December 2025

The Slice

A Monthly Market Update & Investment News Roundup

Cutting through the noise...so you don't have to.

Good morning,

In November, Warren Buffett penned his last letter to Berkshire Hathaway shareholders as CEO. At year end, he'll turn the reins over to Greg Abel, who was tapped by the board to succeed him earlier this year.

Credit: Forbes. Warren Buffett has been CEO of Berkshire Hathaway since 1970. He plans to step down as CEO at year end.

Over the 55 years he's been CEO, Buffett has delivered some great one-liners in his letters to shareholders:

"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price." (1989)

"You only find out who is swimming naked when the tide goes out." (2007)

"Be fearful when others are greedy, and greedy only when others are fearful." (2004)

But one of my personal favorites was Buffett quoting his longtime friend and business partner, Charlie Munger:

"My partner Charlie says there [are] only three ways a smart person can go broke: liquor, ladies and leverage.” 

And boy has that last "L" been on display in the crypto market. In less than two months, Bitcoin has lost a third of its value - and the damage has started to bleed over into the equity market.

One possible explanation for the pullback in stocks we saw last month has to do with a derivative contract called a perpetual swap. A "perp" enables investors to use cryptocurrency as collateral to make bets on the direction of Bitcoin, a stock index, or even a single stock like Tesla, without owning the shares. What makes these contracts popular with traders is that the perp market is open 24/7, unlike equity markets which close at 4pm EST.

The other thing that makes these contracts popular is that leverage ratios can go as high as 100:1. A leverage ratio of 100:1 is like buying a $1,000,000 house with a down payment of only $10,000. With that kind of leverage, a small bet can result in big gains, but the reverse is also true. And for context, leverage ratios in the 2008 crisis reached about 30:1. Not ideal.

The concern for stock investors - even for those who don't own any crypto - is that stocks and cryptocurrency are becoming increasingly tethered; meaning a down move in crypto could trigger a forced liquidation of stocks, either directly through a perp or margin call, or indirectly through a need for liquidity.

We got a little preview of how that can play out last month. In the midst of a 32% decline in the price of Bitcoin, November saw a 5% pullback in the S&P 500, even after strong guidance and earnings reports from the previous quarter.

For now, the pullback appears to be short lived. Markets recovered their losses over the holiday-shortened Thanksgiving week, keeping the S&P up 16.5% for the year.

If we can hang on to those gains in December, the market is on track to do something that has only happened eight times since 1950: finish the year up double digits, three years in a row - the market equivalent of a "triple-double."

What does Warren Buffett, who himself averaged double digits over the course of his very long investment career, say about all of this? Not much as it turns out. He closed his letter, not with another investment maxim, but with a simple reminder to just be kind:

Keep in mind that the cleaning lady is as much a human being as the Chairman. (2025)

A fitting ending as we enter the holiday season. Here's what you need to know.

Markets

2025 Year-to-Date Asset Class Returns

Data thru 11/28/2025. Source: © Exhibit A, FactSet Research Systems Inc., Standard & Poor's  This slide is for informational and illustrative purposes only. The data provided is believed to be accurate, but there is no guarantee of its accuracy, completeness, or timeliness. This is not a recommendation or offer of any financial product. Past performance is not indicative of future results, and investors should consider their own objectives and risk tolerance. Indices, if presented, do not include fees, are unmanaged, and not available for direct investment. Definitions & Methodology: The returns shown represent year-to-date price performance of sector ETFs provided by iShares (EEM, EFA, TIP,AGG, DJP), SPDR (GLD, VNQ, MDY, SPSM, SPY, BIL), and Vanguard (VNQ). These ETFs track the following sectors: Commodities, International, Emerging Markets, U.S. Large Cap, REITs, U.S. Mid Cap, TIPS, U.S. Small Cap, Cash, and Bonds. Data is sorted by return from highest to lowest.

News & Notes

• Outlook for 2026: Morgan Stanley's outlook for 2026 is bullish. Mike Wilson, the firm's Chief US Equity Strategist, sees the S&P 500 reaching 7800 next year, a 14% rise from yesterday's close. (BBG)
   
• 50 Year Mortgage: President Trump has proposed a 50-year mortgage as a solution to improve housing affordability, which could mean lower monthly payments, but may result in paying more in interest over the life of the loan. (BBG)
   
• New Tax Rules: Make $600,000 or less? You may get a bigger tax break for the state and local taxes you pay, but there's a catch: You have to "itemize" your deductions for mortgage interest, charitable donations, medical expenses, SALT and others on Schedule A rather than opt for the lump sum known as the standard deduction. Charitable deduction rules are changing too. An end-of-year planning guide. (WSJ)
   
• Prediction Markets: Shayne Coplan started building Polymarket five years ago when he was 21. Users can put up money and bet against each other on nearly anything. In October, the company that owns the New York Stock Exchange invested $2B in the company, and will integrate Polymarket data to give traders an edge. (60 Minutes)
   
• Catch Up Contributions: If you are over 50, make catch up contributions to your 401(k), and earn over $145,000, your catch up contributions must go into a Roth 401(k) starting in 2026. (Schwab)
   
• Trade: Mexican and Canadian stocks are through the roof. What Trade War? (Barron's)
   
• Travel & Spend:
  36 Hours: San Antonio (NYT)
  36 Hours: Memphis (NYT)
  36 Hours: Cozumel (NYT)
  
  Holiday Gift Guide (NYT)

(Pie)Chart of the Month

AI is Driving Nearly All of GDP Growth in 2025

Source: 3Fourteen Research. 

GDP growth has been robust in 2025. But without AI, GDP after inflation is close to zero.

Management Tip

Owning Your Struggles Can Win Over Investors:

If you're selling your business or raising capital from investors, conventional wisdom tells us to only focus on the positive. But "research shows that - when done right- candidly sharing setbacks can increase funding speed, lower borrowing costs, and improve trust."

1. Set expectations with realism. Faultless investment narratives come off as suspect.
    
2. Signal honesty through self disclosure. Investors don't expect perfection. Admitting failure is reputationally risky, but it suggests to investors that the borrower is going to take responsibility for problems, not hide them.
    
3. Link challenges to a plan. Be specific about past problems and connect them to present solutions. 

Read the full article here. From "Acknowledging Problems Can Strengthen Your Pitch to Investors" by Chris Bingham and Jayaram Uparna, November-December 2025.

Firm News

When asked why he robbed banks, Willie Sutton famously replied "because that's where the money is." That maxim evolved into the "Sutton Rule," which medical schools would later use to teach students to prioritize testing for the most likely diagnosis for a sick patient first, then move on to less likely outcomes.

The Sutton Rule can also be applied to portfolio construction. Financial institutions like JPMorgan, Vanguard, and BlackRock regularly update their long-term assumptions for investable assets - from cash to bonds to private equity. When we compare the projected returns of these assets against their estimated risk, we can quickly distinguish between attractive and less attractive assets (see below).

This information is not intended as a recommendation to invest in any particular asset class or strategy or as a promise - or even estimate - of future performance. Source: BlackRock Investment Institute, November 2025. Data as of 30 September 2025. See full disclosure here.

Excusing the small font for those reading on iPhones, the so-what is that there aren't many double-digit compounders to choose from over the next ten years. Indeed, BlackRock believes that U.S. stocks will likely return just 5.2% per year on average. By contrast, they see private equity, private infrastructure, and direct lending as the only asset types that can clear the 10% per annum hurdle over that same span. And for that reason, we include those asset types in our private capital sleeve for clients, where appropriate.

But what is private capital anyway? Private capital is simply an investment in non-publicly traded companies, meaning these companies don't trade on an exchange, like a traditional stock. What makes private capital an attractive asset class for investors? One reason is that the opportunity set is much bigger than in public markets: In the U.S., there are 385x more privately held companies with 50 or more employees than publicly traded ones. This means less efficient markets for active investors to uncover opportunities. And for clients who can tolerate the illiquidity of these investments (which we try and ascertain through financial planning), investors can pursue higher returns over more liquid, public markets over a full market cycle.

It's important to note that private capital isn't for everyone. Aside from a recent change impacting employer sponsored retirement plans, you have to be an accredited investor to access these vehicles. Private capital is illiquid, the management fees are high (because the investments are more complex) and the investment risk can be considerably higher than what you may see in a publicly traded stock or bond.

We have underwritten three strategies for clients in the following categories: private equity, private credit (sometimes referred to as direct lending), and infrastructure. Performance for all three strategies are listed below through Q3, 2025. Due diligence reports are available on request by emailing will@piecapital.com.

Past performance is no guarantee of future results. See full disclosure here.

Beach!

We spent Thanksgiving in the Outer Banks with family, which I highly recommend.

On Thursday we ran the Turkey Trot 5K after eating several dozen grilled oysters and beer the night before - that I do not recommend.

Smoky Mountains

Last month, Molly and her family went to the Smoky Mountains; visiting Pigeon Forge, the Forbidden Caverns, and Dollywood. Everybody stam-pede!

Birthdays

Evie turned 6 and Cate turned 11!

Cate got a landline phone for her birthday. Within 24 hours, we learned that the blue cross button speed dials 911.

Of note, the police will come to your house even if you tell the dispatcher it was an accident. Sorry about that, Raleigh PD!

Happy Birthday Evie & Cate!

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