Morning Watchlist: Monday Edition
A quick note from Behind the Markets
On Friday morning, Warren Buffett — 96 years old — stepped down as chairman of Berkshire Hathaway. His words, via CNBC: "Father Time always wins."
Six decades in that chair, over. The crowd will spend all week debating what Berkshire is without Buffett's name on the door.
We think that's the wrong question — and we'll give you ours below. Three stories this morning. Three pairings. Let's get into it.
1) The Empty Chair in Omaha
First, the facts. Buffett becomes chairman emeritus, effective immediately. His son Howard — a board member since 1993 — takes the chairman's seat. Greg Abel keeps the CEO office he has held since late last year. Abel's statement called Buffett's impact "without parallel in the history of American business" and named Howard the guardian of the culture.
So, is Berkshire still Berkshire? That's the question everyone will argue about this week, and it misses the point: the machine has been Abel's for months. The chairmanship was ceremony. Here's the question we'd rather ask. If the Berkshire model is what you loved — insurance premiums collected today, invested for decades before the claims come due — where can you still buy that model with the runway in front of it instead of behind it?
The pairing: Markel Group (MKL) — Buy
Markel is a specialty insurer that is open about the fact that it copies Berkshire's playbook — the financial press has called it a "baby Berkshire" for decades. It writes unusual insurance (event cancellations, classic cars, the risks big carriers won't touch), then invests the float in stocks and in whole operating businesses through Markel Ventures. If Berkshire is the ocean liner changing captains mid-voyage, Markel is the smaller ship running the same charts — with more sea ahead of it.
Now the numbers. The whole company costs about $22 billion. Its investment portfolio alone is $33.5 billion — bigger than the market cap — including $13.4 billion of stocks bought for $4.2 billion. The shares closed Thursday at $1,787.65, roughly 18% below their 52-week high, at about 11 times trailing earnings. The S&P 500: about 21 times. (A caveat that applies to every insurer: reported earnings bounce around with investment gains, so treat any single year's P/E gently.)
The honest risks: net income fell about 20% in the latest reported year, insurance pricing is softening across the industry, and the "baby Berkshire" discount has persisted for years — you're buying the compounding, not a quick re-rating. That suits us. So does buying the playbook the week everyone's eulogizing its author.
2) Tokyo Raised Rates and the Yen Fell Anyway
Friday morning in Tokyo, the Bank of Japan raised its policy rate to 1.25% — the highest in 31 years — on a 7–2 vote. The textbook says a rate hike strengthens a currency. The yen weakened instead, sliding toward 156.75 to the dollar, and the Nikkei rose about 0.8%. Why? The hike was fully priced, the statement gave no commitment on a December follow-up, and the Fed — fresh off Wednesday's hike, with another penciled in — still pays meaningfully more to hold dollars. As FXStreet put it: "Once the expected increase arrived without a stronger commitment on the next step, part of that position was reversed."
We owe you two grades, promised in Sunday's edition. Aflac, our September 9th Watch, needed the BoJ to hike and the yen to hold — half the entrance printed, half didn't. Still Watch, and the ~$110 pullback entrance stands. Mitsubishi UFJ, our September 13th Watch, wanted a sell-the-news dip with the hike path intact — Tokyo rallied instead, and no dip had printed by Friday morning. Still Watch. A 90%-priced hike, we wrote, is an entrance fee, not an edge. Friday was the receipt.
But a weaker yen is not a non-event. It's a raise — for the companies that sell in dollars and pay their bills in yen.
The pairing: Toyota Motor (TM) — Buy
Toyota is the world's largest automaker, and it lives the happy side of that currency math: cars sold in dollars and euros, factories and wages paid in yen. Think of a freelancer paid in dollars whose rent is billed in a currency that just got cheaper. Every tick toward 157 stretches the paycheck.
The stock closed Thursday at $193.91 — about 22% below its 52-week high — at roughly 8 times trailing earnings with a dividend near 2.8%. The S&P 500: 21 times. One honest wrinkle: on next year's forecasts, the multiple is closer to 14, because analysts expect the profit squeeze (tariffs, a heavy investment cycle) to continue — last fiscal year's profit fell about 19% even as revenue grew 5.5%. But those forecasts were built on yen assumptions that just got friendlier, and the last quarterly report crushed expectations ($7.57 per share against $3.94 expected). Four covering analysts say Buy, average target $231.58. What would prove us wrong: the BoJ signaling a December hike and snapping the yen back, Washington's tariff guns swiveling toward Japan — we've watched them swivel all quarter — or the profit trough arriving later than the estimates assume. This is a large-cap, and our usual wheelhouse is smaller; the pairing strength earns the exception.
3) The Market That Never Closes Just Got Permission
Here's the story that got buried under Buffett and the BoJ. On Thursday, the SEC issued what it calls an "Innovation Exemption": a five-year framework letting tokenized versions of real U.S. stocks trade on blockchain venues — with dividends and voting rights intact, know-your-customer gates, volume caps, and a 30-day window for companies to object. Chair Paul Atkins said the goal is to "resolve challenges that have prevented responsible innovation from taking root in the United States." Translation: the SEC just sketched a legal path toward stocks that trade nights and weekends.
The crowd did the reflexive thing Friday morning: it bought the familiar tickers. Coinbase rose about 4% to $170.40; Robinhood popped too. Read the fine print, though, and the framework's designed winners are issuer-sponsored tokenization platforms — mostly private companies — while synthetic-token models are excluded and centralized crypto exchanges may sit outside it entirely.
A ledger note before the pairing. We said Sell Coinbase (for holders) on Thursday's edition at $172.11, after the CLARITY Act died in the Senate. Friday morning's bounce still left the stock below our flag. The exemption is real news, but our Sell was about shrinking revenue at a triple-digit multiple, and a five-year experiment is not the rulebook the Senate tabled. Sell stands, for holders.
So who gets paid if trading spreads across new venues and new hours, whoever runs them? The SEC's own order names the role: liquidity providers.
The pairing: Virtu Financial (VIRT) — Buy
Virtu is one of the world's largest market makers. It doesn't bet on direction; it quotes a buy price and a sell price on thousands of securities and collects the spread between them, millions of times a day. The dealer, not the gambler — the house takes a small rake on every hand, and the SEC just approved tables that never close. Virtu already makes markets in crypto around the clock and was recently integrated into BitGo Prime's liquidity network, so the after-hours world isn't a pivot — it's the existing shift schedule.
The numbers: $57.26 at Thursday's close, an $8.9 billion company — our mid-cap wheelhouse — at about 8 times next year's expected earnings. The S&P 500: 21 times. Second-quarter adjusted earnings beat estimates at $1.82 a share, the dividend yields about 1.7%, and the seven covering analysts — who only rate it Hold — still carry an average target of $66.71, comfortably above the price. Volatility is the raw material here, and the tape is supplying it: a fresh hiking cycle, a Gulf war, and crypto swinging in both directions. The honest risks: a long stretch of calm markets shrinks spreads and profits fast — this business mean-reverts hard — and in the very long run, automated on-chain market making could nibble at the middleman's rake. If the fear gauge goes to sleep for a year, so does the thesis.
Before You Go
That's the watchlist: the smaller ship running Berkshire's charts the week the captain stepped ashore, the exporter collecting a raise from a rate hike that backfired on its own currency, and the dealer at every new table the SEC just licensed. Plus two Japan grades kept honest and a Coinbase Sell that survived its first bounce. One theme, as always: the best opportunities stand one step behind the headline.
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Written by Behind the Markets