THE CONDITIONS · PART ONE Durable, Not Inevitable

FROM THE DESK OF STEVEN FELDMAN

Warren Buffett could ignore “macro.” His successor Greg Abel, and the rest of us, may not want to ignore “MACRO.”

On December 31 of last year, Warren Buffett ended sixty-one years as chief executive of Berkshire Hathaway. Greg Abel took over the next day, the first day of 2026, and well into a fast-changing macro world.

It’s interesting that among several qualified candidates, Abel got the keys to dad’s pickup. He is far from a stock picker. He came up through Berkshire Hathaway Energy and spent the last eight years running the non-insurance operations — the railroad, the utilities, the pipelines, the factories. Buffett was a capital allocator who worked in financial claims. His successor is an operator of real assets.

Now look at the second quarter, Abel’s second as CEO. Berkshire Hathaway Energy earnings up 27%. BNSF up 6%. Manufacturing, service and retail up 24%. The weak spot was insurance, where underwriting earnings fell 13%. The physical businesses carried the quarter while the financial one lagged.

By no means am I about to criticize Warren Buffett. I have no interest in looking over my shoulder for the rest of my life. But the Buffett mafia is smart and can indulge the notion that Warren operated on a set of macro conditions he rarely had to price. Those field conditions were changing just as he left the playing field. Abel and the rest of us are not likely to stand on the same ground.

TWO KINDS OF MACRO -- The One He Ignored and the One He Passed Down

Buffett’s discipline was that macro is unknowable and therefore not worth trading on. Don’t forecast the economy. Don’t time the Fed. Don’t sell good businesses because someone on television is worried about the cycle. He was right for six decades, and there is a mountain of underperformance belonging to investors who took the other side of that trade.

But he was referring to macro with a small “m” — prints of economic data, business cycles, Fed meetings, the recession that is always six months away. Noise, correctly identified.

MACRO — all caps — is different. Unpayable compounding debts. Impaired and tariffed global trade. Ever changing alliances. Unabashed imperialism. Wars and military adventurism. Safe havens no longer so safe. Questions about the durability of the rules, the currency, the court system, and whether the money you are owed can be cancelled by somebody merely making a point.

Buffett never had to price MACRO, because while one of the afore-mentioned factors may have always been present, they never moved in unison. A group of variables that sits relatively still for sixty years looks like a condition you can take for granted.

THE FOUR GUARANTEES -- What Nobody Charged Him For

Regardless of the politics of the day, the postwar order made four guarantees reliable enough that investors stopped pricing them.

Global property and contract rights would be honored.

The US Treasury would remain the safe-haven, risk-free asset, and the dollar the world’s stalwart reserve currency.

America could be relied on as a global peacemaker, despite a track record of foreign adventurism.

And free trade would unlock global prosperity, creating an international co-dependence that produced relative stability.

None of the “Four Guarantees” was ever absolute, but each was dependable enough, for long enough, that a rational investor stopped considering it a cost. And Warren Buffett was the most rational investor of all time.

THE CONDITIONS MOVED -- Thirteen Days in August

If you want clear evidence that MACRO has arrived, you will not find it in a speech or a doctrine. You just need to look at thirteen days last month.

On August 16 the US military cancelled long-standing joint exercises with South Korea. On August 19 the US Treasury launched an economic campaign against Iran aimed at the regime’s remaining trade lifelines. On August 21 trade talks with Canada collapsed after US trade officials demanded a say over both Ottawa’s other trade agreements and its language usage. And on August 28 the White House restructured Venezuela’s oil fields, handing operating control to North American partners through the Pentagon’s Office of Strategic Capital.

Each action has a rationale. Deter Pyongyang, squeeze Tehran, grow domestic manufacturing, secure energy dominance. Each also has a reaction — and it is these reactions, not the rationales, that will need to be priced into investments for decades to come.

This may be open to debate, but I believe the shift to MACRO began four years ago when the US froze $300 billion of Russian reserves. Ostensibly the rationale was to turn back Russia’s invasion of Ukraine. Four years later, we all know that did not work.

What we do know is that central banks responded by trimming Treasury holdings and roughly doubling their gold buying — more than 1,000 tonnes a year in 2022, 2023 and 2024, against an average of 473 over the preceding decade — and the trend has continued ever since. It is not as though reserve managers announced they were hedging against sanctions. They cited diversification. But the behavior changed the same year the reserves were frozen, and it has not reverted. Not likely a coincidence.

This summer the Dutch central bank moved a significant amount of its gold reserves out of New York. The French central bank has been selling New York-held bullion and repurchasing in Paris. German politicians are again asking the German central bank to retrieve the 1,236 tonnes still sitting at the Fed.

The official reason for these moves is liquidity and trading standards. Maybe I am being cynical and that is the whole story. But when allies move bullion out of American vaults, watch the trucks, not the press release.

Meanwhile the US fiscal arithmetic keeps compounding in the wrong direction. The most recent annual deficit above $1.8 trillion and gross debt past $40 trillion in August. Of the roughly $30 trillion of that held by the public, the foreign-owned share has fallen from about half in 2011 to near 31% today. Supply rising, the most reliable buyer shrinking.

READ THE SEGMENTS -- Not Proof. Worth Noticing.

Which brings me back to Omaha.

Berkshire has owned railroads, utilities and heavy industry for decades. BNSF was bought in 2010. A CEO succession is not an asset allocation decision, and I am not going to tell you that Berkshire called any of this in advance.

What I will say is that the greatest capital allocator of the old order handed the company to an infrastructure operator, sitting on the largest cash position in corporate history, at the moment the conditions underneath his method began to shift. Make of the timing what you will.

Then look at what the company did with its massive cash hoard this year. Abel bought Taylor Morrison outright for $6.8 billion — a whole-company acquisition, which is a chief executive’s decision. In the public book, Berkshire added to Lennar and D.R. Horton, homebuilders, which is to say land, lumber and title, and cut financials hard: Capital One down 58%, Bank of America and Ally each down about 6%.

Earnings from pipelines, railroads and factories. Purchases in housing. Sales in banking. That is a company drifting toward things you can stand on.

THE HONEST COMPLICATION -- And Then There Is Google

Here is the fact that cuts against me, so let me name it before you do.

Alphabet is now Berkshire’s third-largest equity holding, roughly $37 billion, after the position jumped 83% in the second quarter. Ten billion of that came through a private placement — shares bought directly from the company to help fund its AI infrastructure buildout. Buffett told CNBC in July that he initiated it himself, which makes it the one allocation in this letter whose author is not in doubt.

So the man who spent sixty years refusing to buy what he could not value wrote a ten-billion-dollar check into the AI capital expenditure cycle. If you are looking for evidence against a tidy story about Berkshire retreating into hard assets, that is it.

I will take that up properly in the next letter, because I think the AI capex cycle carries a revenue exposure that is only now coming into relief. For now, note only that it is the one position in the Berkshire portfolio that depends on the old conditions holding.

WHAT THIS MEANS FOR MONEY -- A Default Becomes a Position

Own the stock index, ignore the noise, don’t bet against America. That advice was right for eighty years and may well be right for the next eighty. But let’s be clear that it should not be confused with a law of physics. It is true because it has been true for eighty years, and because people believe it. George Soros called that reflexivity — belief producing the reality that justifies the belief. Reflexive systems are wonderful things to own, right up until somebody inspects the foundation. And this one rested on the Four Guarantees, with the cost borne by somebody else.

That somebody was the United States. The peace was underwritten by the defense budget. Free trade was underwritten by running the trade deficits that let everyone else export their way to prosperity. And the risk-free asset was underwritten by issuing the debt the world needed to hold. Those costs sat on America’s balance sheet, not the investor’s. What the investor got was a lower discount rate on everything he owned, and no invoice other than a tax bill that didn’t come close to funding all of it.

The invoice has arrived.

As such, a prudent investor would be wise to integrate these costs into investment decisions. Consider following the central banks and deploy into gold, as it is the asset least exposed to those costs — provided that it is allocated, unencumbered, in a jurisdiction you trust. Consider adding the same physical economy featured by Berkshire. These are the industries operating inside clear domestic property rights — energy infrastructure and pipelines — unglamorous assets that always get paid. Consider the producers — tier-one mining in North America and Australia, and good farmland if you can find it.

Again, channel your inner central bank and fund it by reducing long-duration Treasury exposure. That is the one asset whose entire value rests on Guarantee Two, issued by an over-extended borrower whose buyer base is shrinking.

THE COUNTERARGUMENT -- He Would Tell Me This Is Noise

The strongest objection to this letter is Buffett himself. He would say this is precisely the geopolitical hand-wringing he spent sixty years profitably ignoring, and that people who write letters like this one have been reliably poorer than people who did nothing.

I don’t have a perfect answer to that. The best I can offer is that the argument here is not "sell." It is that his conclusion travelled with conditions attached, and the conditions are being tested for the first time since his investing career began. He may still be right. I am asking whether he is less right now, which is a different and much smaller claim.

A FINAL THOUGHT

Nobody gets to declare their own assumptions permanent. Not the greatest investor who ever lived, and not the country that produced him.

America is durable. Sixty-one years of compounding is the evidence, and I would not bet against the next sixty. But durable is not the same word as inevitable, and the difference between them is exactly what investors stopped pricing somewhere around 1946.

It is being priced again now. In tonnes.

Steven Feldman is the co-founder & CEO of GBI and Wealthion. This newsletter is for informational purposes only and does not constitute investment advice.