Dear Reader

As the academic year draws to a close and the June bank holiday weekend approaches, summer has well and truly announced itself. Mobile homes are being spruced up, holiday plans are taking shape, and that familiar seasonal anticipation is in the air. There is nothing quite like it.

Whether the old adage of "sell in May and go away" proves prophetic this year remains to be seen, but May has once again delivered its share of twists and turns. Personal finance continues to sit at the crossroads of economics, politics, geopolitics and human psychology. This month was no exception.

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Berkshire Hathaway: A Changing of The Guard

The Berkshire Hathaway annual meeting was held in Omaha, Nebraska on the 2nd May 2026, a gathering that many describe as a capitalist pilgrimage. For sixty years, shareholders made the journey to hear Warren Buffett speak plainly about business, investing, and the principles behind one of the most extraordinary wealth-creation stories in financial history. This year felt different. Greg Abel, Berkshire's new CEO, took the chair for the first time, marking the formal end of an era that began in May 1965 when Buffett pivoted a struggling New England textile manufacturer into the global conglomerate it is today.

Buffett's compounded annual growth rate of 19.7% over sixty years is a genuinely remarkable achievement. To put it in perspective: $100 invested in Berkshire in 1965 would be worth approximately $6.1 million today. The same $100 invested in the S&P 500 with dividends reinvested would be worth around $45,500. That is an extraordinary gap, and it reflects one of the most sustained runs of investment outperformance ever recorded. But when you look beneath the headline number, a more nuanced story emerges.

Berkshire's sixty-year Compound Annual Growth Rate (CAGR) of 19.7% against the S&P 500's 10.5% tells you Buffett nearly doubled the market's return over his full tenure. What it doesn't tell you is when those returns were earned:

In Berkshire's first twenty-five years, while it was still small and nimble, the firm compounded at approximately 27.5% per year, more than two and a half times the S&P 500's 10.3%. In the thirty-five years since 1990, that figure has moderated to around 14.5%, still ahead of the market's 10.7% but a very different proposition. And over the past fifteen years, the S&P 500 has edged ahead, returning approximately 13.9% annually against Berkshire's 12.8%, driven largely by a bull market in mega-cap technology stocks that fell outside Buffett's circle of competence. This pattern is not a failure. It is a predictable consequence of scale.

Outperformance attracts capital. Capital demands deployment. And as the pool of capital grows, the universe of investments large enough to be meaningful shrinks. This is the compounding paradox: the very success that builds a great investment firm gradually erodes the conditions that made it great.

When Berkshire had $100 million in assets, a $10 million investment generating 50% returns was genuinely transformative. Today, managing over $1.2 trillion in total assets, a $10 billion investment, a major undertaking for almost any other institution on earth, barely moves the needle. The firm is now restricted to a handful of companies and transactions large enough to matter, most of which are accurately priced, well understood, and fiercely competed for.

Buffett himself described this dynamic as "the tyranny of size." The small and value universe where academic evidence for growth and mispricing is strongest and where Berkshire built its early edge, is now entirely inaccessible at such scale. What remains is a concentrated portfolio of large, well-known businesses and an enormous cash reserve, currently over $300 billion, waiting for market dislocations significant enough to deploy it.

Reversion to the Mean

Reversion to the mean is the statistical tendency for extreme values to move back toward the long-run average over time. In investing, it shows up consistently. Companies earning exceptional profits attract competition that compresses margins. Fund managers posting exceptional returns attract capital that erodes the conditions behind those returns. Asset classes that outperform for a decade tend to underperform in the decade that follows.

Over very long periods, virtually every outperforming strategy regardless of how skilfully constructed converges toward market returns. This is not pessimism; it is arithmetic. The further from average a result is, the stronger the gravitational pull back toward the centre tends to be.

Based on my own observations of the active investment industry, it is increasingly difficult to scale an outperforming investment business beyond $20 billion. Above this, quantitative strategies may be a partial exception.

Reversion to the mean is investing's law of gravity, what goes up eventually comes down and no business or market, however extraordinary, escapes the natural ceiling that sooner or later brings even the finest compounding machine back to earth.

Key Takeaways

Identify outperformance before it happens: By the time strong investment outperformance is widely known and celebrated, the conditions that produced it are often already changing. Performance chasers, those who move capital to recent winners or trends, rarely capture the same returns.

Be sceptical of extrapolation: The longer and more extreme a run of outperformance, the stronger the forces pulling back toward the average tend to be. This applies to fund managers, sectors, asset classes, and individual companies alike.

Mean reversion is the base case: In the absence of a compelling structural reason why a particular return advantage is durable and defensible, assume it will diminish over time.

Looking Ahead

I wish Greg Abel and his team every success. The task of stewarding the institution Warren Buffett built over a lifetime, at this scale, in this market environment, is genuinely formidable. Berkshire remains one of the most financially robust companies on earth, with exceptional underlying businesses, a fortress balance sheet, and a culture of disciplined capital allocation that Abel has been careful to preserve.

But the era of Berkshire doubling the market's return is most likely behind us. That is not a criticism, it is simply the mathematics of compounding at scale, playing out as theory would predict.

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Wall Street Divorced From Main Street

A Melt-Up Before a Melt Down?

The Shiller P/E Ratio is one of the most widely followed long-term market valuation measures. Rather than focusing only on current earnings, it compares stock market prices to the average inflation-adjusted earnings generated over the previous 10 years. By smoothing out economic booms and recessions, it provides a broader perspective on whether markets appear historically expensive or inexpensive.

Rising prices indicate a stock market falling in value, falling prices indicate a stock market rising in value.

Already elevated valuations have been supported by exceptionally strong corporate earnings. S&P 500 earnings per share surged well ahead of expectations in Q1 2026, rising 28% year-on-year versus estimates of 13%, with full-year earnings now expected to grow by approximately 23%.

Markets appear increasingly willing to overlook geopolitical and inflationary risks. Conflict between the US and Iran have pushed commodity prices higher, reigniting inflation concerns and increasing the likelihood interest rates rise and remain elevated for longer than investors had previously anticipated.

The chart below highlights how earnings evolved through the post-Covid cycle: from the ultra-low inflation and near-zero interest rate environment of 2020–2021, through the inflation and interest rate shock period of 2022–2024, and into the more stable backdrop experienced across 2025 and early 2026. Note the impact of low and high inflation and interest rates on growth rates.

Historically, valuation measures such as the Shiller P/E Ratio tended to revert toward long-term averages as economic growth followed more traditional cyclical patterns. Yet some investors argue that artificial intelligence, software scalability, and productivity gains may fundamentally alter that relationship by allowing businesses to grow revenues and profits faster and more sustainably than in previous decades.

That may prove true but periods of extreme optimism have also historically coincided with speculative excess and sharp market corrections.

This raises an important question for investors: Is today’s market concentration in technology a feature or a bug, a market flaw or a reflection of where long-term value creation is genuinely occurring?

In recent years, the birth of the AI industry has driven the majority of global market returns. While periodic corrections are inevitable, it may continue to remain the dominant engine of long-term economic growth and investment performance.

During the California Gold Rush of 1848, many of the greatest fortunes were not made by the miners themselves, but by those selling the tools, infrastructure, transport, and accommodation required to support them, giving rise to the famous phrase: “During a gold rush, sell shovels.”

Interestingly, while equity markets continue to push higher, bond markets are sending a more cautious signal.

The bond market has historically acted as a leading indicator for both recessions and equity market corrections because bond investors tend to focus heavily on macroeconomic trends, inflation, and interest rate expectations. Debt markets often adjust to economic realities months and sometimes years before equities do.

Last week, the 30-Year US Treasury Yield closed at 5.18%, its highest level since July 2007. Rising long-term yields reflect growing concern that inflation may prove more persistent, requiring interest rates to remain higher for longer.

Against this backdrop, investors will be closely watching the leadership and independence of newly appointed Federal Reserve Chair Kevin Warsh, who was sworn in on May 22nd, 2026.

Main Street

Historically, rising energy prices feed into inflation with a lag as higher transportation, manufacturing, and utility costs ripple through the wider economy. Global commodity prices have surged in recent months, increasing inflation and interest rate expectations once again.

The cost-of-living pressures that had begun moderating prior to the Iran conflict now appear likely to persist for longer. For many households and businesses, affordability continues to deteriorate.

To put recent inflation into perspective. A normal 2% annual inflation target would have resulted in cumulative inflation of 13.4% over the past five years. Actual headline CPI inflation has been 3.69% or 25.4% cumulatively. When weighted more heavily toward essential living costs such as housing, energy, food, and transport, inflation has been 4.88% or 34.7% cumulatively. I suspect most consumers lifestyle inflation is higher again.

Interest rate expectations have shifted significantly throughout 2026. At the start of the year, markets expected rates to fall toward 3%. Today, expectations have reversed, with rates now expected to move closer to 4% by year-end.

Higher inflation and rising borrowing costs come as Irish personal lending reaches record levels. Personal loans outstanding have climbed to €2.9 billion, driven largely by car purchases, home upgrades, and green energy investments.

At the same time, consumer sentiment, a measure of how optimistic or pessimistic people feel about their personal finances and the broader economy, remains near historic lows.

Yet consumer behaviour tells a different story. Irish retail sales volumes were still 1.6% higher year-on-year versus March 2025. As always, it’s important to pay attention not just to what people say, but to what they actually do.

Meanwhile, Ireland’s unemployment rate remains relatively low at 4.8%, although youth unemployment (ages 15–24) remains high at 9.8%.

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Monthly Round-Up

I’ve long been a fan of Benjamin Felix of PWL Capital in Canada, along with the Rational Reminder podcast and Ben Felix’s YouTube channel, so it was no surprise to see him recently appear on Steven Bartlett’s Diary of a CEO. As the title suggests: money is simple, people are hard.

The discussion covers investing psychology, common financial mistakes, behavioural biases, wealth-building frameworks, and many of the personal finance topics people wrestle with most often. Well worth a listen if you have the time.

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With growing speculation surrounding potential IPOs from companies such as SpaceX, OpenAI, and Anthropic, Charlie Bilello and Peter Mallouk of Creative Planning recently discussed the evolution of the IPO market, the current cycle of investor enthusiasm, and the gap that often exists between IPO hype and long-term investment reality.

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Elon Musk remains one of the most polarising business figures in the world, admired by some, heavily criticised by others. Following the release of SpaceX’s S1 registration statement and prospectus, scrutiny surrounding what could become the largest IPO in history has intensified significantly.

The discussion below critiques SpaceX’s valuation, governance concerns, and the substantial “key-man risk” associated with Musk himself. If money is power, becoming the world’s first trillionaire would represent an extraordinary concentration of influence in modern history.

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Gold has attracted renewed investor attention following several years of exceptionally strong performance, particularly as Asian central banks continue diversifying reserves away from the US dollar.

Allocating a single-digit percentage of a portfolio to gold as a form of insurance is entirely reasonable. But if gold ever becomes your only form of financial protection, there may not be much of a world left in which to spend it. Charlie Bilello and Peter Mallouk discuss gold from a data-driven, evidence-based perspective.

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Finally, caring for ageing parents can become one of the most emotionally and financially complex chapters of adult life. For many families, the transition from child to caregiver happens gradually: helping with appointments, supporting household expenses, or navigating long-term care decisions.

Watching a parent age, with all of its grief, perspective, and grace, has a way of clarifying what financial security is truly for. Not simply the accumulation of wealth, but the protection of dignity, choice, and the people we love.

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Whether you're a daughter, son, mother, father, grandmother, grandfather or close family relative having open, honest and potentially uncomfortable conversations about money will in all likelihood make your relationships stronger long term. Getting started and ahead of the curve is the challenge.

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📚 Recommended resources 💡

JP Morgan Guide To The Markets (EMEA):

​​​​​JP Morgan Guide to the Markets EMEA 27th May 2026.pdf​​​​​​​​​​​

Podcast recommendations:

Invest Like The Best with Patrick O'Shaughnessy: The Business of Defence - Darren Farber

Darren Farber on Iran, China... May 26 · Invest Like the Best wit... 52:19   ​

Patrick Boyle on Finance: The Most Unprofitable IPO in Wall Street History

The Most Unprofitable IPO in... May 23 · Patrick Boyle On Finance 30:25   ​

The Rational Reminder Podcast with Ben Felix: The Finance Paper That Changed Everything

Episode 404: The Finance Pap... Apr 9 · The Rational Reminder Po... 72:02   ​

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If you’d like support across personal finance education, coaching, advice, or technology, I’d be happy to help. Depending on what you're looking for you can schedule a meeting through the Vantage website: https://vantagefp.ie/​

Please find useful marketing material resources below:

​Successful Investing in Pictures.pdf​

​Vantage Investment Policy Statement.pdf​

​Vantage A-Z of Financial Planning.pdf​

​Vantage How We Can Help.pdf​

​​​Vantage What We Believe.pdf​

​Vantage Business Owner's Guide.pdf​

If you found this month’s newsletter useful, please feel free to share it with family, friends, or colleagues who might also benefit. Constructive feedback is always welcome. If there is a personal finance topic you would like covered in a future edition, just let me know.

Until next month.

Kind regards,

Ken Mason CFP®

Certified Financial Planner™

Tel: (01) 539 2670

Mobile: 083 803 2008

Email: ken.mason@vantagefp.ie

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