Cautious Bank Outlook, Crypto Law Update, Dividends or Buybacks, New Tax Rules, Solar Loan Trouble, Private Credit Warning, 401(k) Equity Debate, Costly Travel, Diamond Choice & Streaming Showdown

The big brokerage firms are fighting for your investment accounts Our investment advisory firm over the years has never been a favorite of the big brokerage firms because we generally only do three, maybe four trades on average per year. But the big brokerage firms are now acting like the casinos in Las Vegas and are doing everything they can to get you on their platform. They will give you all kinds of tools and seminars, so you’ll take higher risk and do more trading. In the meantime, they're downplaying the risk of trading. You see also like the casinos in Las Vegas, there are now stories of them giving away free rooms for the big players and they are giving you free software and free education on how to trade. Robinhood even invited 1000 people to Las Vegas and took them go kart racing and provided classes with their new trade platform. Schwab and Fidelity are doing similar types of events to get you to use more of their services. Once they get you in the door, they can show you how to use margin debt, which by the way hit a new record of $1.13 trillion in September, along with option trading and other exciting ways to make you think you can make a lot of money. Doesn't that sound like the casinos in Las Vegas that try and get you to hit the gambling tables? Unfortunately, it seems to be working somewhat because the percentage of investors who now have self-directed accounts is 33%, which is a big increase from 24% just five years ago. My problem with this, as you can tell, is I don’t believe they’re teaching people how to invest but more on how to gamble and how exciting it can be. Going back 100 years it's still the same with Wall Street, they will make some big profits, and the small investors will lose most if not all of their nest egg. Can Travis Kelce turn around Six Flags? If you’re not sure who Travis Kelce is, he is a tight end for the Kansas City Chiefs and engaged to the well-known singer Taylor Swift. Six Flags, which is a public company that trades under the symbol FUN, has received an investment of $200 million from the activist investment company JANA Partners. It was not disclosed how much investment Travis has of the $200 million, but he does like to invest in companies both public and private. He has investments in over 30 companies that include manufacturing, distribution, consumer goods, entertainment, and a beer company. He is pretty excited about his investment because as a kid he used to love the roller coasters, Dippin' Dots and him and his brother have great memories at Six Flags. He has suggested that they do a roller coaster with a 300 foot drop where riders feet dangle from beneath. Investing in Six Flags seems to be an uphill battle. Year to date the stock is down roughly 45%, the company is losing money and has a market capitalization of $2.6 billion. Travis does have a long-term perspective on all his investments likes we do. He is OK investing in a company losing money in hopes it could be turned around. Our philosophy at our firm is we will not invest in companies that do not have earnings. One benefit he does have is obviously his name and I’m sure if him and his fiancé, Taylor Swift, would start showing up at Six Flags, you can bet that they will be all over the news giving the company some nice free advertising. Markets actually declined after the Fed rate cut  On Wednesday, the Fed announced they would lower their benchmark overnight borrowing rate by 0.25% to a range of 3.75%-4%. This marked the second consecutive cut of 0.25% and there is still one meeting left this year where we could see another rate cut. The keyword here is could and the lack of conviction around another cut is likely what spooked the market. Powell said a December rate cut isn’t a “foregone conclusion” and while recently appointed Fed Governor Stephen Miran again dissented in favor of a 0.5% cut, there was also a hawkish dissent with Kansas City Fed President Jeffrey Schmid voting for no decrease. Schmid's vote and Powell's language was likely what sent the market lower after the announcement as many essentially had the December rate cut factored in as a sure thing. Powell also added that there is “a growing chorus” among the 19 Fed officials to “at least wait a cycle” before cutting again. This resulted in traders lowering the odds for a December cut to 67% from 90% the day prior. Given the lack of data and an economy that still appears to be in an alright position, I do believe the Fed needs to be careful cutting too quickly especially since they are taking another accommodative stance with the announcement that they would be ending the reduction of its asset purchases – a process known as quantitative tightening – on Dec 1. This in theory will stimulate the Treasury and mortgage-backed securities markets, which should help with longer dated debt instruments, as the Fed was allowing these assets to just roll off the balance sheet and now will need to step in and buy new debt to replace the securities as they mature. While QT shaved off around $2.3 trillion from the Fed's balance sheet, Covid led to a major expansion from just over $4 trillion to close to $9 trillion. The question is with the rapid expansion just a few years ago, was enough removed from the balance sheet to put it at a more normalized level. Like with the Fed cuts, I do believe if monetary policy eases too much, we risk a return of inflation and a further increase in many speculative assets that could cause problems down the road. Financial Planning: When does a Solar System Make Sense? Buying a solar system generally makes the most sense if you use a lot of electricity and plan to stay in your home long term. Installing by the end of 2025 allows you to capture the 30% federal tax credit, which significantly shortens the payback period. If the system is financed with a mortgage or home equity line of credit (HELOC), the interest may be tax-deductible, allowing for little or no upfront cash outlay and after-tax loan payments that can be lower than the monthly electricity savings. Owned solar panels usually increase home value, though not always enough to fully offset the system’s cost, which is why longer-term ownership is important to recoup the investment. In California, including a battery is almost always recommended so you can store power generated during the day for use at night, reducing the need to buy expensive electricity from the grid. Leasing can be attractive for shorter-term homeowners if lease payments are well below current utility costs, but leases generally don’t increase home value and don’t qualify for tax credits. The main advantage is immediate monthly savings without an upfront investment, though leased panels can complicate a future home sale. In some cases, it may be best not to install solar at all—for example, if you don’t plan to stay in the home long term, or if your electricity usage and potential savings are too low to justify the hassle and possible roof wear from installation. Don't ignore the concentration risk in the indexes! I've talked about this before, but the S&P 500 is not as diversified as you think. The Mag Seven, which consists of Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla now accounts for nearly 35% of the entire index. If you look at the QQQ, or the Nasdaq 100, the concentration is even more problematic with the Mag Seven accounting for nearly 45% of that index. If you include Broadcom in the mix, those companies would account for nearly 40% of the S&P 500 and 50% of the QQQ. While the indexes continue to climb, people continue to have the false belief that they have a sound diversified portfolio. It is when the music stops that people will come to realize how over reliant they were on the tech sector. Congratulations if you have consistently held these indexes, but the more I read, the more concerned I am that we are heading towards something similar to the Tech Bust that occurred more than 25 years ago. Maybe we will see a decline in the federal deficit next year I have said before that at this point, the federal debt is not a huge problem, but it’s something that needs to be taken care of before it does get too far out of hand. There only seems to be two ways to reduce the federal debt, one is to reduce spending, which would hurt the economy, or two is to increase taxes, which would probably hurt the economy even more. I recently read something in the Wall Street Journal that gave me a glimmer of hope that there’s another way that maybe we can reduce the federal debt. In one of the articles it mentioned that at the NATO summit in June, President Trump achieved something that has not been possible by every other president since Richard Nixon was in office over 50 years ago in the early 70s. Somehow President Trump convinced the Europeans to make a commitment to increase their defense spending from 2% to 5% of their GDP. This means they’ll be taking care of themselves and that’s less money that the United States has to spend to defend them. In addition to that, President Trump has also pretty much ended most aid to Ukraine and instead offered to sell Tomahawk missiles to the Europeans, which they can give to Kyiv if they want. That would make a lot more sense for the Europeans, and it would save the United States billions and billions of dollars, which should help reduce our spending and generate some revenue to add to our GDP. The tariffs are also generating billions and billions of dollars of revenue for the federal government. I think we could see maybe more ways to reduce spending and increase revenue that no one has thought of. What all this means is, we could see a slightly lower federal deficit by the end of 2026. Let’s keep our fingers crossed as this debt needs to be addressed before it becomes out of control. The much anticipated meeting between Trump & Xi ended with little news I would say it was positive that Trump and Xi finally met, but the meeting ended in what looks like a trade truce instead of a trade deal. Trump agreed to cut fentanyl tariffs on China to 10%, which brings the overall levy on Chinese imports to 47% from 57%. This also means the 100% tarriffs Trump threatened to go into effect on Nov. 1st over rare earths will not occur. The US also agreed to postpone a rule announced on Sept. 29th that blacklisted majority-owned subsidiaries of Chinese companies on an entity list. Beijing said it will work to stop fentanyl coming into the U.S. and buy American-grown soybeans along with other agricultural goods. China also agreed to pause for one year the export controls on rare earths that were announced on Oct. 9th, but China’s rare earths restrictions announced in early April remain in place. The two countries also agreed to suspend fees for one year on ships that dock at each other’s ports. A big problem here according to Trump, the rare earths deal will need to be negotiated every year. I'm concerned by this because there could be a major difference in philosophy with the next administration. Another negative was details were quite light after the meeting and it wasn't really clear what China agreed to in terms of agriculture and energy purchases and their cooperation on fentanyl trafficking. Treasury Secretary, Scott Bessent, said China will buy 25 million metric tons of soybeans annually over the next three years, but all China said was the two sides agreed to expand agricultural trade without providing specifics. Other major points of contention including TikTok and chip exports from Nvidia appeared to go unresolved. Moving forward, Trump said he plans to visit China in April and Xi will come to the U.S., either Palm Beach, Florida or Washington, D.C., at a later date. If we lower interest rates, it is possible we may never be able to raise them again I know that seems strange, but you have to realize that the United States is now nearly at its 1946 peak of indebtedness relative to the size of the economy. It's important to remember 1946 was just after World War II and the country was paying off all the debt that was run up during the war. I do believe going forward, if the economy can maintain or continue to grow and the plans from the current administration generate more revenue, I think we will be fine. However, if they don’t work and the debt continues to rise, it would be hard to raise rates as it could scare current owners of treasury debt as interest expense would climb dramatically, which would make it difficult to recover. This is one problem that Japan is already faced with. Their large amount of debt to GDP and the debt itself cannot keep going up forever as people will eventually become scared and begin selling their treasury bills, notes, and bonds. The average interest rate on US debt is around 3.4%, which is not too excessive and could be paid off overtime. Increasing interest rates in the future would be a problem because as debt matures, it could have to be refinanced at much higher levels than the 3.4%. I believe the best way out of this situation is to maintain the current debt but increase the GDP, which would then in the long term generate more revenue to not only service the debt but also potentially be in a spot to begin paying the debt down. Some states are thinking of putting price caps on insurance companies, bad idea! Illinois is considering a ban on insurance companies being able to increase rates because of catastrophes in other states. At first thought this sounds like a great idea, but the problem is it makes the pool of insurance much smaller and if Illinois would have a catastrophe of their own with a smaller pool to cover the losses, insurance premiums could skyrocket perhaps even double. Louisiana gave its regulator the power to reverse excessive premiums. New York and Michigan are looking at imposing reductions on insurance premiums on both homes and cars. These states need to review what happened in California when the state refused to let insurance companies increase their premiums. Many insurance companies said we will lose money if we stay so we are pulling out of California. After a while California realized their mistake and allowed double digit increases insurance premiums and the insurance companies came back. People, regulators and the government forget that in many places home prices in just a few years more than doubled, which is ironic since people loved to brag about it. The reason this is important is when thinking about insuring an asset, if your house went from $400,000 to $800,000, would it not make sense to have your insurance premium increase 100% as well? States need to think more like Utah that has 130 insurers in their market. This gives consumers the ability to shop for lower prices and in order to compete insurance companies will have to figure out how to keep their rates competitive. I also don’t believe that people in government understand how rigorous the actual analysis insurance companies do to figure out how to cover the losses is and that they still need to make a profit for their shareholders. If someone thinks profit is a bad word, just think about that the next time you look at your pension plan or the growth in your 401(k). If companies were not making profits, the value of your pension plan or 401(k) would never grow. Small business owners may not be putting your deposits into your 401(k) I was surprised to see this, but apparently there are some small businesses that deduct the money from your paycheck but then fail to make the deposit into your 401(k) account. Part of the reason could be retirement plans with less than 100 participants are exempt from an annual audit that the federal law requires. The Labor Department has retrieved almost $24 million in missing 401K loan payments and contributions over the last 10 years through 3,100 civil investigations. The agency has also recouped $14 million through 115 criminal cases involving theft of 401(k) money. What is more staggering is that on top of that, there was roughly $260 million that was voluntarily returned to employees after the companies got caught. They often said the mistake was due to confusion around the rules. A former Principal Deputy Assistant Secretary at the Labor Department’s Employee Benefits Security Administration, which regulates 401(k)'s, says when small companies are facing financial difficulties, they tend to use those deposits as a short-term loan with the intention of paying them back quickly. But unfortunately, that doesn’t always happen and in the meantime, it is possible that your 401K account is missing gains because the money is not invested. If you work for a small company, I recommend at least once a quarter looking at your 401(k) not to see how well it’s doing, but to verify that the deductions from your paycheck are actually going into your account. I would guess roughly 99% of small businesses withdraw the money and put it into your 401(k), but for those 1% that is not happening for it is something you want to be on top of and make sure the money is coming out from your paycheck and going into your 401(k) account. If you find that is not the case, I recommend stopping your 401(k) contributions as soon as possible. If it goes on too long, there are companies that just close the doors, leaving the employees with little help of getting their money back.

Inflation report likely solidifies Fed rate cut this month The September Consumer Price Index, also known as CPI, showed inflation climbed 3% year over year for both the headline and core numbers. Core CPI, which excludes food and energy, came in better than both the estimate and the previous month's reading; both stood at 3.1%. It was a surprise to get this data with the government shutdown, but since it is used as a benchmark for cost-of living adjustments in benefit checks by the Social Security Administration it was a rare economic point in an otherwise quiet period. Energy, which provided such a benefit to the headline number for many months, has started to reverse course as it climbed 2.8% compared to last year. Gasoline was a small benefit as it was down 0.5%, but energy services climbed 6.4% thanks to an increase of 5.1% for electricity and an increase of 11.7% for utility gas service. What I would look to as tariff impacted areas, has still remained quite muted considering apparel prices fell 0.1%, new vehicles were up just 0.8%, and food prices had maybe the hardest hit with an increase of 3.1%. Much of this came from food away from home, which was up 3.7%. Food at home saw a more muted increase of 2.7%. Shelter inflation remained above the headline and core numbers at 3.6%, but it is much less problematic than it was in prior periods. Another positive was owner's equivalent rent climbed 0.1% compared to the prior month, which was the smallest month over month increase since January 2021. Overall, this report likely produced enough evidence for the Fed to cut rates at this month's meeting as odds stood above 95% after the inflation announcement. The likelihood for a December cut also initially climbed to 98.5% following the report. The bank earnings from last week had some surprising undertones. Overall, the third-quarter report from the big banks showed things are pretty much going along OK. But then a couple of the big banks brought up the issue of private credit and some bankruptcies that led to write-downs. Jamie Dimon, the CEO of JPMorgan Chase, pointed out that even though he said he probably should not say it that "if you see one cockroach, there are probably more." Some smaller financial institutions like Zions Bancorp and Alliance Bancorp took a $50 million charge and $100 million charge respectively due to potentially fraudulent loans. The issue here is commercial banks have been making loans to nonfinancial depository institutions or NFDIs and I point out that this type of funding is not very transparent for investors to see what is going on behind the scenes. I was surprised to learn that these NFDIs now account for roughly 1/3 of commercial and industrial loans originated by large banks. One may think if you’re invested in AI companies, you’re safe but research has shown that even your deep pocket players of AI are funding investments with these private loans. As time passes, the more I read, the more I become concerned about what we don’t know about leverage in this economy. Risky investing behavior continues to amaze me! Many people will point out that we have missed the boat on crypto, but I continue to worry about the space long term as there is no true way to value what these cryptocurrencies are worth. While this is a major concern for our firm, I would say leverage in the space is another major risk. A big problem is the rules and regulations and ultimately the transparency in the space is not as clear as when you invest in public equities. I was blown away reading an article on CNBC by how crazy the leverage can be, and I bet most investors have no clue about it. While there are ways to leverage crypto in the US, the offshore market is where things get wild! Offshore, decentralized exchanges Hyperliquid offer maximum leverage of 40-times for bitcoin and 25-times for ether and Binance Labs-linked Aster offers as much as 100x leverage, depending on the token. Leverage is so dangerous because if a decline comes and investors need to unwind a position it can create a cascade of selling that leads to massive losses. It is not just the crypto market where people are gambling though. We saw a return to meme craziness with Beyond Meat producing massive gains of 128% Monday and 146% Tuesday. On Wednesday, the stock at one point produced another triple-digit intraday gain, but it ended up closing down 1% on the day. I also saw a nuclear power development company by the name of Oklo have a sizeable pullback after the Financial Times noted the 500% advance in 2025 and $20 billion market value has come despite “no revenues, no license to operate reactors and no binding contracts to supply power.” These are examples of pure gambling and examples like these typically come during frothy times before reality hits and big pullback comes. Financial Planning: The real cost of financial mistakes When it comes to financial wellbeing, avoiding mistakes can be even more powerful than chasing great decisions. Too often, people lose ground not from lack of opportunity, but from unforced errors. Drawing retirement income without tax strategy can quietly cost thousands in extra taxes or Medicare premiums. Holding too much cash or being overly aggressive both expose you to risk, one to inflation, the other to unrecoverable losses. Maintaining investing discipline sounds simple but emotional reactions like selling when markets fall or chasing what’s hot can destroy more wealth than poor returns ever could. Many homeowners also miss out by not structuring their mortgage correctly resulting in more short-term fees, long-term interest, and missed investment returns. The key isn’t perfection; it’s recognizing that protecting yourself from big mistakes is often the best investment you can make. When making a financial decision, do your best to get your information and advice from accurate and unbiased sources so you can fully understand the impact of the decision. What signals you should watch if you are holding gold. Wouldn’t it be nice if there was a flashing red light that came across your phone saying this is the peak for gold and now is the time to get out. Obviously, that never happens on any investment so investors have to watch for signs that could cause the investment to decline. There are many signs that could arise, and it might be one or a few of them that could cause gold to turn and begin dropping. One area that could bring more stability is President Trump has been trying and trying to get a peace deal between Russia and Ukraine. I know that he is meeting again, I believe in a couple of weeks and if peace is reached with the Russian and Ukraine, it could be a negative for gold. Another thing that could derail gold from its increasing value is for the first time in 45 years silver hit a record high. Many times, investors of gold will buy silver as well and they may decide rather than buying more gold to diversify they will buy silver instead since they have so much gold already. This could hurt the demand for gold, which could stall the rally. Higher oil prices can also take away gold demand. Currently there seems to be a glut of oil on the market, but the Middle East is never a stable area of the world and any disruption there could cause oil to turn around and climb 10 to 20%. Currencies are currently weak and if we were to start seeing currencies like the yen or the dollar start to get stronger along with higher interest rates, this would also not be good for gold. Placing a value on an ounce of gold is difficult to say the least. So, it does make it hard to value, but hopefully these points we have laid out assist you in trying to attach some value to the price of gold. Gen Z is turning their back on buying a home and investing more into stocks. This is good news and bad news at the same time. It is nice to see younger investors have interest in stocks, but they seem to not understand the risk they’re taking. Young investors have only seen stocks average around 14% per year and believe that will happen over the next 40 to 50 years. Since they have been priced out of the housing market, they feel they might as well invest their money, which is wise, but I worry that when we have a long downturn, which will happen someday, these young investors will sell their stocks at a low price and have nothing to fall back on since they don’t own a home. The home ownership rate for Gen Z, which are those between 13 and 28 years old, is just 16%. This is on the low side compared to history. A study from JPMorgan Chase showed in the last ten years, 25-year-olds with investment accounts has risen from 6% in 2015 to now 37%. I’m all for investing in equities if people understand how to invest properly and not gamble. I always love the stories about how somebody bought a house back in the 1970s, they’re now up 1500%. Which means a $25,000 house is not worth $375,000, what could be better? How about if you had your money invested in stocks, you would be up over 6000% and that same $25,000 would be worth $1.5 million, which is four times as much. Just imagine if you put those stocks in a 401(k) and received a tax deduction, your employer matched some of your deposits and it grew tax deferred, wow. The problem is they all want to buy the next hot tech company and make 1000% over the next couple years, rather than focusing on the long term. Unfortunately, that is a formula that will fail for many of the young investors, leaving them without a home and a small amount of investment savings. Lays potato chips will become healthier Because of the campaign to make America healthy again that has gained traction in Washington and with consumers, artificial colors and seed oils are becoming a thing of the past. Lays potato chips are a top selling brand and have been around for 80 years, but because of the switch to healthier foods, the potato chips are switching to olive oil or avocado oil from seed and corn oils. The new chips will be easy to recognize because Lays, which is owned by PepsiCo, is changing the packaging from that shiny crinkly bag we have become so used to, to a heavier matte finish displaying potatoes and chips. With consumers buying less snacks and their preferences changing faster than anyone expected, Pepsi had to change course. It’s surprising that back in 2021 research revealed that 42% of people didn’t know that Lays chips were made out of real potatoes and Pepsi will need to do a better job with their messaging so consumers know what they are actually eating. Having more natural ingredients will be a challenge for the company because colors that come from plants, vegetables, or other natural products don’t behave the same as artificial ones and are more sensitive to light and temperature. The shelf life of potato chips with natural ingredients may also be shorter, which could be a problem for PepsiCo. Sales of potato chips increased dramatically during the pandemic and PepsiCo increased prices substantially during that timeframe. To get consumers to try the new improved healthier chips, the company might need to lower prices to bring consumers back. I personally can’t wait to try the new chips. I hope that they’ve also reduced the sodium content as well. The government thinks it’s OK for some fees in your investments to be hidden Your first reaction to that may be that there’s no way that could be possible. Why would the government allow investment funds to hide their fee? I can’t give an answer why, but a bill that was recently passed by the House and is now waiting for approval from the Senate would authorize portfolios to skip reporting expenses of certain funds they may invest in. I read this stuff and I can hardly believe it, but what they are trying to allow is if a fund owns BDC's, which are Business Development companies, which have very high expenses and can range anywhere from 1% to 5%, Congress is saying it’s OK not to disclose those expenses. BDC's are very high-risk investments but over the last five years their assets have grown from $127 billion to over $450 billion. What is concerning for me is if this does pass in the Senate, will it also be ok to hide fees for private equity, venture capital, private debt, and other alternative vehicles that would want the same treatment as BDC’s. I’m not a big believer in big government, but I do believe that the government should have rules and regulations for investors like they have rules for speed limits on highways. With more young people renting, the furniture market is changing Furniture stores like Ethan Allen and RH do well when people buy new homes. New homeowners will generally have to fill entire rooms and change many things in the house to personalize to the way they like. But now with the price of homes becoming nearly unaffordable, many young people are shopping differently to make their long-term rentals feel comfortable and personalized. When I’m talking about young people, I’m not talking about those just in their early 20s because according to the National Association of Realtors, the average age of the first-time homebuyer in 2024 climbed to 38 years old. So, until home prices become affordable again, which may be a while, some major furniture stores will probably suffer. Those that serve renters such as Wayfair and Williams Sonoma will probably continue to do well though. Renters are generally more practical about shopping for their apartments and in many cases will buy single items at lower prices from different vendors. However, don’t think that means they’re spending only $10-$15. Since they know they will be in that rental for a while, they are still spending sometimes thousands of dollars to buy multiuse products like folding tables and pullout couches with built-in storage. Business has always fascinated me following consumer trends, this is the new trend for younger people as they try and make these long-term rental homes and apartments a place they are proud of. This trend will change someday, but I believe it is probably down the road at least a few years. Are the best days for packaged food companies over? With the diet drugs, and the campaign to "Make America Healthy Again" from RFK, your packaged food companies are struggling. They’re also fighting inflation and tariffs, which is making the environment even more challenging. But consumers, whether they are high or low income, if they like a certain product, they’ll pay a premium for it even if it is not the cheapest thing on the shelf. One may think the best thing for these companies is to really become healthy fresh food companies, but they may be able to have some other options that are healthier than before. What they need to do as time passes is to get creative at what they’re good at and not try to be something they're not. There are many companies in this category like Mondelez, Hershey’s, Kraft Heinz and Conagra. Some of these companies have seen their stocks drop 30, 40 or even as much as 50%. Even with that drop many of their dividends have remained the same, which means the yield for that dividend is much higher. I think for long-term investors there may be some opportunities here as the companies become more creative and the tariffs just become part of doing business. Also, these companies will change their products somewhat to meet consumers expectations, and eventually some consumers will still want to have some good cookies or a hotdog as a treat.

Will gold hit $5000 an ounce? With all the excitement surrounding the run up in gold this year it seems to be an easy target. However, as investors pour money into precious metals, such as gold, people have to remember that President Trump has pledged to stimulate the economy through tax cuts. The run up in gold has been due to investors that worry about the future of the dollar and other major currencies. Wall Street has labeled this the debasement trade. The dollar did decline in the first six months of 2025, but it has since stabilized. September saw a record $33 billion invested in exchange traded funds tied to physical gold. The excitement continues for gold buyers, but it is important to remember that normally during uncertain times investors will find safety in dollar denominated assets like treasuries that can push-up the dollar's value. The danger for gold investors is if the narrative shifts, gold could have a major decline. If you look back 165 years to 1860, you will see that gold has other multi-year runs but has consistently had a major bust after those run ups. Investors in gold should also look at what happened in 1979 with a major rally in gold but 3 1/2 years later all the gains accumulated had disappeared. Investors may want to take some of their profits because the higher gold climbs, the bigger the fall could be. In my view, $5000 per ounce for gold is a big gamble. Great news, more working-class Americans than ever before are in the stock market. That does sound like good news, but then when you dig a little deeper, it is rather scary! 54% of Americans with incomes between $30,000 and $80,000 have taxable investment accounts. There are several reasons for this like no more commissions for trading stocks, the excitement of investing on certain social media sites, and it’s so easy to trade stocks now as anyone who has a cell phone can pretty much trade stocks instantaneously. I remember an old saying from years ago that when your barber starts talking to you about stock tips that is the peak of the market. This seems to be where we're at today and unfortunately, these investors have only been investing for probably the last five years and have not experienced any long, lasting declines or turmoil in the markets. Many of these investors are simply trading stocks and don’t understand the fundamentals of investing for the long-term. Some of them have experienced very good returns, not because of any specialized knowledge but because of the luck of picking some highflyers that have done well for them in the short term. In many cases, they do not believe it’s luck and they feel they now know what they’re doing. These investors probably have no idea what the earnings or debt is for the stocks they are trading. They just see that they continue to make money as they buy and sell. It is a shame because many of them are young investors from 25 to 45 years old and a big mistake could cost them years of compounding. Over my 40+ years of working in the investment industry I’ve heard the same story many times, and it never turns out well. When you try to help them understand how things really work in the investment world, they justify what they’re doing with such statements as “this time it is different”. I wish these young investors would understand that investing in stocks and earning a 10% annual return per year is very good. I’m sure many who read this or hear the words I speak think I have no clue what they’re doing, and they have a specialized technique that can’t fail. When the day comes, which it will, these investors will be left with a small amount of capital and not much time left to invest because they are now older and closer to retirement. Only then will they realize that their risky trading strategy proved to be nothing more than gambling! Lower end consumers are having a hard time making their car payments With the rising cost of cars and higher interest rates, lower end consumers are falling behind on their car payments, and the numbers are starting to get a little scary. 14% of new cars that were sold to people had a credit score under 650, this is the highest percent going back to 2016. People seem to be getting in over their head as subprime loans that are 60 days or more overdue are at a record 6% this year. The number of repossessed vehicles is also climbing to a record not seen in 16 years to an estimated 17.3 million repossessed vehicles. Some consumers overbought a car probably due to a good salesperson and that new car smell that sometimes is hard to resist. Some consumers are starting to regret their new car purchase considering the average car payment is around $750 and 20% of loans and new leases are over $1000 a month. We will continue to watch this indicator along with others to verify that we are only seeing a slowdown of growth in the economy, rather than a declining economy. It's important to remember to be careful where you invest. It appears that some of these subprime loans for cars ended up in private loan deals that were sold as low risk because of no market fluctuation. The problem here is we are starting to see write-downs from publicly traded banks for bad loans and with private credit you might not know there is a problem until it's too late since they don't have to disclose the same info as these publicly traded companies. Financial Planning: Upgrade Your Emergency Fund to an Emergency Plan When paychecks stop, as many federal employees are currently experiencing, having an emergency plan with multiple layers of liquidity is essential. The first line of defense is your credit card. When used strategically, it can buy you up to two months of interest-free spending since no interest accrues until after the statement due date. However, you don’t want to carry a balance beyond that point. Next comes cash reserves, ideally kept in a high-yield Treasury bill money market fund, where your money earns competitive interest while avoiding state tax. Beyond cash, having credit lines such as a HELOC provides deeper, low-cost access to capital without forcing you to liquidate investments. These can take a couple of months to establish, and since they generally don’t have origination fees, it’s best to set them up before you need them. After that, investment accounts can serve as a secondary safety net. Taxable accounts may generate capital gains, but withdrawals are unrestricted. Roth IRA contributions can be withdrawn tax- and penalty-free at any age, and HSA accounts can issue reimbursements for qualified medical expenses incurred in prior years. In a true last-resort scenario, you can even access retirement funds through a 60-day rollover, temporarily using the cash before redepositing it. By layering these tools, from credit to cash to credit lines to investments, you build a structured, flexible liquidity plan that can withstand extended income disruptions and operate far more efficiently than simply keeping 12 months of expenses in a savings account. Not a good time to be a Qualcomm shareholder Qualcomm, a San Diego based business, has made many people millionaires over the years. However, what made them successful years ago is now one of their biggest problems, and that is their relationship with China. In fiscal year 2024, almost 50% of Qualcomm's revenue came from China. About six months ago, we came very close to investing a large portion of our portfolio into Qualcomm, but decided against it for a few reasons, one of which was the relationship with China. On Friday, Chinese regulators said they launched an investigation into Qualcomm for perhaps violating the country's anti-monopoly law. In 2024, Qualcomm tried to acquire a company called Autotalks, which was based in Israel and dealt with the communication between cars and their surroundings, but ultimately gave up on the deal. In June of this year, the company went ahead and acquired that auto chip designer. Now the company is facing the investigation from China. We have written many times that we are concerned on any tariff deals with China because they are very slow negotiators and very hard as well. I would love to tell you this is a buying opportunity for Qualcomm, but there are just too many concerns in the current environment that could cause Qualcomm to fall further than the 7% decline experienced last Friday. I will not feel comfortable until China and the United States have a trade deal signed in writing. Another sign of a slowing economy is the number of people quitting their jobs It’s a pretty obvious indicator because if there’s a lot of jobs out there for higher pay, people are more willing to quit their job to obtain a higher paying job somewhere else. When going back about 20 years you will see the number of people quitting their jobs declined rapidly during the Great Recession as the rate fell to under 1.5%. It fell again in 2020 to about 1.7% during the pandemic, but after Covid the percentage of people quitting their jobs increased substantially to nearly 3.5%. The labor market changed dramatically during this time period in part to all the stimulus and loose money that was floating around in the economy from the government. As the economy has started to tighten, the most recent report released from the federal government before the shutdown shows that the percentage of workers quitting their jobs in the private sector has fallen back down to 2.1%. Based on the data, we are seeing a slowdown in the economy but I'm still not expecting a major recession. We will continue to watch other important data and keep you informed of how the economy is doing. AI does consume a lot of energy, but it can also reduce energy consumption as well. There’s no secret AI is hogging a lot of energy with bigger demand needed in the future. On the positive side, it can also make transportation and other uses of energy more efficient to help save energy. It is estimated ground freight trucks using AI dynamic route optimization could cut emissions by 10 to 15%. According to Texas A&M University, AI could also analyze traffic in real time and quickly come up with better routes to reduce stop and go driving which leads to sitting in traffic and burning fuel. It is estimated that 3.3 billion gallons of gasoline and diesel fuel in 2022 was consumed, that is over 215,000 barrels a day of petroleum. Commercial buildings could also benefit from AI with the use of sensors that can track occupancy in real time and shut down some elevator banks and turn off lights that aren’t needed as the number of people declines throughout the day. Heating ventilation and air conditioning systems with the use of AI could receive forecasts on heat waves and pre-cool buildings ahead of the heatwave, which would also lower energy use. Buildings could also be equipped with smart window shading that could adjust to sun angles and avoid glare and reduce heat coming from the windows. I doubt these energy saving ideas will completely offset the high demand of energy by AI data centers, but it could at least help somewhat. Will Tesla ever be able to use their self-driving cars in the US? I ask this question because it seems like they are so close but yet so far away when it comes to having their Full Self Driving system operate with no drivers on the road. It seems that even though they claim 2.9 million vehicles are currently equipped with the FSD System and they have millions of miles of test data, the National Highway Traffic Safety Administration, known as NHTSA, keeps finding problems with the system. NHTSA has found some concerns that could cause injuries. One such incident was when a car approached an intersection with a red light, it drove right through it without stopping. There’s also questions about how the FSD system works in reduced visibility conditions such as heavy rain or fog. Questions have also come up on Tesla‘s being able to be operated remotely. What is interesting about NHTSA is they do not advise when new products come out, instead it is only after they have been road tested do they issue a recall if it is not performing well. It is then up to the car manufacturer to voluntarily fix the problem. If they do not correct the problem, then NHTSA launches an investigation which could lead to court battles and years before a solution is found. There is no doubt in my mind that Tesla's will eventually be seen on the road driving themselves, but the big question is when? The excitement of drinking wine is going sour Over the last few years wine consumption has been falling. California is starting to feel the pinch since the state produces roughly 80% of wine shipped in America. Since 2021, cases of wine shipments from California to the US are down 15%. There are several reasons for this, but a large one is the percentage of US adults who drink alcohol is now 54% and that’s the lowest in nearly 90 years according to a Gallup poll. People are eating and drinking less for health reasons and due to the diet drugs people just don’t eat or drink as much they used to. Wine sales recovered and grew in 2004 after the popular movie called Sideways about Pinot Noir and then again during the pandemic wine sales spiked. Good news for wine consumers is with the current glut of wine on the market; it is causing prices to fall. There are currently wine producers in Northern California that are ripping out vines to reduce production because they can’t sell their full harvest of grapes. Adding to the oversupply problem was the great weather this summer for grapes on the vine as wine makers had one of the biggest producing seasons of grapes. Big companies like Constellation Brands, which sells roughly $900 million of wine, have cut back on their purchases of grapes because their warehouses are filled with it. Adding to the problem is the wine business in Canada. Even though the tariffs of 25% for US wine going to Canada have been lifted, there are certain provinces like Ontario and Nova Scotia that still ban the sale of US wine. This has all culminated into a difficult time period for wine producers in the US. Will the new electric Ferrari be able to carry on the tradition? To answer that question quickly, I’m going to say no based on how poorly EVs have been accepted by Porsche consumers. If you want a cheap Porsche, go to the dealership and you can pick up an electric Porsche relatively cheap. Ferrari thinks they can convince people who can afford a $300,000 car that their electric vehicle will have the same prestige as their internal combustion engine. It has taken Ferrari years and hundreds of millions of dollars to come up with a battery powered sports car, including building a factory just to build the electric vehicles. The new Ferrari is called Elettrica, it goes 0 to 60 mph in just under 2.5 seconds and has a top speed of 193 mph. It is estimated that a single charge will last about 329 miles. Don’t start searching the Internet for what one looks like, they have kept the model looks under wraps and will not release images until spring of next year with delivery starting later in 2026. Over the past year, the stock, which trades under the ticker RACE, has declined by about 12% but over the years it has done very well. I do worry that going forward the company is reaching for growth considering over the next five years the company is expected to release 20 new models, which I think will hurt the exclusivity of a Ferrari and also create confusion around what Ferrari to get. Apparently, the company may feel this way as well, since they have reduced their annual revenue growth for the next five years to only 5%, which is below the expectations of the analysts. Time will tell, but sometimes a company has to realize what they’re good at and known for and not try to keep up with the most recent hot items like electric vehicles.