SY

REAL ESTATE

Illustration: Morning Brew Inc., Photo: Adobe Stock

Somewhere between the Fed’s latest rate hike and mortgage rates flirting with 7%, a bunch of homebuilders quietly rolled up their blueprints and waved a white flag of defeat.

According to the National Association of Home Builders, 38% of builders slashed prices on new homes in September, up from 35% in August—the highest proportion in eight months. While the average discount held steady at 6%, builders are throwing in everything but the kitchen sink to close deals: Two-thirds offered incentives like mortgage-rate buydowns or free appliance upgrades.

Builders are also building less. Housing starts fell 2.6% in August to 1.275 million, falling short of the 4.9% increase economists had expected. NAHB Chairman Bill Owens blamed not only high mortgage rates, but the federal immigration crackdown scaring off workers from showing up to job sites.

Not surprisingly, with builders building less and earning less, morale is in the toilet. Builder confidence sank to its lowest point in a year, according to the NAHB.

Constructing crisis

Lennar, which released its Q3 earnings the same day the Fed raised rates this week, added to the pain: The construction giant posted profits of $283.9 million, down more than 50% from a year earlier. The company also cut its full-year delivery target yet again, this time to a range of 80,000 to 81,000 homes—below both its own previous guidance and analysts’ expectations.

“Consumer confidence has declined as rates and affordability have driven more consumers to slow their purchase decisions,” CEO Stuart Miller said, adding that the typical homebuyer is now spending well above the recommended 30% maximum of their income on a home. Many are “clearly stretching.”

Lennar isn’t the only builder on shaky ground. In July, America’s biggest homebuilder, D.R. Horton, trimmed its revenue outlook for the fiscal year to a range of $32.5 billion to $33 billion, which was below forecasts. Cautious buyers weren’t the only culprit; rising construction costs from stubborn inflation and tariffs on key materials hurt too.

With another Fed rate hike likely in the cards before the end of the year, the housing market may not offer relief to builders or regular home sellers any time soon. Redfin found that the number of listings for sale has soared to a seven-year high. There were 58% more sellers than buyers in the market in August—the widest spread since the firm started tracking this metric in 2013.

The one silver lining? For the rare lucky homebuyers who can stomach today’s high mortgage rates or sidestep them entirely by paying all cash, it’s a buyer’s market bonanza. “With sellers piling into the market and demand falling flat, today’s house hunters can afford to be choosy,” said Redfin senior economist Asad Khan.

Hey, at least someone’s having fun touring open houses—and walking away with free waterfall countertops thrown in.—JD

      

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News

• So, who exactly is Howard Buffett anyway?
• Your high schooler may soon be better at financial advice than you are, thanks to the new AP Business course rolled out this year.
• The iPhone 18 Pro hits shelves today, and if Apple sticks the landing, one analyst says the company’s stock could pop 13%.
• Airfares rose 23% last month—and somehow, demand hasn’t slowed down one bit.
• Napster is back, and this time it’s bringing AI to classrooms.
• Fears of an earnings bubble are overblown, according to Goldman Sachs’ chief US equity strategist.
• Here’s how Kevin Warsh pulled off hiking rates without angering President Trump.

Calendar

Tuesday: AutoZone drives by with an earnings report in the morning.

Wednesday: General Mills and workwear maker Cintas report earnings before the market opens, while the Federal Reserve’s Michael Barr speaks later that morning.

Thursday: Presidents Trump and Xi Jinping meet in Washington for a much-awaited summit, their second this year. Earnings include BlackBerry and Olive Garden operator Darden Restaurants reporting before the bell, and Costco and Scholastic after the market close.

recs

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