Economic commentator Kyla Scanlon is noticing a potentially worrying trend in the investing outlook among younger generations.

“It’s a bifurcated world,” she told CNBC’s “ETF Edge” this week. 

Scanlon, 26, who rose to prominence through her social media videos on the market and economy, explained why some members of Generation Z are aggressively saving for milestones like retirement, while others are taking a far more lax approach. 

“You do have these people who are maxing out their 401(k)s. They’re doing everything they can to plan for retirement,” she said. “But then you have the other side, which is an element to financial nihilism, where people don’t want to save for retirement. They don’t want to save money in general because they don’t believe the future is there.”

Scanlon is aiming to bridge Gen Z’s divided financial attitudes with her new book, “In This Economy? How Money and Markets Really Work.”

“Financial education is always going to be an uphill battle, just because money is such a personal subject. But it’s important that we give people the tools that they need to start somewhere,” she said.

She points to the housing market as a prime example of where young people are falling behind. Gen Zers represented just 3% of total home buyers in 2023, according to a recent report from the National Association of Realtors — a statistic Scanlon attributes to higher interest rates.

“The younger generation definitely wants [homeownership], because there’s a lot of financial benefit to having equity,” she said. “People are just trying to figure out how to do that financially right now, considering where mortgage rates are, considering where home prices have been. It’s difficult.”

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Billionaire Charlie Munger, the investing sage who made a fortune even before he became Warren Buffett’s right-hand man at Berkshire Hathaway, has died at age 99.

Munger died Tuesday, according to a press release from Berkshire Hathaway. The conglomerate said it was advised by members of Munger’s family that he peacefully died this morning at a California hospital. He would have turned 100 on New Year’s Day.

“Berkshire Hathaway could not have been built to its present status without Charlie’s inspiration, wisdom and participation,” Buffett said in a statement.

In addition to being Berkshire vice chairman, Munger was a real estate attorney, chairman and publisher of the Daily Journal Corp., a member of the Costco board, a philanthropist and an architect.

In early 2023, his fortune was estimated at $2.3 billion — a jaw-dropping amount for many people but vastly smaller than Buffett’s unfathomable fortune, which is estimated at more than $100 billion.

During Berkshire’s 2021 annual shareholder meeting, the then-97-year-old Munger apparently inadvertently revealed a well-guarded secret: that Vice Chairman Greg Abel “will keep the culture” after the Buffett era.

Munger, who wore thick glasses, had lost his left eye after complications from cataract surgery in 1980.

Munger was chairman and CEO of Wesco Financial from 1984 to 2011, when Buffett’s Berkshire purchased the remaining shares of the Pasadena, California-based insurance and investment company it did not own.

Buffett credited Munger with broadening his investment strategy from favoring troubled companies at low prices in hopes of getting a profit to focusing on higher-quality but underpriced companies.

An early example of the shift was illustrated in 1972 by Munger’s ability to persuade Buffett to sign off on Berkshire’s purchase of See’s Candies for $25 million even though the California candy maker had annual pretax earnings of only about $4 million. It has since produced more than $2 billion in sales for Berkshire.

“He weaned me away from the idea of buying very so-so companies at very cheap prices, knowing that there was some small profit in it, and looking for some really wonderful businesses that we could buy in fair prices,” Buffett told CNBC in May 2016.

Or as Munger put it at the 1998 Berkshire shareholder meeting: “It’s not that much fun to buy a business where you really hope this sucker liquidates before it goes broke.”

Munger was often the straight man to Buffett’s jovial commentaries. “I have nothing to add,” he would say after one of Buffett’s loquacious responses to questions at Berkshire annual meetings in Omaha, Nebraska. But like his friend and colleague, Munger was a font of wisdom in investing, and in life. And like one of his heroes, Benjamin Franklin, Munger’s insight didn’t lack humor.

“I have a friend who says the first rule of fishing is to fish where the fish are. The second rule of fishing is to never forget the first rule. We’ve gotten good at fishing where the fish are,” the then-93-year-old Munger told the thousands of people at Berkshire’s 2017 meeting.

He believed in what he called the “lollapalooza effect,” in which a confluence of factors merged to drive investment psychology.

Charles Thomas Munger was born in Omaha on Jan. 1, 1924. His father, Alfred, was a lawyer, and his mother, Florence “Toody,” was from an affluent family. Like Warren, Munger worked at Buffett’s grandfather’s grocery store as a youth, but the two future joined-at-the-hip partners didn’t meet until years later.

At 17, Munger left Omaha for the University of Michigan. Two years later, in 1943, he enlisted in the Army Air Corps, according to Janet Lowe’s 2003 biography “Damn Right!”

The military sent him to the California Institute of Technology in Pasadena to study meteorology. In California, he fell in love with his sister’s roommate at Scripps College, Nancy Huggins, and married her in 1945. Although he never completed his undergraduate degree, Munger graduated magna cum laude from Harvard Law School in 1948, and the couple moved back to California, where he practiced real estate law. He founded the law firm Munger, Tolles & Olson in 1962 and focused on managing investments at the hedge fund Wheeler, Munger & Co., which he also founded that year.

“I’m proud of being an Omaha boy,” Munger said in a 2017 interview with Dean Scott Derue of the Michigan Ross Business School. “I sometimes use the old saying, ‘They got the boy out of Omaha but they never got Omaha out of the boy.’ All those old-fashioned values — family comes first; be in a position so that you can help others when troubles come; prudent, sensible; moral duty to be reasonable [is] more important than anything else — more important than being rich, more important than being important — an absolute moral duty.”

In California, he partnered with Franklin Otis Booth, a member of the founding family of the Los Angeles Times, in real estate. One of their early developments turned out to be a lucrative condo project on Booth’s grandfather’s property in Pasadena. (Booth, who died in 2008, had been introduced to Buffett by Munger in 1963 and became one of Berkshire’s largest investors.)

“I had five real estate projects,” Munger told Derue. “I did both side by side for a few years, and in a very few years, I had $3 million — $4 million.”

Munger closed the hedge fund in 1975. Three years later, he became vice chairman of Berkshire Hathaway.

In 1959, at age 35, Munger returned to Omaha to close his late father’s legal practice. That’s when he was introduced to the then-29-year-old Buffett by one of Buffett’s investor clients. The two hit it off and stayed in contact despite living half a continent away from each other.

“We think so much alike that it’s spooky,” Buffett recalled in an interview with the Omaha World-Herald in 1977. “He’s as smart and as high-grade a guy as I’ve ever run into.”

“We never had an argument in the entire time we’ve known each other, which is almost 60 years now,” Buffett told CNBC’s Becky Quick in 2018. “Charlie has given me the ultimate gift that a person can give to somebody else. He’s made me a better person than I would have otherwise been. … He’s given me a lot of good advice over time. … I’ve lived a better life because of Charlie.”

The melding of the minds focused on value investing, in which stocks are picked because their price appears to be undervalued based on the company’s long-term fundamentals.

“All intelligent investing is value investing — acquiring more than you are paying for,” Munger once said. “You must value the business in order to value the stock.”

But during the coronavirus outbreak in early 2020, when Berkshire suffered a massive $50 billion loss in the first quarter, Munger and Buffett were more conservative than they were during the Great Recession, when they invested in U.S. airlines and financials like Bank of America and Goldman Sachs hit hard by that downturn.

“Well, I would say basically we’re like the captain of a ship when the worst typhoon that’s ever happened comes,” Munger told The Wall Street Journal in April 2020. “We just want to get through the typhoon, and we’d rather come out of it with a whole lot of liquidity. We’re not playing, ‘Oh goody, goody, everything’s going to hell, let’s plunge 100% of the reserves’ [into buying businesses].” 

Munger donated hundreds of millions of dollars to educational institutions, including the University of Michigan, Stanford University and Harvard Law School, often with the stipulation that the school accept his building designs, even though he was not formally trained as an architect.

At Los Angeles’ Harvard-Westlake prep school, where Munger had been a board member for decades, he ensured that the girls bathrooms were larger than the boys room during the construction of the science center in the 1990s.

“Any time you go to a football game or a function there’s a huge line outside the women’s bathroom. Who doesn’t know that they pee in a different way than the men?” Munger told The Wall Street Journal in 2019. “What kind of idiot would make the men’s bathroom and the women’s bathroom the same size? The answer is, a normal architect!”

Munger and his wife had three children, daughters Wendy and Molly, and son Teddy, who died of leukemia at age 9. The Mungers divorced in 1953.

Two years later, he married Nancy Barry, whom he met on a blind date at a chicken dinner restaurant. The couple had four children, Charles Jr., Emilie, Barry and Philip. He also was the stepfather to her two other sons, William Harold Borthwick and David Borthwick. The Mungers, who were married 54 years until her death in 2010, contributed $43.5 million to Stanford University to help build the Munger Graduate Residence, which houses 600 law and graduate students.

Asked by CNBC’s Quick in a February 2019 “Squawk Box” interview about the secret to a long and happy life, Munger said the answer “is easy, because it’s so simple.”

“You don’t have a lot of envy, you don’t have a lot of resentment, you don’t overspend your income, you stay cheerful in spite of your troubles. You deal with reliable people and you do what you’re supposed to do. And all these simple rules work so well to make your life better. And they’re so trite,” he said.

“And staying cheerful … because it’s a wise thing to do. Is that so hard? And can you be cheerful when you’re absolutely mired in deep hatred and resentment? Of course you can’t. So why would you take it on?”

— CNBC’s Yun Li contributed reporting.

As the war between Israel and the Hamas militant group ramped up last month, Kenneth Suna took to his investing-focused TikTok account.

Suna began a video asking his more than 200,000 followers “if you’re cool with profiting off war,” before adding “I am not.” He went on to list the names and performances of defense-focused funds including the iShares U.S. Aerospace & Defense ETF (ITA) and the SPDR S&P Aerospace & Defense ETF (XAR).

“You have a choice where your money goes,” the 38-year-old Washington, D.C., resident told CNBC. “I would feel guilty.”

Suna is part of a group of everyday investors skirting the “returns at any costs” mentality on moral grounds. As the latest geopolitical conflict escalates, these investors are ignoring defense stocks despite the market axiom that those holdings tend to perform better in times of war.

Indeed, the iShares U.S. Aerospace & Defense ETF popped more than 4% in the week following Hamas’ Oct. 7 attack and went on to finish October up about 3.7%. Meanwhile, the benchmark S&P 500 index added just 0.5% that week and ended the month 2.2% lower.

Retail traders poured into defense stocks and funds in the aftermath of the invasion, but inflows have since cooled, according to Vanda Research. Defense giant RTX, which Vanda found was a top sector pick among individual investors, has climbed 14% since the start of October.

But not everyone sees the intensifying conflict as a moment to invest in defense stocks. Weapon Free Funds, a screening tool gauging defense exposure in portfolios, including the funds in your 401(k), recorded a five-fold increase in visits between the attack and early November from the 30 days prior. 

Weapon Free Funds is part of a family of tools from shareholder advocacy nonprofit As You Sow aimed at helping people check if their fund dollars are invested in companies tied to themes such as guns or deforestation. Andrew Behar, As You Sow’s CEO, said it can be particularly challenging for those with money in large funds to decipher which companies they are investing in.

“The person who earns the money should have the right to decide how it’s invested and should be able to invest in alignment with their values,” Behar said. “We find there’s a really strong correlation of people who want that, but they don’t know how to do it.”

The screening platform gives funds a letter grade. An “A” means no holdings were flagged in a military weapons screen, while an “F” indicates more than 4% were. (For reference, the SPDR S&P 500 ETF Trust (SPY), which tracks the broad S&P 500 index, earned a “D'” grade.)

Critics of defense companies have pointed to the fact that the need for their products can increase during periods of heightened geopolitical strife. The latest war’s impact on these businesses has already started becoming apparent: General Dynamics CFO Jason Aiken told analysts last month that artillery demand would likely see “upward pressure” as the Israel-Hamas conflict broke out alongside the ongoing war between Russia and Ukraine.

Those with moral qualms have also historically highlighted the death toll of war as a reason for their uneasiness.

Weapon Free Funds’ recent surge in interest surpassed what was seen in February and March of 2022 following Russia’s invasion of Ukraine, As You Sow said.

That can be tied to differences in public consensus of how these conflicts should play out. While there was overwhelming international support for Ukraine to fight back with weapons, opinion appears to be more mixed on the Israel-Hamas war as calls for a ceasefire grow.

These moral calculations are the latest example of a growing trend of some investors wanting their holdings to reflect personal values. In one of the newest data points on the relationship, U.S. Bank found more than four-fifths of Gen Z and millennials would underperform the S&P 500′s 10-year return to ensure the companies they invested in had aligned with their beliefs.

“A common decision making process is that if I hold a value that I’m anti-war, then I don’t want to be holding stocks that enable war,” said Brad Barber, a finance professor focused on investor psychology at the University of California, Davis. “That is a fairly simple way of trying to invest in a way that’s consistent with one’s values.”

Meanwhile, Suna said he can feel caught between two schools of thought. There are those who tell him that war is going to happen anyway, so he might as well see the return on defense stocks. On the other side of the spectrum, he’s heard younger people say that they don’t invest because no corporation is perfect or because they see the stock market as an unequitable system for building wealth.

Suna is left walking a fine line: He views investing as creating a chance at retirement one day, but simultaneously needs to feel morally sound about where his money goes. Still, while he said choices about where to invest can sometimes be tricky or complex, deciding to avoid defense stocks wasn’t a particularly difficult call.

“More and more young people are saying, ‘You know what? You can invest how you want, but I’m not OK with that,'” Suna said. “Everyone draws the line somewhere.”

Large US banks included c. B. Morgan ChaseAnd Wells Fargo And Morgan Stanley They said on Friday that they plan to raise the quarterly dividend payout after clearing the Fed’s annual stress test.

The New York-based bank said in a statement that JPMorgan plans to increase its payout to $1.05 per share from $1 per share beginning in the third quarter, subject to board approval.

“The results of the 2023 federal stress test show that banks are resilient — even withstanding severe shocks — and continue to serve as a pillar of strength for the financial system and the broader economy,” Jamie Dimon, CEO of JPMorgan, said in the release. “The Board’s intended increase in the dividend represents a higher modest and sustainable level of capital distribution to our shareholders.”

On Wednesday, the Fed released its annual exercise results and said all 23 banks that participated had cleared the regulatory hurdle. The test determines how much capital banks can return to shareholders through buybacks and dividends. In this year’s exam, banks succumbed to a “severe global recession” with unemployment soaring 10%, commercial real estate values ​​plummeting 40%, and housing prices falling 38%.

After completing the test, Wells Fargo said it would increase its dividend to 35 cents per share from 30 cents per share, and Morgan Stanley said it would boost its payout to 85 cents per share from 77.5 cents per share.

Goldman Sachs announced the largest payout per share among major banks, raising its dividend to $2.75 per share from $2.50 per share.

Meanwhile, Citigroup said it would increase its quarterly payout to 53 cents per share from 51 cents per share, the smallest increase among its peers.

That’s likely because while JPMorgan and Goldman surprised analysts this week with better-than-expected results that allowed for smaller capital stockpiles, Citigroup was among the banks that saw their reserves increase after a stress test.

“While we would have clearly preferred not to see an increase in turbulent capital reserves, these results continue to demonstrate Citi’s financial resilience through all economic environments,” Citigroup CEO Jane Fraser said in a statement to her company.

All the major banks have refrained from announcing specific plans to boost share buybacks. For example, both JPMorgan and Morgan Stanley said they could buy back shares using previously announced buyback plans; Wells Fargo said it has “the ability to buy back common stock” within the next year.

Analysts said banks are likely to be more conservative with their capital return plans this year. That’s because the finalization of international banking regulations is expected to boost the levels of capital that major global corporations like JPMorgan will need to maintain.

There are other reasons for banks to hold capital: Regional banks could also be subject to higher standards as part of regulators’ response to the Silicon Valley bank collapse in March, and a potential recession could increase future loan losses for the industry.

The price of Bitcoin rose on Monday as financial institutions continued to give their blessing to Bitcoin.

Bitcoin rose more than 5% to $28,064.10, its highest level since early May, according to Coin Metrics. Ether added 3.7% to $1,786.25.

Sentiment in crypto has been high since late last week when Black stone, the world’s largest asset manager, has filed for what will be the first US spot bitcoin ETF. The filing came a week after the Securities and Exchange Commission sued two of the largest crypto exchanges, Binance and Coinbase. Many have speculated about the timing of BlackRock’s move, especially with Coinbase as its crypto custody partner.

Then on Tuesday morning, a new crypto exchange backed by financial giants Charles Schwab, Fidelity Digital Assets and Citadel Securities announced it had been live for several weeks, trading bitcoin and ether.

Fidelity has been actively following along with crypto developments since 2014. In recent years, the firm spun off the Fidelity Digital Assets division, created a commission-free retail investing app called Fidelity Crypto, and began offering 401(k) investors access to cryptocurrencies (an option that must be provided by employers).

Many financial operators are eager to show enthusiasm for blockchain technology and the ways in which it can evolve the old financial infrastructure. However, most are quieter about their views on crypto investing.

With big names like BlackRock and Fidelity putting their crypto commitments on display, investors were optimistic on Tuesday that some of the reputational risk involved in doing any kind of crypto business — which for some investors is a mental barrier to buying bitcoin — could begin to fade.

Bitcoin has struggled to break out of a tight trading range this quarter, but has yet to drop significantly below $25,000. Tuesday’s big move pushed monthly gains into the green. It is now up 69% this year.

While it’s difficult to predict future interest rate cuts, Kyle Newell, a certified financial planner and owner of Newell Wealth Management in Orlando, Fla., said he has begun to realign his bond allocation.

When building a bond portfolio, advisers take into account so-called duration, which measures a bond’s sensitivity to changes in interest rates. Expressed in years, duration factors in the coupon, time to maturity and yield paid over the term.

As interest rates edged higher in 2022, many advisors chose shorter-duration bonds to protect portfolios from interest rate risk. But the allocation could change depending on the Fed’s future policy.

“I don’t want to get too aggressive with increasing the duration,” Newell said. “Because bond clients tend to be more conservative and it’s really about protecting the principal.”

As policies change, advisors are also looking for ways to optimize allocations amid continued economic uncertainty.

“There are still areas of opportunity in the bond market that are very attractive based on how poorly bonds performed last year,” such as corporate bonds trading at a discount, below “par” or face value, said Ashton Lawrence, CFP and principal at Mariner Wealth Advisors in Greenville, South Carolina.

“We’re always looking to find a sale or a discount,” Lawrence said, noting that high-quality, discount bonds have built-in growth as long as the assets don’t default. “You capture that appreciation as you get paid along the way,” he said.

Of course, every investor has different needs, Lawrence said. “But there are definitely some areas of opportunity in fixed income.”

With a deal on the debt ceiling easing macro concerns, the implications of avoiding a default could pose new challenges for ETF investors.

“Interest rates are lower than you would think in the Treasury market,” Howard Lutnick, chairman and CEO of BGC Partners, told CNBC’s Bob Pisani on “ETF Edge” on Wednesday.

“Now [The Fed] will hit it with trillions of dollars of sales that will drive short-term interest rates higher,” he said. “And that will feel like a rate hike.”

Lutnik explained that the pressure from the Fed’s selloff will spur the central bank to hold off on raising interest rates again. Also, the trillions of dollars pulled out of the regional banking system and put into money market funds added pressure on big and systemic banks, he said, increasing the Fed’s constraints.

“The Fed is not raising [rates]don’t buy it,” Lutnick said. “They don’t raise.”

While the effect is positive for investors worried about further hikes, raising the debt ceiling next year could accelerate global liquidity drain.

“Low rates make people take risks [and] go buy stocks,” Lutnick said. “Now you have people saying, ‘Hey, maybe I should just put my money in Treasurys. I get 5% no risk. And that’s money coming from the stock market.”

As money market yields continue to rise, Lutnick said he sees capital continuing to flow out of stocks and into money market funds and government bond ETFs.

“You’re going to see the stock market go away, but the bond market is going to continue to attract money and get a lot of power,” Lutnick said.

But as investors prepare for an influx of Treasuries to enter the market, Tradeweb CEO Billy Hult stressed the importance of finding liquidity in the market to get a sense of how the government bond market is performing.

“The most sophisticated players that live and breathe in my space are oriented toward creating ETF technology around liquidity,” Hult said in the same segment. “This market is extremely solid.”

Hult explained that the incorporation of greater transparency, cost efficiency and technology into fixed income funds has helped accelerate the development of the bond market. In turn, he said, investors’ interest in bonds and government bonds will eventually be expressed through ETFs.

“That’s not going to change,” Hult said. It’s the easier and more liquid way to express an opinion.”

Rebuttal

The $2.2 billion in US client assets held by Binance are at “significant risk” of being stolen from founder Changpeng Zhao unless a freezing order is put in place, federal regulators said in a statement Tuesday night. after the crypto regulator was indicted by the Securities and Exchange Commission.

SEC lawyers filed an emergency motion earlier, citing risk of capital flight and asking a judge to repatriate and freeze assets of U.S. clients to prevent illegal transfers from Zhao or Binance entities. The SEC sued Binance and Zhao on Monday, alleging that they engaged in an unregistered offering and sale of securities and mixed investment funds with their own.

The latest declaration described Zhao as “a foreign national who has openly expressed his views that he is not under the jurisdiction of this court”. SEC lawyers alleged that two Binance subsidiaries in the US — BAM Trading and BAM Management — were controlled by Zhao and had already earned “illegal profits” of at least $420.4 million in profits and venture fundraising.

Years of communication between the SEC and Binance, which claims it has no official headquarters, suggested that Binance.US could not clearly indicate who controlled customer assets, according to the filing.

“Zhao and Binance had free reign,” the SEC alleged, over “billions of dollars worth of client assets.”

Zhao’s lawyers say the billionaire is not subject to U.S. law despite his control or beneficial ownership of U.S. companies and bank accounts that sent billions of dollars to holding companies based in Switzerland and the British Virgin Islands, the SEC said.

The SEC says federal law and precedent establish the court’s jurisdiction over Zhao and Binance.

“There is no doubt that the Court has personal jurisdiction over all Defendants,” the SEC said.

While Binance’s U.S. arm said it maintains control over much of its technology and financial infrastructure, the SEC says Zhao’s ultimate control puts investors’ assets at risk unless immediate action is taken.

“Given the history of Zhao and Binance’s open desire to avoid US regulation and oversight and their covert control of BAM Trading and the commingling and movement of BAM Trading’s assets through a network of entities controlled by Zhao outside the United States, it may there are no guarantees that BAM Trading employees were not influenced by Zhao or Binance today,” the filing said.

Federal regulators are also asking the court to allow them to serve Zhao in an email to his lawyers, saying his “pattern of geographic elusiveness” makes it difficult to identify his exact residence or whereabouts. Zhao is reported to be a resident of the UAE.

Binance did not immediately respond to a request for comment.

WATCHING: Timothy Massad: Crypto risk is ‘not just about the token’

Cryptocurrency prices were slightly higher on Tuesday after the Securities and Exchange Commission sued crypto services provider Coinbase.

Bitcoin climbed more than 1% to $25,891.00, according to Coin Metrics. Earlier, it briefly fell to $25,368.57, its lowest level since March. Ether rose 1% to $1,826.64.

On Tuesday, the SEC filed a lawsuit in New York federal court alleging that Coinbase acted as an unregistered broker and exchange. The agency asked that the company be “permanently restrained and enjoined” from continuing to do so.

“If there is real value in these crypto tokens, then compliance will build trust and the business model can change,” SEC Chairman Gary Gensler said Tuesday in an interview on CNBC’s “Squawk on the Street.” “What we’re doing at the SEC is supporting innovation because capital markets really don’t work.”

“There is a lot of work to be done here for the crypto field, but we are willing to work to bring them into line,” he added.

The complaint lists 13 crypto assets on Coinbase that could be considered “crypto asset securities” by the regulator, including popular coins Solana (SOL) and polygons MATIC token, which fell by more than 3% and 5% respectively on Tuesday. of Cardano ADA the token fell by 2.8%.

The news came a day after the SEC alleged that Binance, the world’s largest crypto exchange by volume, and its co-founder, Changpeng Zhao, violated securities laws. Cryptocurrency prices fell on Monday to their lowest levels since March after the complaint against Binance.

US regulators are cracking down on crypto businesses. Since January, the SEC has accused Kraken, Genesis and Gemini Trust of offering unregistered securities to investors.

It also issued a Wells Notice to Coinbase earlier this year, warning the company of potential securities charges.

Matt Hogan, chief investment officer at Bitwise Asset Management, called the lawsuit against Coinbase “an important event that investors can look forward to,” speaking to CNBC on Monday night.

“The [SEC’s] the next step in the direction of Coinbase is probably a signal that we have passed this period of regulatory dark clouds, or at least we have reached the end of it,” he said.