SMART INVESTING NEWSLETTER
Alternative Assets Crumbling, Tariffs & Inflation, HHS Overhaul, Richer Rich, Retirement Recession, Cybertruck Letdown, California Gas Woes, Bitcoin Surge, Utility Bill Spike & Solar Slowdown
Brent Wilsey • June 13, 2025
Alternative Assets Appear to Be a House of Cards
I remember using that same terminology back before the tech bust about 25 years ago. I was maybe a little bit early back then, but the house of cards collapsed. The more I read about alternative assets the more I scratch my head and ask how is Wall Street getting away with this? In the end, I believe the small investor will end up paying dearly for investing in these alternative assets. I learned something new over the weekend, a company called Hamilton Lane Private assets can buy private stakes from other holders at a discounted price, but then they can magically increase the value to the net asset value. This also reminds me of the mortgage crisis in 2008 with collateralized mortgage obligations better known as CMO‘s that also had major difficulties. Hamilton Lane Private assets can disregard the discounted price they paid no matter how they paid for it, even if it was in a competitive auction and again mark it up to net asset value. In 2024 there were $162 billion in secondary deals with an average discount of 11%. My question is how can they magically create $18 billion of value on those secondary deals. The incentive fees that private equity firms like Hamilton Lane earn range from 10 to 12 1/2%. If it sounds complicated, it is and if you don’t understand something, you should not be investing in it no matter how simple your broker tries to make it sound. The greed on Wall Street appears to be running rampant, I would highly caution investors to avoid any type of private equity in their portfolio.
Tariffs Are Still Not Impacting Inflation
The May Consumer Price Index, also known as CPI, showed little impact from tariffs. Headline CPI came in at 2.4%, which was right in line with expectations and core CPI, which excludes food and energy, came in at 2.8%, which was actually below the expectation of 2.9%. The headline CPI continues to remain softer than core CPI due to falling energy prices. Compared to last year, energy prices were down 3.5% and gasoline in particular fell 12.0%. The core prices do remain a little bit stuck at the 2.8% level considering it was at that level in both the March and April reports as well, but considering the concern around tariffs I would say this was a really strong report. It will be interesting to see the coming months as economists are pointing to the fact that companies brought in excess inventory before the tariffs were implemented so they are still working through pre tariff inventory and have not needed to raise prices yet. I do wonder if inflation does not substantially increase at what point will economists say that the tariffs maybe aren’t as impactful as they once thought? My belief remains that we will see a small uptick in inflation in the coming months, but there are other forces reducing inflation in some areas so I think it will be more muted than many believe.
Health and Human Services Is Receiving a Major Makeover
Back in the 60s, the world looked to America’s health regulators for guidance because they had a reputation for integrity, scientific impartiality and a strong defense of patient welfare. Today and for probably the last couple of decades, HHS has lost trust among many people. This week, a major shakeup of the advisory committee for immunization practices known as ACIP is retiring all 17 of the current members on the committee. In the past, the committee had many persistent conflicts of interest and approved every vaccine that came through. The committee met behind closed doors and without transparency the public had no faith in their decisions. Some of the members had financial stakes or received substantial funding from the pharmaceutical companies. I’m happy to report with all 17 of the committee members being forced into retirement we should see big changes on the approval of vaccines and hopefully in a few years, the HHS and the committee can regain public trust. This could have an impact on some pharmaceutical stocks if vaccines go through a more rigorous approval process.
Financial Planning: What If There’s a Recession While in Retirement?
With 8 in 10 Americans already changing their spending habits and 58% expecting a recession, it’s clear that economic uncertainty is weighing heavily on people’s minds. But the reality is if you're retiring soon, or already retired, you should assume you'll face multiple recessions, market corrections, and bear markets during your retirement. It’s not a matter of it, but when. Historically, recessions occur about every 6 to 10 years and typically last 10 to 18 months. Market corrections, defined as a drop of 10% or more, happen about once every 1 to 2 years, and bear markets, declines of 20% or more, occur roughly every 5 to 6 years, lasting on average about 10 months, though the recovery to previous highs can take up to 2 years or more depending on the severity. The point isn’t to try and time retirement around these events, it’s to build an income strategy that expects them. A well-structured retirement income plan includes diversified investment portfolio that will provide long-term growth, cash reserves to avoid selling investments at a loss, a sustainable withdraw rate, and flexibility to adjust withdrawals from various sources when needed. By accepting volatility as a normal part of retirement, you can build a plan that weathers it and sleep better when the markets are volatile.
Yes, the Rich Are Getting Richer
That is how the saying goes and the rich did get richer in 2024. With the nice gains for many assets during the year, the number of people in North America with at least $1 million in investible assets grew to 8.4 million, which was an increase of 7.3%. This led to the group’s wealth increasing by 8.9%, to nearly $30 trillion. It is important to understand that the ultrarich, which is those with at least $30 million in assets, really provides a lot of the wealth. While this group represents just one percent of wealthy individuals, it accounts for 34% of all the wealth. People that have investable assets of less than $1 million should not despair and they too should continue to invest and grow their wealth. One of the reasons that the rich get richer is that they spend more time understanding investing they tend to buy assets. In many cases they are also more conservative as they don’t want to lose what they have. In my experience, many times people with less than $1 million in assets like to gamble in higher risk investments trying to get rich quick and we all know how that turns out. If you only have $100,000 or even $50,000 one should adhere to a good investment plan of buying good quality equities, and not panic and sell when a drop in price occurs. Any easy way people with lower incomes and investable assets can grow their wealth is in 401K plans and IRAs. This can increase the percent of their investments by a larger magnitude compared to a person with over $1 million because the contribution limits are not as effective on higher dollar amounts. For example, if you max out your 401k this year, which would be $23,500, that would have a much larger impact on the percent your assets grew if you had $100,000 instead of $1 million. I believe If one plans well and invests in good quality equities along with staying the course, it is very possible that they too can pass the $1 million in investible assets.
The Disappointing Cybertruck From Tesla
I’m not surprised that the Cybertruck is not selling as well as expected. It is selling well under the estimates and when I say well under, I mean it because in 2024 Elon Musk estimated goal was 250,000 sales per year. It did not even come close to that figure last year as sales came in under 40,000. The first quarter of 2025 looks even worse with total sales of only 7,100. Could it be because it is still the ugliest vehicle on the road? It reminds me of years ago when VW had the Thing. Could it be the price of around $100,000 is too high? Interestingly, the price has already been greatly reduced as the company has likely been trying to get sales moving. Or could it be the seven recalls on the Cybertruck? I do know that some of these were software issues, which could be fixed by a download, but there are also issues with the windshield cracking. The windshield is very heavy and very long. Also, what is known as a cant rail could fall off while you’re driving down the road because the adhesive was too weak. Another scary recall was the accelerator pedal that had a rectangular pad can become loose and get stuck under the paneling, which locks the accelerator in the down position, that’s a scary thought! It took years for the truck to come to market and it definitely did not meet those initial claims. It was first announced in 2019 at a cost of $39,900 with a battery range of 500 miles and it was supposed to be able to go in the water. Fast forward to the reality of today and the price as I said is well above $40,000. The battery range at best is 350 miles and the truck needs to stay on land and it cannot function on water. I have seen a few around town and I think the people driving them are pretty proud that their vehicle stands out, but I still think it is one of the ugliest things on the road and you could not give me one.
Shocker… California Continues to Struggle With Gas Prices
We have discussed how refiners are closing in California due to growing regulatory and cost pressures. Both Phillips 66 and Valero will close two major refineries in the state by next year, but there are already problems with supply and recent outages at refineries in the state have only added fuel to the fire. The state’s fuel imports climbed to 279k barrels per day in May, which was the highest in four years. This meant refiners had to turn to trading partners in Asia to make up for the shortage of fuel. The shrinking supply will likely only exacerbate this problem and I wouldn’t be surprised to see the import numbers continue to climb. The restrictive policies and the high taxes in California have led to gas prices that are far above the national average. Last Friday, retail gas prices averaged $4.68 per gallon in California versus a national average of $3.12 per gallon. This means California prices are about 50% higher than the national average.
The Tidal Wave in Bitcoin Continues to Build
Bitcoin is trading over $100,000 once again and it has attracted a lot of attention. Public companies are even starting to buy Bitcoin to put it in their treasury to hopefully get a boost in their stock price. It appears about 60 public companies with ties to the stock market are using a Bitcoin strategy for their treasury investments. They are in hopes that Bitcoin will continue to increase in value and ultimately boost their stock price. Some of these public companies are even borrowing or selling shares of their stock to raise money to purchase Bitcoin. I remember back during the tech boom many companies were implementing a similar strategy as they were buying high risk tech stocks in an effort to boost the value of their own stock price. We know how that ended. Based on research, if Bitcoin would fall below $90,000, roughly half of the public companies that invested in Bitcoin would then have a loss on their investment. If the company stock price began to fall, the companies may elect to unwind their investments in Bitcoin, which then could create an avalanche of selling. Who knows where the bottom would be? The only reason Bitcoin is being bought now is because it continues to go up, but we know that cannot go on forever. Bitcoin does not pay dividends, interest or anything else, it is just a gambling chip. As I mentioned in the title, this is a title wave where the wave continues to grow and get bigger and bigger until at some point in time it collapses and wipes out everyone involved. I don’t know where we are with the Bitcoin tidal wave, but I would not want to be holding any of it finally crashes on the shores.
A Hot Summer Is Going to Lead to Higher Utility Bills
The temperatures for June, July, and August are expected to be higher this year than last year and that’s not the only thing that could be going higher. It is projected with lower supply and higher demand that natural gas prices could also be higher. Natural gas futures are currently around $3.80 per million British thermal units and are expected to rise with estimates of above four dollars and some estimates even hitting five dollars by August. For the past two years there has been a glut of natural gas and prices have stayed on the low side. But now with demand for LNG, which is liquefied natural gas, and power producers requiring more energy, natural gas prices will likely push higher. The biggest natural gas demand is still in the winter months, but because of the warmer summer, the demand is picking up with power plants accounting for 41% of US natural gas consumption. There’s also a lack of natural gas piping on the East Coast, which really slows down the transportation and is adding to its cost. Other countries around the world need natural gas as well, and the United States has now become a big producer and exporter of LNG, which takes away from our supply here at home. The natural gas market in the US has now becomes a global market. We need to correct the pipeline matrix and develop more natural gas to meet the increasing demand and keep prices low.
The Sun Is Setting on Solar Companies
The tide has definitely turned-on installers of residential solar companies, which have been hurt by higher interest rates and now the tax and spending package passed by the House of Representatives includes eliminating certain tax credits for rooftop solar and battery storage. This has crushed companies like Sunnova Energy International, which at one point had a market capitalization of $5 billion and over 400,000 customers. The company was started in Texas in 2012 to provide affordable residential solar products across the country. The stock is now a penny stock after falling 93% and has a market cap under $30 million. The company cannot pay its debt or attract new investors and will likely file bankruptcy. They are not alone as SunPower, Lumio, and Solar Mosaic filed for bankruptcy last year. Titan solar also just closed the doors, leaving their residential customers nowhere to turn. Sunnova being the biggest was probably hurt the most last year. The company lost $448 million and probably has very little chance of ever being a profitable business again without the tax credits as many consumers will forgo solar energy. Because of the high cost of energy in California, there may be some room for a small operator to offset the high cost of electricity in the state. Another well-known company in the solar industry is First Solar, which has seen its stock drop nearly 50% in the past year may have a chance to survive since they sell and manufacture solar for businesses rather than residential customers. The fundamentals of the company look pretty good and it appears since they manufacture solar in the US they will continue to receive some tax credits, but the future for this company is just too fuzzy and while they may pull through, I don’t think the risk is worth the reward.
Should members of Congress be allowed to trade stocks? I recently saw there was a bipartisan bill presented in the House that would ban lawmakers from trading individual stocks. I feel like we have been hearing about this for years, and according to NPR, “For more than a decade, a series of bills have been proposed to address such trades, but differences about the details and a lack of support from top congressional leaders stalled past reform efforts.” The question is, will this time be different? The bill made me curious though about how active congress was when it came to trading and let’s just say I couldn’t believe the numbers! In 2022 154 members of Congress made 14,752 trades, in 2023 118 members made 11,491 trades, in 2024 113 members made 9,261 trades, and through July of 2025 108 members made 7,810 trades. That is a crazy amount of activity and I’m not sure how they even have time for that. Their returns were also quite impressive with Democrats producing an average return of 31.1% in 2024 and Republicans producing an average return of 26.1%. For reference, the S&P 500 was up 23.3%. The numbers were quite staggering when you look at the individual performance of some of these politicians. In 2024, Rep. David Rouzer (R-NC) was up 149.0%, Rep. Debbie Wasserman Schultz (D-FL) was up 142.3%, Sen. Ron Wyden (D-OR) was up 123.8%, Rep. Roger Williams (R-TX) was up 111.2% and Rep. Nancy Pelosi (D-CA) rounded out the top ten with 70.9% return. These are hedge funds that are beating returns in several cases! Personally, I think it is ridiculous that politicians can trade individual stocks, and I hope there is finally action in Congress that ends it! There are risks to Nvidia stock that you may not realize! There is no denying what Nvidia has done has been extremely impressive, but one major problem with the company is the revenue is extremely concentrated. Their top customers made up 23% of total revenue in the recent quarter, which was up from 14% in the same quarter last year. Their second largest customer made up 16% of total revenue, which was up from 11% in the same quarter last year. Sales to four other customers contributed 14%, 11%,11%, and 10% of revenue respectively. This means that six customers accounted for 85% of Nvidia’s total sales. My concern is what if one of them drops out of the AI arms race or if a few of them pull back spending, that could really slow Nvidia’s business. I also believe that China is a risk to Nvidia. While sales have been hindered in the country due to political constraints, I believe many investors are looking to China as an area of potential growth for the company. All I can say to that, is do you really think the Chinese government wants Chinese companies using Nvidia chips? It was reported that Alibaba has recently developed an advanced chip, and I’d assume Huawei and other Chinese companies are racing to compete against Nvidia. While Nvidia stock essentially just keeps climbing, it’s important to realize there are several risks that could take the stock down! Understanding more about AI and why it's becoming more expensive We are no expert on artificial intelligence, but we have learned that while AI has gotten smarter it has also gotten more expensive. It is now broken down into a unit of AI which is known as a token and while the price of tokens continues to drop, the number of tokens needed to accomplish a task is increasing dramatically. There are two basic attributes to AI, one is called training, and the other is AI inference. The increase in cost is coming from the training side that has to use large models and demands even more costly processing. AI applications are using so-called reasoning and new forms of AI double check queries on their answers, which may include scanning the entire Web. Sometimes they write their own programs to calculate things all before releasing an answer that may only be a short sentence. Delivering meaningful and better responses takes a lot more tokens to complete that process. Looking at examples, basic chatbot Q&A requires 50 to 500 tokens. Short document summaries can be used anywhere from 200 tokens to 6000 tokens. Lawyers and paralegals who use legal document analysis require 5,000 to 250,000 tokens. If one is trying to do multi-step agent workflows, well now you’re looking at 100,000 to over 1 million tokens. Please understand when we talk tokens we’re not talking about anything that has to do with cryptocurrencies, and this is a different token pertaining to AI. Some big companies are spending $100 billion a year or more to create cutting-edge AI models and building out their infrastructure. However, for all that investment there needs to be a return on investment, and businesses and individuals will eventually have to pay more for artificial intelligence. The CFO of Open AI said last October that 75% of the company’s revenue comes from your average person paying $20 a month. Currently the cheapest AI models, which includes Open AI‘s new ChatGPT – 5 nano is costing around $.10 per million tokens but go to the top-of-the-line GPT -5 and that costs about $3.44 per million tokens. What they are trying to figure out is what the consumer will pay for AI. There is also concern about how long the big giants can keep up this spending when they’re competing with their own Financial Planning: 529 Withdrawal Pitfalls A 529 plan is a tax-advantaged savings account designed to help families pay for education costs, with contributions growing tax-deferred and withdrawals tax-free when used for “qualified education expenses” such as college tuition, fees, books, and room and board. A qualified withdrawal avoids taxes and penalties, while a non-qualified withdrawal means the earnings portion (not contributions) is subject to federal and state income tax plus a 10% federal penalty. The IRS also allows up to $10,000 per year, or $20,000 in 2026, per student for K–12 tuition, and under the One Big Beautiful Bill signed on July 4, 2025, Congress expanded 529 qualified expenses to include not just K–12 tuition, but also fees, books, and required supplies for primary and secondary education. However, California does not conform to this expansion and continues to treat K–12 withdrawals of any kind as non-qualified, taxing the earnings and applying a 2.5% state penalty. This mismatch means California families using 529 funds for K–12 costs may face unexpected taxes and penalties despite the new federal flexibility. Keep this in mind if you are considering funding a 529 plan. Should you buy the new iPhone or work with what you have? On Tuesday, September 9th, Apple launched their new iPhone and while there was a lot of excitement around the event, I just don't see what's exciting about the limited changes. If you are excited about the new features though and if you’re a techie, you probably want to get the new iPhone just to brag about it. But if you want to be financially smart, you need to think about maybe you really don’t need a new phone. The new iPhone 17 is supposed to be the best ever, which is of course what they are going to say. The cost of the new iPhone 17 is expected to be between $800-$1200. If your phone is seven years or older, you may start running into problems with updates, which could include security fixes and updated software. Apple may not support your phone so maybe it would be wise to buy a new one. Your phone may be feeling slow or short on battery life, but there are repairs that can correct that situation for you and are far cheaper than buying a new phone. Repairs could be anywhere between $100-$350 and be sure to check out a good independent shop but be aware they may use third party aftermarket parts. You may be thinking, "what’s the big deal? It’s only $800" but it’s important to remember that a few hundred dollars here and a few hundred dollars there adds up and before you know it, you're way over your monthly budget. Also, think about what you’re saving on repairing your phone versus getting a new one. That is money that you can put away into your emergency fund or hopefully invest it for long-term growth to increase your net worth. Think about how it will grow over time and when invested properly, you’ll be very happy that you didn’t waste that few hundred dollars extra on a new iPhone. It will be interesting to see how "different" the new model really is! Here’s another indicator showing how overpriced the S&P 500 is! There are four main valuations used when valuing a public company or a stock. The most common one is what investors are paying for the earnings, that is known as a price to earnings ratio. Another one that is fairly well known is price to book value, which looks at how much you are paying for the assets, minus the liabilities of a company. The price of cash flow is not as well known, but we believe that cash flow is very important for businesses and like the other ratios, we don’t want to overpay for it. The last one that has been around for many years is the price to sales. This can be one of the best indicators because unlike price to earnings, there’s no way for a company to pad or manipulate the sales, they are what they are. As of now the S&P 500 is trading at 3.23 times sales, which is an all-time record high. When it comes to the price to earnings, the ratio is also high at 22.5 times projected earnings. While this is not a record, it is well above the average of 16.8 over the last 25 years. Some people are ignoring the valuations saying that the companies are worth these higher values, but as I said they are well above historical averages. The other problem is many of these popular names pushing the indexes higher are crowded trades and it seems like everyone is in those stocks. The problem is, if almost everyone is in those stocks and there is a pullback for any reason, there are not many people that have extra capital to step in and buy more. We have also talked about margin hitting a record high of $1 trillion and the problem here is if people have margin on their accounts, they could be hit with margin calls perhaps taking away what little cash they had left or they could be forced to sell out of the stock, which would create more downward pressure. No one knows what will cause the bad news for a fall, but it will likely come out of left field. That could then lower future expectations and that is when valuations will matter. The decline could be larger than people realize. It’s always important to understand what you are paying when you are buying stocks. Remember they’re not gambling chips; they are small pieces of large companies that trade based on valuations. Does the BLS need to change the way they calculate the job numbers? While we know the labor market has been softening, I was quite surprised to see annual revisions to nonfarm payrolls data for the year prior to March 2025 showed a drop of 911,000 from the initial estimate. This is a huge change considering the average pace of seasonally adjusted employment gains went from 147,000 jobs a month over the period to a bit over 70,000! This means instead of adding about 1.8 million positions as originally reported, the U.S. economy created just 847,000 jobs. It also marked the largest preliminary revision on record going back to 2000 and when looking at it as a percentage of total jobs lost the revision represents the largest since 2009. To be clear, while this is troubling, this is not the final revision, and it is just the preliminary part of an annual process in which the BLS updates the job figures from its monthly employer survey using more comprehensive data from state unemployment tax records. The official revision will come in February, and large changes can still occur. As an example, last year's August revision of negative 818,000 was revised to a final reading of negative 598,000 in February of this year. With how much technology has changed, I would expect these monthly reports would get more accurate over time, not less. Maybe instead of relying on a survey of about 121,000 employers there is a better way to get this data? The BLS pointed out that the revisions were so large because businesses within its survey reported higher employment in its survey than they did in their quarterly tax reports and that businesses that responded to its survey had stronger employment than those that had been selected for the survey but didn’t respond. While this all may seem extremely troubling, I have continued to question how payroll gains could be so large without a good pool of people to fill those jobs. I still believe that though the labor market has softened more than we initially thought, I still believe the economy is in an alright spot considering the unemployment rate remains historically low. Does the de minimis rule affect you? You may have never heard of this rule before and if you’ve been buying packages online that were less than $800, you probably didn’t realize that they could enter the US tariff free. Well, that has now changed, and you may have to pay tariffs on that small package depending on the country of origin and the type of product it is. It also is important to know how the product was delivered, did it come through a post office or a commercial carrier like UPS or Federal Express. If you buy small items overseas such things as fishing poles, pens, or small statues, and even some types of shoes, you may have to pay additional tariffs when your package arrives. It’s a little bit unclear about who and when the tariff will have to be paid. It is possible that you could receive a package from UPS and when they come to your door, you may be asked to pay the tariff right then and there. Whether you knew about it or not. You will have the right to refuse the package. When you are shopping online, you should look on the seller's website closely to see who is responsible for paying the tariff and when. The tariff can be very high if you’re buying yoga pants from Vietnam at $98 a pair, your tariff would be 56% or about $55. Expecting a child and you found a great stroller online coming from China for $399. Be prepared to pay over $540 because of the 36% tariff. If you’re trying to stay healthy and found some great deals on nutritional supplements from Canada that were only $37, by the time you pay the tariff of 63% you’ll be paying $60 for those nutritional supplements. Inflation reports likely cements Fed rate cut next week The Consumer Price Index, also known as CPI, showed August headline prices rose by 2.9% compared to last year and core prices, which exclude food and energy, saw an increase of 3.1%. Both readings were essentially in line with market expectations. Annual core price inflation was essentially in line with last month's reading, but the headline did climb from an annual rate of 2.7% in July and the August number marked the highest reading since January. This was largely due to the fact that food prices rose 3.2% compared to last year and energy is no longer providing the same benefit it did earlier in the year. Energy has largely seen deflation this year, but in August there was an annual increase of 0.2%. Gasoline was down 6.6% compared to last year, but electricity prices increased 6.6% and utility gas service rose 13.8%. What I would consider is that tariff impacted products are still surprisingly seeing little change. Apparel was up 0.2% compared to last year and new vehicles only saw an increase of 0.7%. I was surprised to see prices for used cars and trucks increase 6% though. As I've said for many months now, shelter continues to provide a large headwind in the inflation report as prices climbed 3.6%, but the positive here is it has been steadily declining, and it is well off the recent peak around 8% at the beginning of 2023. We also got the Producer Price Index, also known as PPI, earlier in the week and that came in largely better than expected. Headline prices showed an increase of 2.6% compared to last year and core prices climbed by 2.8%. Looking at all the inflation data from this past week, I wouldn't say it was overly impressive, but I believe it does enough for the Fed to justify starting rate cuts considering the concerns that are being discussed around the labor market. Is Elon Musk worth $1 trillion? Tesla is asking shareholders to approve another huge pay package for Elon Musk. Based on the maximum payout assuming the share count remains, the total package would be worth $975 billion. Looking at the details, it is quite ambitious so I'd say if he ends up hitting these targets maybe he would be worth that amount. Operational milestones for the award include: 20 million Tesla vehicles delivered, 10 million active FSD Subscriptions, 1 million robots delivered, 1 million Robotaxis in commercial operation and a series of adjusted EBITDA benchmarks. The more challenging milestones revolve around the market cap of the company. These milestones are separated into 12 tranches with the first benefit coming at a market cap of $2 trillion and the final benchmark coming at a market cap of $8.5 trillion. I believe to achieve these lofty goals Telsa will have to execute on both Robotaxis and their Optimus robot. In the past Elon has said he believes Optimus can make Tesla a $25 trillion company and he recently said roughly 80% of Tesla’s value could eventually come from Optimus. These goals would be needed as I believe the car business will not be enough to get him to even a $2 trillion market cap, especially considering the problems they are having with slumping sales and declining market share. It was just reported the Telsa accounted for just 38% of total US EV sales in the month of August. This was the first time its market share has fallen below 40% since October 2017 and it is well off the records it had over 80% just a few years ago. From an investment perspective, Elon has proven me wrong before, but this stock is definitely one of the highest risks/speculative bets that investors can make. For me it's more like gambling and while it's entertaining to watch what Elon says and does, I wouldn't touch the stock.
You don’t always need to pick the hot technology stocks to get great returns Investing is very emotional and it’s always nice to be part of the crowd and buy the hot stocks like Apple, Alphabet and Amazon, but they are not always the top performers. Sometimes your boring, undervalued companies can do very well. As an example, Apple over the years has performed nicely, but over the last five years the gain was 114%. Not a bad return, but if you held a boring company like Tractor Supply over the same five years, you would have a gain of 119%. Even an old insurance company like Allstate over the last five years was up 115%. Five years ago, if you saw the value in a company called Tapestry, which owns Coach and Kate Spade, your return was over 545%. Apple's not the only big tech company that was surpassed by these boring companies. If you look at Amazon over the last five years, you’ll see a return of only 49%. One other area that is often discounted is that many of your boring companies are also paying dividends and generating cash flow that can be used to purchase other equities on sale. You may be thinking Apple does pay at dividend but it's important to note the yield is only 0.45%. Sometimes being boring is good and not being so concentrated in the hot stocks can pay off in the long run. I especially think this will be the case as we look out over the next 5-10 years! Another weak job report likely solidifies a Fed rate cut August non-farm payrolls increased by just 22,000, which was well below the estimate of 75,000. This weak report also comes with another month of negative revisions as employment in June and July combined is 21,000 lower than previously reported. Healthcare and social assistance continued to lift the headline number as the sectors added 31k and 16k jobs respectively. Many other areas in the report actually saw declines with payrolls in construction falling 7,000, manufacturing declining 12,000, and professional and business services dropping 17,000. Government also saw a decline of 16,000 jobs and I worry this is a ticking time bomb since employees on paid leave or receiving ongoing severance pay are counted as employed in the establishment survey and those that opted to take the government’s offer at the beginning of the year will start coming off severance pay as the deal lasted through September. The most recent data I saw was that 75,000 federal employees took the offer, but not all were accepted into the program. I guess we will see the actual data and its impact over the next couple of months. With the weakness, I was surprised to see leisure and hospitality produce a gain of 28,000 jobs in the month. While much of this sounds concerning, the unemployment rate held relatively steady at 4.3% and that doesn’t incorporate the fact that 1.9 million or 25.7% of all unemployed people were jobless for 27 weeks or more. My belief is that many of those that have been unemployed that long are skewing the data as I can’t imagine they have been looking for a job that hard. With the unemployment rate low and deportations potentially weighing on the supply of workers, I just don’t see how it would be possible to maintain strong job growth given the limited supply. Because of this I still don’t remain overly concerned by the weak showing. Even with my lack of concern, this will likely lead to a Fed rate cut this month with markets now essentially putting odds for a 25-basis point cut at 100% and even a 50-basis point cut is now on the table with markets putting those odds at 12% after the job print. That’s up from a zero percent chance on Thursday. Should you panic over the job opening data? The Job Openings and Labor Turnover Survey showed job openings fell to 7.18 million in the month of July. This was below the estimate of 7.4 million and also marked the lowest reading since September 2024. It was only the second time since the end of 2020 that job openings came in below 7.2 million. While this may sound troubling, I believe it just illustrates how crazy the labor market got after Covid. If we look at job openings before 2020, nearly 7.2 million openings would have been a great number. In 2016, job openings averaged 5.86 million; in 2017, job openings averaged 6.12 million; in 2018, job openings averaged 7.11 million; and in 2019, job openings averaged 7.15 million. So, while the headline may sound troubling, I still believe we could have job openings fall into the low 6 million range and it wouldn't be problematic, especially given the fact that unemployment remains extremely low. Even with that, I do believe the Fed will use this as further evidence of a softening labor market and that will give them the excuse to cut rates at the meeting this month. I'm still not convinced that is the right move, but we did hear from Fed Governor Christopher Waller, who is supposedly on the short list to replace Powell as Fed chair, that he believes there should be multiple cuts over the next few months, saying interest rates today are perhaps 1.0 to 1.5 percentage points above their “neutral” level. American luxury brands are destroying Europe’s luxury brands It appears that European luxury brands like Gucci, Hermes and LVMH have increased their prices beyond what the average consumer is willing to pay. Currently, American consumers are spending the lowest share of discretionary income on luxury goods since 2019. The European luxury brands seem to have their heads in the clouds thinking American consumers would pay any price for a luxury purse from Europe. I think they have now discovered that the American consumer has reached their limit. Two luxury American brands have benefited from the ignorance of the European luxury brands. Both Ralph Lauren and Tapestry, which owns Coach and Kate Spade, have seen their sales increase. A chart of these luxury brands stocks shows European brands dropping while American brands have been increasing. One may be thinking now is the time to step in and buy Tapestry or Ralph Lauren, but with the recent stock increase they are no longer a great value as Ralph Lauren trades at over 20 times forward earnings and Tapestry is now over 19 times forward earnings. I would take a different side of the coin as I believe investors should understand that the European luxury brands will likely not just sit on their hands and do nothing and they will likely try and win back market share. With the increase in prices over the years I’m sure the profit margins are very fat, and they may have a good amount of space to do some heavy discounts to get their market share back. Both Tapestry and Ralph Lauren are dealing with the current tariff situation and that could hurt their profit margins going forward as well. On a side note, in years past we have warned people paying the high prices for European purses that they would not appreciate as much if at all. I have not researched it, but I feel pretty confident that if sales are down as much as they are, the resale on those expensive purses has probably dropped as well. Financial Planning: Mortgage rates reach 2025 low Mortgage rates have fallen to their lowest level of the year, reaching levels not seen since last October. Throughout 2025, 30-year mortgage rates have fluctuated between 6.5% and 7%, and as of Friday, September 5, they dipped as low as 6.29%. While this presents an opportunity for buyers and homeowners considering a refinance, caution is warranted. Rates are still likely to experience volatility even as the broader declining trend continues over the next several years. In 2024, mortgage rates actually rose at year-end despite the Federal Reserve implementing three rate cuts. In 2025, it is widely expected that the Fed will cut again in September, with additional cuts likely by year-end. This current window of lower rates may be worth taking advantage of, but paying upfront points may not be wise just yet, as there will likely be future opportunities to capture even lower rates. Warren Buffett’s Kraft Heinz deal is coming apart after 10 years! Not everything Warren Buffett does turns gold and he readily admits that he does have mistakes. In 2015 he and a Brazilian private equity firm called 3G Capital had the idea to merge Kraft and Heinz, which they expected to do very well. Over the last 10 years, the stock has struggled though as it is down over 60%. It currently has a nice dividend yield of 5.7%, which helps reduce the loss, but needless to say investors have not been happy with the results from the combined entity. Kraft has been putting more into its faster growing businesses such as hot sauces, dressings and condiments, which consumers have increased their spending on. However, the other part of the business, which includes processed foods like lunch, meats and cheeses, has been in decline over the years. The announced split will create two new companies that are not currently named, and the hope is that the two companies will be worth more than the current $30ish billion market value. One company will primarily include shelf-stable meals and will be home to brands such as Heinz, Philadelphia and Kraft mac and cheese. This part of the business accounted for $15.4 billion in 2024 net sales, and approximately 75% of those sales came from sauces, spreads and seasonings. The second company would according to Kraft, be a “scaled portfolio of North America staples” and would include items such as Oscar Mayer, Kraft singles and Lunchables. That company would have had approximately $10.4 billion in 2024 net sales. Executive chair of the board, Miguel Patricio said, “Kraft Heinz’s brands are iconic and beloved, but the complexity of our current structure makes it challenging to allocate capital effectively, prioritize initiatives and drive scale in our most promising areas. By separating into two companies, we can allocate the right level of attention and resources to unlock the potential of each brand to drive better performance and the creation of long-term shareholder value.” Although this deal isn't expected to close until the second half of 2026, Warren Buffett and Berkshire Hathway have said they are disappointed by the announcement. This is important considering the fact that Berkshire remains the largest shareholder with a 27.5% stake in the company. The question is, could his disappointment lead to the selling of shares? While Buffett may not like it, there have been other successful recent splits like Kellogg and General Electric. Keurig Dr Pepper is also unwinding their 2018 transaction, but it is still unknown if that will be another success story. One reason businesses will acquire another company is to try to diversify their business and enhance the earnings going forward. Unfortunately, sometimes the opposite happens, and it creates more complexity that leads to business struggles and a suffering stock price. Normally, when the split is announced, the stock will increase in value as investors see the opportunity for more value, but that was not the case with Kraft as it looks like Buffett's disapproval created a large overhang and resulted in a stock price that fell more than 7% after the announcement. Would you fly with an airline that filed bankruptcy twice in one year? The airline I’m talking about is Spirit Airlines, which filed for bankruptcy in November 2024 and came out of bankruptcy in March of this year. It exchanged almost $800 million of corporate debt into equity. The executive team from Spirit is now saying they should’ve renegotiated the expensive leases they had before, and they still have over $2 billion in debt on their balance sheet. The management team also blames the airline market. They estimated that the discount airspace would rebound for them, but it did not. Your bigger airlines like United, Delta and American do have less expensive basic economy tickets, but they also have more profitable sales from premium seats and destinations around the world. Spirit seems to think that maybe management from Frontier Airlines will maybe pick them up even though they had no interest before. They also feel that maybe another airline will be interested. We will see stranger things have happened, but I know as a consumer I would not want to buy any tickets from Spirit Airlines that go out more than a few weeks because you could be holding a ticket that is worthless from a bankrupt airline. Water shortages around the globe sound scary, could it reduce meat and dairy production? It is rather scary that based on a report from the Global Commission on the Economics of Water, in just five years the demand for freshwater is set to exceed supply by 40%. Meat and dairy farms use water to hydrate their animals, grow crops to feed them and when the heat gets high, they use water to cool them off. The American Farm Bureau Federation says that farmers need to work on reducing the water consumption by up to 40% by getting moisture directly to each plant using drip irrigation. The reason why watering plants is so important is if there’s not enough water to grow the crops, then the farms and businesses will have to buy more feed, which is more expensive and would add to the cost of meat and dairy production. The American Farm Bureau Federation is hopeful that advancements in humidity sensing technology will help farmers understand how much each plant needs down to the last drop. Once again, technology will probably save consumers a lot of money going forward by helping farmers become more efficient in raising crops and animals.
Yet another warning on private investments! I remember hearing about a company by the name of Yieldstreet a few years ago and how it was a new way for smaller investors to get access to private investments and diversify away from stocks. The company promoted their platform with the tagline, “Invest like the 1%.” Unfortunately, it is now coming out that several investors may have lost everything they invested in the platform. One gentleman shared with CNBC how he invested $400,000 in two real estate projects: A luxury apartment building in downtown Nashville overseen by former WeWork CEO Adam Neumann’s family office, and a three-building renovation in the Chelsea neighborhood of New York. Each project had targeted annual returns of around 20%. After three years, Yieldstreet declared the Nashville project a total loss, which wiped out $300k of his funds and the Chelsea deal needs to raise fresh capital or it will face a similar fate. Unfortunately, he is not alone and CNBC reviewed documents that show investors put more than $370 million into 30 real estate projects that have already recognized $78 million in defaults in the past year. Yieldstreet customers who spoke to CNBC say they anticipate deep or total losses on the remainder. Looking into this platform in more detail, it’s crazy what they were doing. Their portfolio doesn’t just consist of real estate as there is also private equity, private credit, art, crypto, and other less common investments. It appears Yieldstreet makes money by charging a management fee of around 2% on invested funds. The craziest part to me though was in several cases, Yieldstreet went to its userbase to raise rescue funds for troubled deals and told members the loans combined the protections of debt with the upside of equity. But in one case, a $3.1 million member loan to rescue a Nashville project was wiped out after just a few months! One of the big problems with these platforms is professional large investors are more disciplined when looking at investing in this space and the smaller players may be getting the bad deals that are passed over by the more established players. It’s unfortunate to see people lose money like this, but this is why I avoid the private investment space. There is just not enough clarity and in many cases these platforms seem to be in it for themselves rather than for their investors. I will continue to invest in good, quality equities as I worry, we will continue to hear stories like this from investors who put money into private investments thinking they were investing in a safer asset, just to find out years later there is nothing left. Will tariffs hurt this holiday season? Here we are already at the end of August and before you know it, you’ll be thinking about putting out the Christmas lights and decorating your home. For the past few years, we have seen growth in holiday sales, but this year could be different as it appears from recent conference calls from CEOs at Walmart, Home Depot and Target that they are seeing the tariff increases starting to come through. During his recent conference call, the CEO of Walmart, Doug McMillon, said that the impact of tariffs has been gradually increasing to protect the consumer, but he also said that the company is seeing cost increases each week as it rebuilds inventories with new products post tariff. He also mentioned that they may not be able to protect the consumer from rising prices much longer. What is also bad about this is that retail sales may rise, but consumers will receive less product to put under the Christmas tree considering sales are not adjusted for inflation. This could be the delayed inflation that Jerome Powell and the Federal Reserve has been waiting for and unfortunately, it may show up when people begin shopping for Christmas gifts. Maybe there should not be an interest rate cut in September after all? Should you work in retirement? When many people are in their working years, they can’t wait to retire so they can do what they want to do. For some people that retirement works out well, but science has shown that there’s health benefits to working in retirement along with financial benefits. The health benefits would include more physical activity as you’re not laying around the house or sitting in the rocking chair on the front porch. Instead, you’re moving around walking places and staying active. Working also helps you stay connected with other people, which has been proven to extend your life. The financial benefits from working in your later years would include taking out less from your retirement accounts to maintain a good lifestyle. Also, you can hold off on Social Security which means you’d get a larger Social Security check when you do decide to collect. The type of work you do depend on you and some people in retirement have started a second career that is a job that they always wanted to do. Some people just work part time to stay active and involved. If you’re in retirement, you can take a low stress job because you don’t really need all the income to cover your expenses as long as you have the financial accounts/investments to do so. Financial Planning: The challenge of creating retirement income For decades, American workers relied on pensions, but today retirement security largely depends on defined contribution plans like the 401(k), where the burden has shifted to the individual saver. The real challenge comes when it is time to turn a pile of assets into a reliable, inflation-adjusted income stream that can last 20–30 years. Some retirees look to CDs and Treasury bills, which are guaranteed and currently pay about 4% interest, but they offer no appreciation to offset inflation and yields will likely decline as short-term rates drop. Corporate bonds may provide a slightly higher return, but they come with interest rate, credit, duration, and reinvestment risks that often outweigh the modest extra yield. Others consider annuities, which can create a pension-like income stream, but these require handing over principal, and because they are designed by insurance companies, the terms typically favor the provider rather than the investor. High-dividend stocks can also be appealing, but they may be a trap, as struggling companies often have elevated yields due to falling stock prices, which can be compounded further if the dividend is cut. On the other end of the spectrum, broad market indexes like the S&P 500 and Nasdaq have been popular for growth, but their dividend yields remain low, around 1.2% and 0.8% respectively, forcing investors to sell shares for income, and poorly timed sales can shorten portfolio longevity. Even dividend aristocrats, known for steadily increasing payouts, currently only yield about 2% to 2.5% on average. There is no simple solution, but one truth stands out: accumulating assets is very different than generating income from them. Retirees need a clear income plan before leaving the workforce in order to maximize both security and enjoyment in retirement. Why Bitcoin could never be a world currency One of the reasons that Bitcoin and cryptocurrencies increase in value is because of the thought that they will become a world currency someday. Let me explain one of the many reasons why that will not happen. As an example, let’s take a look at the Euro and how difficult it was to get the European countries to adapt to just one currency and let’s not forget about Brexit, where Great Britain dropped out of the European Union and the Euro? Think about this, the European Union is just 27 countries but there’s 195 countries in the world. There are many different income gaps, difference cultures and let’s not even talk about the differences of opinion on politics. There is currently an attempt at a global currency of sort known as the International Monetary Fund, better known as the IMF, which introduced the SDR, which are special drawing rights. There is problems with this already where it requires the United States to re-dominate its treasury bills into SDRs for any foreign central bank that asks and make a legally binding international agreement to reduce the US deficit whenever it is deemed excessive or to increase it whenever it is deemed insufficient. That’s what will put an end to the SDR‘s before it gets very far. What large government would want to be controlled by the world let alone have no control over a currency like Bitcoin? Who benefits from private investments in your 401(k), not you! I keep seeing more and more of a push to allow private investments in credit, equity and real estate into your 401(k). Let me give you a list of who the big benefactors are if private investments are allowed in your 401(k) and yes, it is the big fat cats on Wall Street. There are six main players: Apollo Global, KKR, Carlyle Group, Blackstone, Ares and Blue Owl Capital. These companies rake in high fees with Morningstar estimating them around 2.5% on average. I was disappointed on August 7th when President Trump signed an executive order that instructed the Department of Labor and the Securities and Exchange Commission to make it easier for company plans to offer private assets. A spoke person from the White House, Taylor Rogers, said the intent of the order is to reduce the regulatory burdens and litigation risk that impede American workers from achieving a competitive return. Considering the return for equities of the last several decades, I believe nothing could be further from the truth when looking at that statement. On August 12th, the Department of Labor rescinded a Biden era statement that said most companies are not likely suitable to evaluate the use of private equity investments. It’s a shame that has been reversed because most the business owners that I know don’t have the time to analyze investments enough to make decisions to allow them in the 401(k). Ultimately, employers have a fiduciary responsibility to their employees to make sure their retirement is safe and I worry if employers get to loose in allowing these into 401k plans, they could open themselves up to lawsuits down the road. There is hope as there’s an advocacy group called Americans for Financial Reform that says without strong guardrails, ordinary savers will pay the price of diminished resources in retirement and will more than likely be left holding the bag with these expensive private investments. I do hope the Department of Labor is opposed to making a quick issue on guidance and hopefully they will take their time in drafting formal rules. This could take months and after that it could take employers years to do the due diligence on these investments. Hopefully by that time, people will come to their senses as we may see another liquidity crunch like the Blackstone BREIT had in 2022 and 2023 or even potentially a collapse in some of the popular private investment funds. Why is the union trying to get into JPMorgan Chase? I would not have believed it unless I read it myself but yes, there’s a union called JPMC Workers Alliance that is trying to unionize the 300,000 employees at the big bank. I see no benefit at all for the employees and instead see it as more of a fee generator for the unions to collect union dues. It is doubtful this will go anywhere since employees overall are very happy at the bank and view it as a great place to work with good work/life balance and opportunities for advancement. The union‘s big gripe is in January all employees were required to go back to the office five days a week. The United States finance industry has the least amount of unions of any private industry. According to the Bureau of Labor Statistics, unions in the financial industry for the US is less than one percent at 0.8%. There are currently about 200 people that formed a private group about unionizing, but they have a long way to go to get the union into JP Morgan Chase. Well known CEO, Jamie Dimon, is defending his five-day work week in the office saying that when you work from home it is hurtful to younger generations and that virtual meetings are really nothing more than a bunch of distracted colleagues. He has said before, that before the return to office change, on Fridays he couldn’t get a hold of people by phone. It seems people these days feel like they deserve the freedom to choose when and for how long they are in the office. I don’t know where some of these people in their group get their information, but I’m sure many of them have never run a business. I know myself; I can’t count the number of times I needed to go to one of my employees in the office to speak about something right then and there and many times needed to actually see what they had. Waymo’s autonomous taxi services will now be available in New York City Waymo, which is owned by Alphabet, received approval to test up to eight autonomous vehicles in Manhattan and Brooklyn through late September, but at this time they are required to have a trained AV specialist behind the wheel at all times. If you’ve been to Phoenix, San Francisco, or Los Angeles, you may have seen these weird looking vehicles scooting around the streets. Waymo has now completed over 10 million rides in five major US cities and they claim to have a very strong safety record. New York City is not the end or the last city for Waymo as the company did say earlier this year, they plan on being in 10 new cities, which includes Las Vegas and San Diego. It seems we’re getting closer and closer to having autonomous driving taxis as a more normalized option. If you have not done so already, you may soon be getting into a car and there will be no one in the front seat. That will be kind of weird don’t you agree? Ivy League schools don’t appear to be the best investors You may beat yourself up over some investment you did that lost money. That investment may have been sold to you because of no market fluctuation and it sounded like a great idea. It appears the Ivy League endowment funds are pretty much in the same boat. Because of the excitement around private investments, endowments are really short on liquidity if they need money. Endowment funds have been moving sometimes over 50% of an endowment into non-liquid investments like private equity, private real estate, and private credit. Maybe the managers are younger and forgot about the 2008 Great Recession and how important it was to have liquid investments in the portfolio. They have really gotten away from the standard portfolio of 60% stocks and 40% bonds, which has brought investors a decent return in the long term. In fiscal year 2024, the National Association of College and University Business Officers revealed that endowments with over $5 billion in assets only held 2% in cash or money markets, 6% in bonds, 8% in US stocks and 16% in international stocks. If you do the math, you’ll see that only 32% of the portfolio was liquid, which means the other 68% was in non-liquid assets. Because of the investments in non-liquid assets, the endowments have had to borrow money to pay obligations. Brown with a $7.2 billion endowment borrowed $300 million in April and $500 million in July. Northwestern borrowed $500 million and Harvard borrowed $750 million in April. Also, in the spring of 2025 Harvard had to sell $1 billion of private equity funds at a 7% discount to the stated value. If the economy does hit a slow period or a recession, it could really wreak havoc on these endowment funds. I would say, don’t invest like the Ivy League funds, instead find good quality equities that are trading at reasonable prices and that pay nice dividends. I believe you’ll be far better off than the Ivy League folks. Europe is far behind in their economy 500 years ago, European nations conquered and ran as much as 80% of the planet. They shaped the globe as their wars killed millions of people and surprisingly it was the birth place of modern capitalism and the industrial revolution. Over the last 15 years though, their economy has essentially been treading water. Their share of the global economic output was 33% 20 years ago and as of 2024 it was only 23%. It is estimated to be their lowest portion of the global economy since the Middle Ages. Household wealth growth has also been a problem for Europe as it has grown by a third as much as Americans since 2009. Per capita GDP in the US is about $86,000 a year versus $56,000 a year for Germany and only $53,000 for the UK. You may think Europe is a great place to live, but Americans have a far higher standard of living. Here in the United States, we have over 50% more living space on average per person and four out of five Americans have air conditioning and clothes dryers at home. This compares to Europeans, where the numbers range between one-fifth and one-third. The high tax revenue needed to finance their welfare-spending could be causing problems. I was blown away by the fact that Europe’s welfare states account for half of the planet’s welfare spending. Looking at tax revenue as a share of economic output shows problems. It is currently around 38% in Germany, 43% in Italy, and 44% in France. The US is only at 25%. Their politics subsidize vacations, back to school equipment for children and public transit is free for everyone. A big problem is their workforce is at risk of declining due to an aging population. The average European is nearly 45 years old, compared with 39 for the average American, and the continent’s working-age population is predicted to fall by nearly 50 million by 2050. The question is who will pay all the tax revenue if there are less people working and more people collecting? We have our problems here at home in the US, but I worry Europe is on a troubling economic path. I was just in Europe, a couple weeks ago and what I saw of Spain and Portugal, I was not that impressed. It seemed every single piece of blank space new and old was covered with graffiti and I also noticed at the airport in Munich it was really dark as they appeared to only use half the lights to save energy. One may like to visit places in Europe for the history, but I believe over the next 10 years they’re going to have a meeting with reality that you cannot keep giving your citizens free stuff as less and less people work.
How much will EV car makers lose in credits? The nations Corporate Average Fuel Economy, or CAFE, standards are still in place; however, penalties for violating those standards have been removed. So obviously there’s no incentive for any car maker to abide by them. The National Highway Traffic Safety Administration is focusing on standards to try to make cars more affordable again. But the big EV car makers, I will call them the big three which are Tesla, Rivian, and Lucid will have some difficulties. The credits were tradable and the EV car makers were making a lot of money selling the credits to car makers who were not meeting the required standards. Tesla will probably be OK, but I think their stock could be at risk because the credits have amounted to more than $12 billion in revenue since 2008 and that essentially is pure profit. In the most recent quarter Tesla said a loss of the credit revenue will reduce revenue by about $1.1 billion. Rivian, whose stock price in May finally showed some sign of hope trading above $16 a share has now dropped back down to around $12 a share and has said they had received over $400 million in revenue over the years and the credits accounted for 6.5% of the total revenue in the first half of 2025. I do believe with the loss of the credits and lower gas prices, Rivian may have trouble staying afloat in future years. Lucid will probably be hurt the most as they said the credits represented a significant share of their revenue. I have not looked at this company recently, but I still believe their balance sheet looks very risky and this could be the final nail in the coffin for this business. A couple years ago the stock was trading around four dollars a share and it is now trading just above two dollars a share. I’m pretty confident we will not see this company around in the next two or three years. The winners in this situation are the legacy automakers that were buying the credit, GM for example has spent $3.5B since 2022 to purchase CAFE credits. Stay away from interval funds! I have been seeing more of these interval funds when we take over accounts for new clients and let me tell you I am not a fan of them. They appear to be normal mutual funds, but when you go to sell them, you find out you can only sell once per quarter. The other problem is when you enter the sell, the next day you realize you still own shares in the fund. The reason for that is product’s unique structure typically allows investors to redeem just 5% of a fund’s assets! I’m sure most people have no idea when their advisor or themselves buy these funds that they will be locked in them for years to come. For example, I first saw these about 4 years ago with a new client and we still have not been able to fully exit the position. The reason withdrawals are limited is because the funds generally invest in illiquid assets, so managers want to make sure investors can’t exit in masse and force the manager to sell securities at fire sale prices. As many of you know, we are not fans of illiquid investments because if things go south, you have no way of exiting these positions in an efficient manner. The allure here for many is that retail investors with less investible assets generally don’t have the same access to as many private equity, venture capital, real estate, and private debt deals, so interval funds enabled those investors with minimums as low as $1,000 to gain exposure to the space. I would not recommend investments in any of those assets, but it just appears these are sold as a way for people to invest “like the wealthy”. A big problem here is the fees are just crazy! According to Morningstar, of the 307 interval fund share classes currently available, the median fund’s total expense ratio is 3.02%. A big reason for the high fees is they include the cost of leverage, which these funds use in many cases to amplify returns…. That doesn’t risky! Even if we exclude leverage costs though, the median expense ratio is still 2.18%. Brian Moriarty, a principal on Morningstar’s fixed-income strategies team had some interesting things to say after researching the space. He concluded before deducting any fees or incorporating any leverage, there was little difference between private-credit interval funds and public bank loan mutual funds and exchange-traded funds. However, after incorporating leverage, interval funds have beaten traditional loan and high-yield bond funds, as they’ve had about 1.3 times exposure on average to such debt in a rising market, but the problem is they will also have that exposure in a falling one. Needless to say, you will not fund us buying any of these funds in our portfolios at Wilsey Asset Management! ESPN just launched a new streaming product and I’m more confused than ever! I like streaming because it gives more flexibility in choosing what you want to watch, but gosh there are so many different apps and so many different bundles to choose from now. I believe it has just gotten more and more confusing and companies seem to keep increasing the prices for their services. Just this year Netflix increased their prices for various tiers, but the tier with ads went from $6.99 to $7.99, Peacock went from $7.99 to $10.99, and Apple just recently went from $9.99 to $12.99. Apple has been aggressive with pricing considering in 2022 you could get the service for just $4.99 and I personally believe it may be the worst value as I don’t think their content justifies that price point. In terms of new services, ESPN just launched it’s new service to allow consumers access to its programming without needing to get cable, but the price is quite high at $29.99 per month. Fox also just announced its new streaming service for $19.99 per month. You add these services to other like Disney+, Paramount+, HBO Max, and Hulu and the costs seem to just get quite ridiculous. For me I don’t use all the services so I save money on streaming vs traditional cable, but during football season they really get you. Since the league splits its games among so many providers you’re almost forced to have Fox, ESPN, Peacock, Paramount+, Amazon Prime, and now even Netflix carries some of the games. I’m not even going to throw in Sunday Ticket into that mix, which now costs almost $480 for returning users. It’s now gotten to the point where I wish these sports leagues would just go direct to consumer to keep things simple. What do you think, has the complexities in streaming gotten out of hand? Financial Planning: Form SSA-44 to Reduce Medicare Premiums When you retire, your income often drops significantly, but Medicare bases its Income-Related Monthly Adjustment Amount (IRMAA) on your tax return from two years prior when you may have been earning much more. This can result in unnecessarily high Medicare premiums at the start of retirement. For example, in 2025, a married couple with income above $212,000 begins to trigger IRMAA increasing premiums by $1,000 to over $6,000 per person per year depending on how high the income is. If that couple retires and their income falls to less than $212,000, they would still be charged the higher IRMAA unless they file Form SSA-44 to report “Work Stoppage” as a life-changing event. By filing, Medicare will use their new, lower income to set premiums, potentially saving thousands of dollars per year. If you’re nearing retirement or have recently retired, beware of the Medicare costs and consider filing this form to avoid paying too much. A new week and another warning about risks with the S&P 500 Many investors feel comfortable with the S&P 500 because it keeps going up and investors feel that it will continue. We can’t tell you when it will decline, but I believe it will and let me give you some scary information when it comes to risks with the S&P 500. Technology now accounts for almost 35% of the index and that is an increase from 32% at the end of 2024. Seven years ago it was just 20%. You may be surprised by this, but tech companies like Meta, Alphabet, Amazon and Tesla are not considered technology companies. If you were to add those to the tech weighting, which I believe most people would consider them tech companies, technology makes up 45% of the entire index, that’s scary. Another concern with the overconcentration in the market is Nvidia with a market cap of $4.4 trillion, now accounts for 8% of the entire index. It’s crazy when you compare that number to the entire healthcare sector at $4.7 trillion and energy at $1.5 trillion, which is now just 3% of the index. With investing it is important to understand what price an investor is paying for the sales of a company. On a historical basis, paying 10 times for the sales of a business used to be considered way overvalued. Today, Nvidia trades at over 20 times 2025 sales and the hot stock Palantir is around 100 times sales. Healthcare, energy and financials are looking far more attractive trading at 15 times earnings rather than the top line sales. Tech companies trade at higher valuations because they generally have less expenses on capital expenditures like an energy company would have, but AI has changed that considering Alphabet will probably spend somewhere around $85 billion in expenses this year compared to only $52 billion in 2024. Meta is estimated to spend about $70 billion on capital expenditures, nearly twice the $39 billion it spent in 2024. No one knows when the big downturn will come, but I’m sure you’ve heard the old saying, the higher it goes the greater the fall. Investors need to be aware of what they’re paying for their investments and not think that it will continue to go up just because it’s gone up in the past. Is your 401(k) worth less than you would like? I’m sure many people would like to see their 401(k)s much higher than they are, but unfortunately that wish is not a reality for many people. Even though 401(k)s across the US now total over $12 trillion, there are still people that are way behind in saving for a good retirement. It is not the fault of the 401(k), it is generally the fault of the saver/investor. Why? Such things we have talked about in the past like not rolling over your 401(k) when you go to a new employer or taking early distributions for what you thought was an emergency. Workers who are 45 to 60 years old known as generation X have an average balance in their 401(k) of $192,300. It is not that much higher for baby boomers who are at or are very close to retirement and have an average balance of only $249,300. At our firm, we have used a 6% distribution rate for our income accounts over 25 years and even at that rate a retiree based on the baby boomer’s average balance would only receive $1245 per month in retirement. The 401(k) is a long term investment and it requires some sacrifice and discipline, but in my mind there’s no reason why a 25-year-old earning $60,000 a year should not become a 401(k) millionaire. Besides the obvious of not investing enough or taking money out during the accumulation phase of your retirement, poor investment decisions are a big problem as well. If a 401(k) investor can average even seven or 8% per year and invest 15% of their salary, which would include the company match, a $1 million 401(k) is easily obtainable. People become too emotional in their 401(k) when they see a drop of 10 maybe even 20% and they panic and move everything to the money market or bonds, forgetting that retirement is five, 10, maybe 15 years or farther away. We also tell people that even when you retire at 65 you still have at least another 20 or 30 years of investing and should not be all in bonds or money markets during retirement. If you have a good advisor, they should be there for you when times get difficult, which they will, and not just tell you to stay the course, but explain to you in understandable terms of why your investments may be down now and why they are still the right investments for the long-term. Target date funds have been pushed by many as an easy way to hit your retirement goal and nearly 60% of plan participants were invested in a single target date fund in 2024. That is an increase of 50% from just 10 years ago. The problem with target date funds is the fees can be excessively high and even if you pick the correct year for your target retirement date, you may find that you’re invested too conservatively and not have enough exposure to quality equities. At our firm, Wilsey Asset Management we do not recommend target date funds but more of a managed approach using value investing, which has proven to be a great investment strategy for many years. A warning for 401(k) investors! There is a lot of pressure to allow private investments into 401(k) plans and I believe these will benefit the fat cats on Wall Street more than the individual investor. I highly recommend that you avoid these high fee, high risk investments. The federal government is reducing taxes and some states are now going to increase their taxes. Not all states will do this, but if you live in Washington, Rhode Island, Connecticut, California, or New York, in 2026 you may see higher state taxes. The states will generally be going after couples with a combined income of over $500,000 or individuals making around $250,000. The way states will likely try to get more revenue is by increasing tax rates on annual incomes, capital gains, or putting levies of some sort on luxury vacation homes. We won’t even imagine what their plan is for estate taxes. It is possible that even though many politicians of these states don’t think it will happen, many high income people may decide to move to another low tax state. I have seen this happen before and with states like California already having the highest tax bracket at 13.3%, if they increase the tax rate further and start taxing people on their second homes, it may make sense and save people tens of thousands of dollars by moving to another state. I think politicians are blind to this and don’t realize that these high-income individuals spend a lot of their income on purchases and services. When they leave the state, that is revenue that other businesses have lost and that does not include the lost revenue on sales tax and wages other people earned from those purchases and spending that came from those higher income individuals. Stock buybacks could be the highest in over 40 years With markets at all-time highs, why would public companies be buying back their stock? It is unfortunate, but many times they’re not looking at the true value of what they’re paying for their own stock but are trying to boost their stock price by buying their own stock. It is forecasted for 2025 that stock buybacks will hit $1.1 trillion and that is a high going back to 1982. However, if you look at the number on an inflation adjusted basis, I think you would find it is not that spectacular. Also, with market capitalizations higher for many companies, the percent of the outstanding shares being purchased may not be that large. So, while the headline looks good about companies buying back a higher dollar amount of stock, a smart investor will look at how much the company is paying for the stock and how much the buyback is reducing the shares outstanding. Bed Bath and Beyond is returning, but not in California Two years ago, Bed Bath & Beyond filed for bankruptcy as the business struggled with inventory, debt and cash flow and they had to close their doors. You may remember Marcus Lemonis, who was the star of the show on CNBC called the Profit. He’s a smart businessman and has run many businesses and now he is the executive chairman of the new Bed Bath and Beyond. He is very excited about bringing Bed Bath & Beyond back and will be opening roughly 300 stores nationwide within the next couple years. The first opening will take place in Nashville, Tennessee on August 29th and I was glad to see him stand up to California and say they will not be opening any stores in the state because California is one of the most over regulated, expensive and risky environments to run a business compared with anywhere in the United States. He says California has made it harder to employ people and make a profit as a business. He was accused of not wanting to pay his employees, but he said that was not true and they pay their employees very well but they don’t want to have the state of California tell them how to run their business. Even though there will be no brick and mortar locations, the company will still have an online presence for people in California. He also said he is tired of California bragging about being the 4th largest economy in the world, but yet taxes it’s citizens and businesses at unreasonable rates. There have been other businesses that have left California and I think that trend will continue with less businesses coming to California until Sacramento wakes up to the reality that people and businesses have pretty much had enough and California needs to get its state finances in order and stop wasting money! The markets loved Powell’s speech in Jackson Hole, BUT....! After Federal Reserve Chairman, Jerome Powell, spoke at Jackson Hole, the markets surged as they apparently loved what they heard. Like everyone else we are very pleased with the movement in our portfolio, but we are also realistic and people must understand that there’s a lot of time between now and the Federal Reserve meeting that starts September 16th when the Federal Reserve meets to determine what to do with interest rates. When I listened to the speech, two things stood out to me. First, I could hear concern about the most recent employment numbers, but I also heard concern about the tariffs and inflation. What really concerns me and should concern you as well is September 16th is a couple weeks away and during that timeframe, we will get the PCE report (Personal Consumption Expenditures Price index), a jobs report that will be released on September 5th, and also another CPI report (Consumer Price Index). This is important data and if there is more signs of inflation from the PCE and the CPI and improvement in the jobs numbers, it is possible that Chairman Powell will decide to stay the course and hold interest rates where they are. So enjoy the nice increase, but we still recommend being cautious and remember valuations are really high for many stocks.