Dear Financial Samurai,
When Jeff Dean left Google after 27 years to start his own company, Alphabet’s market cap dropped by roughly $190 billion in a single session. That is the most impact I’ve ever seen one individual have on a company.
Dean was Google’s chief scientist and its 30th employee back in 1999. So I’m guessing his net worth is well over $250 million. He’s now off to run Discovery Loop, a public benefit corporation focused on AI for science, and he’s taking Sanjay Ghemawat, Oriol Vinyals, and Quoc Le with him. Google is a founding investor and cloud partner, which is a very polite way of saying “please don’t leave, but if you must, here’s a check.”
Good for him. If you’re that far ahead financially, the only thing left to buy is the freedom to build something of your own.
His departure is also worth thinking about regarding your own. If you left your company tomorrow, how would your bosses, colleagues, and the market react? If the answer is little-to-no fanfare, that’s actually a great signal to take more risk and do something new. Nobody is going to miss you enough to stop you.
When I left Credit Suisse in 2012, I was running the west coast Asian equities business. To convince my bosses to give me a severance package, I told them I would train my junior long enough that when I left, everything would be OK. They appreciated the gesture. I kept all my deferred compensation for the next five years and received a six-figure severance check.
The more you think about the well-being of your colleagues and company before you depart, the greater your chance of getting a fantastic separation package. I walk through the entire playbook in How To Engineer Your Layoff.
The Market Was Saved By Bad Jobs Numbers
Going into the July jobs report on August 7, markets were pricing in a September rate hike at better than a coin flip. Three of twelve Fed officials had already dissented in favor of raising.
Then the numbers landed. The economy lost 23,000 jobs versus expectations of a gain of 80,000. May and June were revised down by a combined 103,000. Average hourly earnings rose just 3.2% year over year, the slowest since 2021 and effectively nothing after inflation.
The unemployment rate actually fell to 4.1%, but not for a good reason. Labor force participation dropped to 61.4%, the lowest in more than five years. People aren’t finding jobs. They’re giving up looking for them.
So the 10-year yield fell to about 4.66%, the September hike got priced out, and money markets pushed the next potential hike all the way to December. The S&P 500 closed at a record 7,756. The Nasdaq gained 5.2% on the week.
Congrats to everyone who stayed invested and kept their jobs.
Meanwhile, Berkshire Hathaway was a net buyer of about $20 billion in stocks in the second quarter. That’s the first time in 14 quarters, or nearly three years, that Berkshire has bought more than it sold. The cash pile fell to $365.5 billion.
Here’s the punchline. A big chunk of those purchases was Alphabet, including $10 billion bought via private placement. Then Jeff Dean walked out the door. Greg Abel waits three years for a fat pitch, swings, and the chief scientist quits the following month. Investing is humbling for everyone.
Earnings and margins for the S&P 500 are beating already-lofty expectations for a second straight quarter. If the Mag 7 sees a turnaround in free cash flow, I expect the strength to continue. The chart below might be the most bullish thing an equity investor sees all year.
Oh, and SpaceX rebounded sharply after the first tranche of locked-up shares was released, which is the opposite of what almost everyone expected. I’ll be writing about that this week, along with why venture funds keep getting bigger.
The Park Ranger Story Goes Global
My encounter with two armed park rangers in bulletproof vests, while teaching my two kids tennis at an empty park, went global after the local paper and then Fox News picked it up. Of the 5,000+ comments across the various articles, I’d estimate 99.9% agreed this was government overreach and a poor use of resources.
Having sat with it for a while, my main takeaway is this. If two serious-looking armed people are walking toward you, stay calm, listen, and de-escalate. You are not wearing armor. You are not carrying a weapon. Your only goal is to live another day. And if you have little kids with you, you must protect them.
The tricky part is that when you’re surprised by a situation you don’t understand, your body defaults to fight or flight before your brain gets a vote. That’s an argument for training in combat sports and putting yourself through as many controlled confrontations as possible, so an unknown one doesn’t own you. I go deeper on this in my new podcast episode on Apple and Spotify.
Two weeks ago I introduced the Leash Ratio to help you measure how long a leash the government has you on, and whether that should push you to save more or work less. Last week I followed up with A Backwards Tax Identification System For Determining Your Freedom, which is either satire or a policy proposal depending on how your week is going.
Couple high taxes with government overreach and unfriendly policing of citizens, and it’s no wonder fewer people are having children. I dig into that in The Crushing Cost Of Childcare. The U.S. is not producing enough babies to replace its population, which is a slow-motion problem for society and the economy. Just ask China.
If you’re wrestling with whether you can afford kids, or whether you’re setting them up properly for a world that keeps changing the rules, that’s exactly what my new book, Your Children Will Be OK, is about.
Lessons From Trying To Spend Exorbitantly
Finally, after meticulously logging every dollar for 30 days in Honolulu, I have the results of my Summer YOLO Fund challenge to blow through $40,000.
The results are hilariously off.
The main takeaway is that you are probably saving and investing too much for retirement. Which also means you’re probably working more than you need to. If you’re a personal finance enthusiast and a regular Financial Samurai reader, I’m fairly confident you’ll die with far more money than you ever needed.
That’s not a compliment. That’s a warning.
Read: Why You Need Less Money Than You Think To Be Happy
To your financial freedom,
Sam
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Everything you read here comes from firsthand experience, writing about money since 2009.