Apple Lawsuits, Retirement Assets, Investing, Mortgage Points & Lender Credits, Banning TikTok, Dollar Stores Closing, Investing in Bitcoin, Healthcare Costs, Liquid Money and Shopping Malls

Can the heartland states save our country? The heartland states are 20 states pretty much in the center of the country. They have been regaining economic strength over the years and currently about 39% of the US population lives in these states, according to the census bureau for 2024. The population growth in this area was above the rest of the country for the last five years with numbers that have not been seen in over 65 years. Employers in this area grew by 13.2% between 2020 to 2023 and business capital expenditures totaled $76.9 billion in 2023 and have seen an average annual growth of 9.43% since the beginning of Covid. These 20 states on average have established more business-friendly policies along with tax incentives and grant programs that draw businesses to their area. The East and the West Coast just can’t seem to compete with the affordability of states in the middle of America. These mid America states have lower cost for land and utilities are far less being as much as 1/3 less than the rest of the country. This is according to the Energy Information Administration (EIA). The overall cost of living is lower, so wages can also be lower and still provide a good standard of living for their employees. In my opinion, states like California and others need to wake up and realize that perhaps stats in Middle America are on to something with policies that are attracting new residents. It would appear that foreign companies coming to the United States would build and prosper in one of these 20 states rather than states that are against business or have high taxes and other costs. Consumer actions aren’t matching their words We continue to see negative surveys about consumer confidence and sentiment, but you wouldn’t think consumers feel bad after looking at the recent retail sales report. March sales climbed 4.6% compared to last year and if gas stations, which fell 4.3%, are excluded the report was even more impressive as it climbed 5.3%. Some of this is likely due to concerns over looming tariffs as consumers pull forward demand before expected price increases. Some areas that are likely more impacted did see large gains as motor vehicle and parts dealers saw an increase of 8.8% and sales at furniture and home furnishing stores climbed 7.7%. With those said gains were quite widespread in the report and areas that would not see a pull forward in demand like food services and drinking places still saw a nice gain of 4.8%. If people were truly worried about the economy, they would not be spending money at restaurants, especially considering the fact that dining out has gotten quite expensive. While I am expecting the tariffs to have a short-term impact on the economy, we must remember the consumer is coming from a point of strength with relatively low debt levels, a low unemployment rate, and balance sheets that have seen asset prices significantly increase over the last several years. I continue to believe that our economy and the consumer will be able to whether this volatility, but the numbers will likely decelerate from here. We will continue to watch these reports closely, but I again remain confident we will get through the concerns about these tariffs. Are TV networks tapped out on sports deals? Last year Disney signed a $2.6 billion a year deal with the NBA; however, ESPN said goodbye after a 35-year relationship with the MLB where they were paying $550 million a year for their package of games. One area of growth that surprised me was Formula One car racing as over the last six years it has seen viewership double to 1.1 million viewers in a season. Liberty Media, who owns F1, is trying to get a rights package between $150-$180 million a year and all they’re hearing is crickets. Research firms estimate that it is worth over $100 million but it is not at the $150-$180 million that Liberty wants. Netflix, Warner Bros. Discovery, Fox, Amazon and NBC are not showing much interest in the asset. Netflix will probably not bid since there’s no real gain for them considering the estimate that 75% of F1 fans already have Netflix subscriptions. With so many people having Netflix, multiple big dollar sports packages probably don’t make much sense for the company. In a couple of months around June, Warner Brothers is distributing an Apple film called F1, starring Brad Pitt. If you want to watch this movie, which is projected to be a blockbuster, you must subscribe to Apple TV. I almost feel like I want to add Apple TV to the five or six other subscriptions I have, but I can’t watch everything I have access to now, so I should probably resist. Financial Planning: Why Life Insurance Is a Poor Retirement Vehicle (And What to Do Instead) Cash value life insurance is often pitched as a tax-free retirement strategy. On the surface it sounds great. You get tax-deferred growth, tax-free loans, no contribution limits, and a death benefit, but when you look under the hood the numbers often don’t work out. First, the returns simply don’t compare. With Indexed Universal Life (IUL) or Whole Life, your cash value growth is limited by caps and participation rates, and you miss out on dividends. Add in the cost of insurance, admin fees, and other hidden charges, and the actual return on cash value often falls well below the market. Second, the fees get larger over time. The older you get, the higher your cost of insurance becomes which directly eats into your cash value. If you’re taking policy loans and the policy lapses, you could even get hit with a massive tax bill in retirement. Third, the opportunity cost is huge. The high premiums needed to fund a policy could instead be invested in assets with better returns, more liquidity, and lower fees. Meanwhile, better tools for tax-free retirement income already exist. Most 401(k)s now offer a Roth option, allowing you to contribute after-tax dollars and grow your money tax-free, exactly what cash value life insurance offers. You can pair this with a Roth IRA or even a Backdoor Roth IRA if your income is too high to contribute directly. Together, these vehicles allow for substantial tax-free retirement savings without the complexity, high fees, or risk of policy lapse that come with life insurance. Don’t let marketing hype cloud your long-term strategy. Run the numbers and stick with what works. The Apple credit card is up for bids. Goldman Sachs has been the credit card provider for Apple for a while now, but they have found being in the consumer lending world is not profitable enough for them. This has sparked the beginning of a bidding war with Visa offering roughly $100 million payment to be the exclusive credit card provider for Apple. Also looking at bidding are two other major players, American Express and MasterCard. If you’re wondering why a company would bid $100 million, understand that the Apple credit card program has about $20 billion in account balances and remember every time a card is swiped, credit card companies get paid a fee. Apple is one of the biggest co-branded credit card programs along with Costco who also brings in a lot of fee revenue to the credit card company. This could be a small boost to Apple and it comes at a good time considering the difficulties they are having with the tariffs, dealing with China in the trade war, and struggling with rolling out AI. At this time, it is unclear if Goldman Sachs will receive any payments or profits for giving up exclusive rights to the Apple credit card. I do know that Goldman Sachs is a very a smart investment bank, and I find it hard to believe that they would receive no financial compensation of any kind for giving up this deal. The consumer will probably not notice any difference other than the change of the name on the card. Visa does have a great reputation for service so I would not expect any problems with the changing of the guard on the Apple credit card. Buy Now, Pay Later loan volume sky rockets If you’re not familiar with the term buy now, pay later I’m sure somebody else that you know is using it. It is also known as BNPL which is what you will see many times in print. In 2019 the BNPL loan volume was only about $1 billion. Fast forward to 2022 and it has increased roughly 30 times to over $30 billion. It is a way of getting short-term credit so if you buy something you can pay for it over a short period of time. In the past, the short-term loans were not showing up on your credit history, which in my opinion was a mistake because one could buy an expensive luxury item and have high payments, but yet still go into a car dealership or apply for a credit card and get themselves into a negative cash flow situation since their real debt and monthly payments are not revealed. Retailers love using BNPL and sometimes you see it right at the checkout stand. In 2021 there was 180 million BNPL loans for roughly $24 billion. The next year that was up nearly 50% to 277 million loans with a value around $34 billion. Since no one was reporting these loans there were people that would stack the loans and in 2022 just under two thirds of the users had more than one loan. I’m happy to report that those offering these short-term loans like Affirm are now sending to the credit bureaus the balances and the payments so it will show up on people’s credit reports. I know some people are going to disagree with me but I do believe it will help prevent consumers from getting in over their heads. Is Cathie Wood still worth listening to? Over the weekend, I read an article that contained opinions from seven market pros on Wall Street about the recent extreme volatility. Three of them stood out to me as good long-term investors. Mario Gabelli has been managing money for 49 years. Michael Cuggino, who runs the Permanent Portfolio has always made sense to me, even though I don’t always agree with his decisions. Lastly, Chris Davis runs investments for Davis Advisors and is the son of Shelby Davis who began value investing probably about 75 years ago. Who was part of the panel that I thought should not be there was chief executive officer of ARK Investment Management, Cathie Wood. I say that because her investments ideas in my opinion have always been overly aggressive and over the last five years her flagship ARK Innovation fund is down over 10%. Since the peak in early 2021, the fund is down more than 70%! Back in June 2021 when investors were buying many crazy things, she was managing $25.5 billion. Today it is at around $5 billion, about 1/5 the value just four years ago. She still has the crazy ideas like before, I’m just surprised that she is still relevant enough for anyone to follow her. There is so much information out there for investors, I feel an investor has to be selective on what they read and listen to. They should make sure there is experience and wisdom behind the thoughts on paper or whatever avenue the information was delivered on. Employers are still wrestling with paying for weight loss drugs Insurance companies say that going forward employers and employees will be fighting over paying for weight loss drugs like Ozempic. Some companies have already ended coverage for the weight loss treatments known as GLP-1s. Although it’s a nice benefit for the employee, it has been discovered that some employees go to work for a company that will pay for the drug and then leave that company eight or nine months later after they lost the weight that they wanted. It is also suspected that the benefit of paying for these weight loss drugs does not offset enough of the cost. The added costs are really difficult on small businesses and it appears they are either cutting out the drug completely or restricting it to people with diabetes or they require that employees on the drug also join a weight loss program. It appears the cheaper copycat weight loss drugs from companies like Ro and Hims and Hers Health, who is charging around $200 a month for the same service, is coming to an end. The reason for this was the FDA allowed these companies to offer their knock off drugs while the name-brand drugs were in short supply. That is now changing and that special allowance from the FDA is coming to a close. On the bright side, the FDA did approve its first generic GLP-1, which could be priced between 60 to 80% lower than the current drugs. Unfortunately, it appears that is still about two years away. That lower price for the new generic brands would likely be somewhere between $150 to maybe $200, and I believe it will be a big problem for the major drug companies that have seen their stocks skyrocket due to the big profits from these weight loss drugs. A big benefactor of the drug has been Eli Lilly, their symbol is LLY. The stock peaked in August 2024 at around $948 a share, it is now trading around $740 a share. I’m not sure what else they have in the pipeline, but I think you could see more air let out of the balloon as we get closer to 2027 and these generic weight loss drugs are released. Weight Watchers has slimmed down way too much! Weight Watchers, now known as WW International, has seen its stock fall from $92 a share back in mid-2018 to a recent price of around $.15. With the new weight loss drugs, I’m not sure why anyone was buying the stock over the last couple years. They just can’t compete with the success of weight loss drugs like Ozempic. In January, they took out the remaining $120 million on their credit facility and now have over $1.4 billion of loans and bonds that come due in 2028 and 2029. S&P Global Ratings downgraded the stock just a couple months ago and stated the subscriber base has aged and its brand is not in favor, especially among young consumers. What lifted the stock in recent years was the endorsement from Oprah Winfrey, but she stepped down from the board about a year ago. It had something to do with avoiding a conflict of interest over a TV special she was making about weight loss drugs. If you’re thinking at $.15 a share, what have you got to lose? I will tell you your entire investment. It was reported on April 9th by the Wall Street Journal the company was preparing to filed for bankruptcy in the coming months. If this does come to fruition, shareholders would then likely lose everything. If the company desires to stay around they will then need to it by recapitalizing. I don’t believe this would be a wise move though as I just don’t think weight loss companies like WW International can compete with the weight loss drugs. Are you thinking about raising your own chickens to save on the cost of eggs? With the recent market decline and all the talk about tariffs, discussions around the price of eggs seems to have fallen off the radar, but the price of eggs are still rather high. I say rather because it depends on what area of the country you live in. If you thought about getting a couple of chickens for yourself to produce your morning breakfast eggs, you’re not alone. In 2018, there were about 5.8 million American households with backyard chickens. But now with the doubling and sometimes tripling in the cost of eggs, 11 million households have backyard chickens, nearly a 100% increase. It sounds like a good idea, but be aware like anything in life there are pros and cons to it. You will absolutely get fresh healthy eggs on a regular basis every morning for free. but the word for free comes with the caveat that there is work involved. It will take some of your time and obviously investment in housing and feeding them. And don’t forget that you have to provide some type of predator protection because you’re not the only one that likes chickens. There’s a lot of wildlife around that could find your chickens and have them as a tasty meal. Don’t forget that wild birds do carry the bird flu and your chickens could contract that disease as well. As a chicken farmer, you will also have to put up with the noise of the chickens, the odor and what goes into a chicken must come out the other end. If you have a big family or even a family of four, you may need a few chickens because a chicken only produces one egg every 24 to 26 hours. So, if you think you might save a few dollars raising your own chickens as opposed to paying five dollars for a dozen of eggs, you may discover that raising your chickens is not for you.

Why I’m so excited about the tariffs You may be thinking I’m a little bit crazy or blind to what is happening now, but I really wish people would be a little more patient and give this a few months to see the benefits. I want to remind people that the path we were on could’ve led to a collapse just like the great Roman Empire in 476 A.D. The United States in 2024 helped other countries grow their economies by sending them over $1 trillion in trade, not even close to fair trade and that is money we will never see again. Also in 2024, we saw our national debt climb to $35.5 trillion, an increase of roughly $2.5 trillion dollars in just one year! If that continued for the next 10 years, we would have debt of nearly $60 trillion, which would be unsustainable. Let’s not even talk about the interest payments on a debt level that high. What is already starting to happen is not the foreign countries, but rather the foreign companies themselves want to continue to be profitable and understand they must produce and be located in the United States. Companies like Siemens from Germany, Taiwan semiconductor and Foxconn along with others have already made huge financial commitments that will benefit their companies and also our country as well. As the days, weeks, and months pass along, I believe you will be hearing about more companies coming to the United States. I believe immigration will also change because we simply do not have enough workers to fulfill all these new jobs. This could lead these foreign companies to bring their workers along, which would make them part of the US consumer base that buys houses, cars, and simple things like go to the grocery store and go out to dinner and even get haircuts. This is quite a bit different from the problems we have with immigration now as it has become a big burden on the US economy. I believe this would create a major win for our country, please be patient! Good luck if you are trying to time the market If you have sold out of strong companies at good valuations during this market pullback, I believe you have made a huge mistake. As I have said there will be positive news that comes about and moves the market higher, which then leaves you with the question of what do you do now? Get back in? Wait for it to pull back? These trading mistakes can cost you immensely in the long run. I was surprised to see that going back over the last 20 years, seven of the top 10 days in stocks came within a two-week period of the worst 10 days. Which means many people that sold during the worst 10 days likely also missed those great days and the eventual recovery. A great example showing how quickly the tide can turn came on Wednesday after the announcement that there will be a 90-day pause on the full effect of tariffs since more than 75 countries have contacted US officials to negotiate a solution. There was also news that there is an “on the water clause” for cargo entering the US ports. This means any cargo “loaded onto a vessel at the port of loading and in transit on the final mode of transport on or after 12:01 a.m. EDT April 5, 2025, and before 12:01 a.m. EDT April 9, 2025, and (2) are entered for consumption, or withdrawn from warehouse for consumption, before 12:01 a.m. EDT on May 27 2025, are subject to the 10% additional rate in lieu of the country-specific rate of duty.” This is important as it will give companies more time to plan for elevated tariffs. These announcements led to a huge gain in stocks with the Dow climbing 7.87% on the day and the S&P 500 climbing 9.52%. The thing that surprised me was many companies that have China ties also rebounded substantially, but the tariff charged to China will be 125%, effective immediately. I’d be careful buying the dip here on all companies, but the important point I want to show is that the tide can turner quicker than you think! How does the United States collect tariffs? It is quite the system and it’s not as simple as a country/importer sending a check to the United States. The US doesn’t do the calculation for every shipment that comes into the country. No matter how it comes in, if it is by truck, plane or ships the country doing the importing is the one that calculates the tariffs and sometimes they use what are known as customs brokers to do the calculation for them. It may surprise you that it is somewhat on the honor system. Before a shipment approaches the border, the importer or the customs broker files electronically the paperwork and says what they are bringing and how much they owe. When the ship pulls into port, the information is reviewed by customs agents before they allow the goods to be unloaded and released. It is kind of like when we file our tax returns. It is on the honor system that you put in all the correct information and just like you may be audited on your tax return, customs do perform random inspections to verify what is being brought in and that the tariff amount is correct. Importers have an account with customs and pay the duties to them. If they use a licensed customs broker, then that broker would make the payment. After all this is completed, whoever imported the goods has 10 days to pay the duties. The penalties are pretty hefty if the importer does not pay within 10 days as they will be hit with admin fees, interest, and other penalties along with the biggest concern which would be suspension of deliveries to the United States. I would definitely say it is in the best interest pf these importers to pay the United States customs within 10 days. China may look at other avenues to hurt the US in this trade war I’ve said this before, but the tariffs on Chinese goods hurts them more than their tariffs on our goods. The simple math on it is the U.S. exported $143.5 billion of goods to China in 2024, while importing products worth $438.9 billion. Trade is way more important to their economy considering the fact they are a net exporter and a large one at that. In 2024, China exported roughly $3.58 trillion worth of goods, while importing just $2.59 trillion worth of goods for a surplus around $1 trillion. This makes trade a huge part of GDP as net exports contribute around 20% of GDP. The US on the other hand is a net importer so our trade deficit actually subtracts from GDP. What else can China do to harm the US? China did issue an alert warning its citizens of the potential risk of traveling to the US and attending schools there. Although there were approximately 1.6 million Chinese tourists that visited the US in 2024 and more than 250,000 students enrolled in schools, I don’t see this advisory as too problematic especially considering there was an estimated 77.7 million people from other countries that visited the US in 2024. The big concern people have is China selling our debt to drive up borrowing costs. I was disappointed by an article that said China could crush our housing market by selling mortgage-backed securities. Seemed a little dramatic to me considering foreign countries only owned 15% of the total outstanding mortgage-backed securities. Top owners did include China, Japan, Taiwan, and Canada, but I don’t see those other players selling at this point in time to harm US markets. It appears China holds just around 2-3% of these mortgage-backed securities and has been selling them over time with holdings down 8.7% year over year in the month of September and down 20% by the start of December. Even looking more broadly at U.S. treasury securities, China owned just $760.8 billion as of January 2025, which would represent about 2.2% of the total U.S. federal debt. Be careful falling for click bait, as I don’t believe China has the ability to “crush” our housing market. It would likely cause interest rates to increase slightly, but an outright crash would be extremely unlikely. Overall, while this trade war may hurt us, I still firmly believe it will have a far larger negative impact on the Chinese economy! Why You Should Never Buy a Certificate of Deposit (CD) Again For decades, certificates of deposit (CDs) have been a go-to option for savers looking to earn a little extra interest while keeping their money safe. However, in today’s financial landscape, CDs have become nearly obsolete, offering little to no advantages over more flexible and higher-yielding alternatives. One of the biggest drawbacks of CDs is their lack of liquidity. When you lock your money into a CD, you typically agree to keep it there for months or years. Withdrawing early results in penalties, often forfeiting several months' worth of interest. High-yield savings accounts, on the other hand, offer similar or even better interest rates while allowing you to withdraw funds at any time. Many online banks now offer savings accounts with yields that rival or exceed CD rates, giving you the best of both worlds: competitive returns and unrestricted access to your money. Another option is U.S. Treasury Bills (T-Bills) which are one of the best alternatives to CDs, offering higher returns with even greater security. Backed by the U.S. government, they are virtually risk-free and often yield more than CDs of similar durations. Additionally, T-Bills offer tax advantages, as the interest earned is exempt from state and local income taxes—something CDs cannot provide. Money market accounts provide another strong alternative to CDs. They often have rates similar to or higher than CDs but come with added flexibility and liquidity. Additionally, money market funds that hold federal or municipal debt come with some tax-exempt income as well. CDs may seem like a safe, simple choice, but in reality, they are an outdated savings vehicle that rarely makes financial sense anymore. Whether you choose a high-yield savings account, T-Bills, or money market funds, there’s always a better alternative that offers higher returns, more liquidity, or better tax advantages. Even a little screw is getting hit with tariffs You probably don’t even think about all the screws and fasteners that go in so many different products. We have said many times that there’s a much bigger range of import products that are going to have tariffs placed on them when compared to 2018. This time around, the plan with tariffs is to hit it fast and hard and hopefully it will be over in a few months and not drag on for years. Some manufacturers were smart including a company in Michigan called Great Products as they switched most of their screw imports to Taiwan in late 2018. The company uses about 17 million screws a year as they build parts for appliances. They imported about three million screws last year and made about 14 million screws themselves. Even if a company can make the screws themselves, they will still find themselves paying higher prices for the steel and aluminum to make those screws. At the current time there seems to be no easy answers for many companies. It will be interesting to see how companies adapt to this environment as I do believe these trade wars could last several months with China in particular dragging on longer. Gold is currently a hot commodity According to Morningstar, over the last couple of months, investors have put about $11.4 billion into gold ETFs. The funds are on pace to have the highest monthly inflows since July 2020. If that year rings a bell, that was during Covid when fear was high. Fear is once again running high and unfortunately investors generally chase returns and get stuck buying investments on the high side. Looking in the rearview mirror, gold is up 57% over the last couple years and people are even selling their cryptocurrency to buy the precious metal as it is hitting all-time highs. Over the last 50 years, gold has compounded at roughly 8% per year. That compounded return has increased because of the recent rise in the price of gold. Maybe gold will go higher and maybe it even hits $4000 an ounce. No one really knows but the problem is if you’re buying gold now you are really helping push the price higher and what happens if in the next let’s say 3 to 6 months the tariff war is over? More than likely, what drove gold up is fear and if that fear subsides you’ll probably see a decline in gold prices. Investors who chase excitement on anything whether it is gold or the next hot stock, generally don’t see the returns last. In modern times I never really got the idea of buying gold because of fears over things collapsing. You can’t eat gold, you can’t make clothing out of gold, there’s not much you can really do with it. If you think it would be the new currency, remember gold was used as a currency back in 550 BC in a country called Lydia, which is now part of Turkey. I’m sorry, but do you really think you’d be driving to the gas station to fill up your car with gold or go to Albertsons to buy food with gold. The only reason people buy gold is the fear and the speculation that it will go higher. If it makes you feel good to buy some go ahead and do it, but long-term you’re not going to have the best returns. And don’t forget about the selling commissions on gold are very high, somewhere between five and 10%. This is not a good time to buy a Mercedes You may have been dreaming about getting a beautiful Mercedes-Benz and you’ve finally reached the point that you’re going to pull the trigger. Well, you may want to wait a little bit longer because they’re going to be hit pretty hard with the tariffs. In 2024 Mercedes shipped roughly 324,000 vehicles to dealerships throughout the United States. This includes the popular GLE and GLS models, which have been helping fill the appetite for Americans desire of luxurious SUVs. You may be thinking they won’t be hit with tariffs because they have an assembly plant in Alabama, but only 1/3 of the 324,000 vehicles that were shipped to the dealers were made in the Alabama plant. You may now be thinking the ones built here won’t have tariffs on them, right? Wrong! Unfortunately, Mercedes-Benz ships from Europe engine sand transmissions, which will be hit with the 25% tariff. It is expected to cost Mercedes about $1.7 billion. A big concern for the business is they are not in a position like Ferrari where they can pass along the full tariff onto their customers. They are stuck in the middle because they are not as big as Toyota where they can shift assembly of vehicles to different parts of the world, but also can’t increase price as easily as an elite supercar like Ferrari or Lamborghini. So if you’re thinking of buying that Mercedes, you may have to hold off for the next six months or so, or else you could be paying a rather high price for that luxury. Give the tariffs some time It’s only been a few days and there are protests across the country of people complaining about these tariffs. I hate to say it, but most of these people likely do not understand how tariffs even work. I will admit it is a complicated agenda and if you don’t understand finance or how economies work, the fear of not knowing can be scary. Those that understand investing and the economy, realize that making such a large shake up in global trade will not be resolved in a couple of days. With that said we have seen companies like Siemens from Germany say they would increase their investment in the US by $10 billion. Taiwan Semiconductor set a plan to invest at least $100 billion if not more in chip manufacturing plants in the United States over the next several years. Also, other Taiwanese companies like Foxconn, Compal and Inventec are looking for land in Texas for AI server manufacturing that could be larger than their existing operations in Mexico. Remember these tariffs will have a larger impact on countries that export more than they import and the US is a net importer, which means they will have a smaller impact on our domestic production. In 2024 we sent over $1 trillion to other countries around the world allowing them to grow their economies while they charged tariffs on US products. Also understand that in 2024 government debt grew by $2.3 trillion to $35.5 trillion. This is only April, just imagine how many more billions perhaps trillions of dollars will come into our country by June or July. I know it may feel hard now, but be patient and gosh waiting just three or four months shouldn’t be that challenging. I believe we’ll continue to hear negative news over that time frame, but it should also come with positive news including new trade agreements with countries and the additional investment by foreign companies that I discussed. With all the noise, an important inflation report seems to have gone unnoticed Tariffs and trade continue to take center stage, but the consumer price index (CPI) came in with very positive news on Thursday. The CPI showed an annual increase of 2.4% for the 12 months ended in march. This was down from February’s reading of 2.8% and came in below the expectation of 2.6%. Core CPI, which excludes food and energy was also impressive coming in at an annual rate of just 2.8%. This was down from February’s reading of 3.1% and also came in below the estimate of 3%. This also marked the lowest reading for core CPI since March 2021 when it was just 1.6%. I don’t think we’ll see a level like that again for quite some time. There is of course some negatives in the report with eggs prices in particular jumping 60.4% compared to last year, but overall I’d say this was a great report. Shelter, which we have been talking about for what feels like years now, was up just 4% compared to last year. This was the smallest gain since November 2021. The deceleration in shelter costs continues to put less pressure on the headline numbers and it appears to be on a glidepath lower, which should mean more promising reports in the coming months. The big question mark is of course the tariffs and how the trade wars will ultimately impact inflation. I am still in the camp that it will be less problematic than many fear. Be patient as I believe these concerns will persist for the next few months, but I still am looking for a lower inflation rate as we exit 2025 when compared to this March report.

Tariff announcements cause market chaos In an effort to balance trade relationships across the globe, several new tariff announcements were made on April 2nd. This caused the markets to decline sharply in Thursday’s session with the Nasdaq closing down nearly 6% and the S&P 500 closing down nearly 5%. I must say I was not necessarily surprised by that decline, but was more surprised by the run up in the market in the days leading up to the announcement. The administration has been talking about these tariffs for months and I for one was not necessarily surprised by the actions they plan on taking. The U.S. will be implementing a baseline tariff rate of 10% on all countries and that goes into effect on April 5th. After research into trade practices from other countries including tariffs, currency manipulation, and trade barriers the U.S. will also be implementing higher duties on several countries. This includes an additional 34% on China, which comes on top of the previous tariffs for a new effective rate of 54%. According to the administration, this compares to a calculated tariff rate of 67% from China. Other tariffs included a 20% rate on the European Union vs a 39% calculated rate on our goods, a 46% rate on Vietnam vs a 90% calculated rate on our goods, a 32% rate on Taiwan vs a 64% calculated rate on our goods, and a 24% rate on Japan vs a calculated rate of 46% on our goods. This is just a small sample as more than 180 countries and territories will be facing these reciprocal tariffs. The problem here is the bottom for stocks might not be in as there will likely be continued announcements from other countries with their response. Some countries like China, France, Canada, and Germany have responded with a combative tone and a promise to fight back. I continue to believe this trade war will not be solved overnight, but I must say with the pullback there definitely appears to be some opportunities surfacing. I’d be careful waiting for the all clear on this as by the time that comes, you may have missed some great opportunities. Trade barriers increase around the world It is not just the US that is increasing tariffs, many countries around the world are also increasing their tariffs. There are some economists predicting that we could be headed to the biggest increase in protectionism since the 1930s, when the Smoot-Harley tariff act was in place. Back then the average tariff rate in the US was nearly 30%. Today it is around 8.4%. When it comes to the group of 20 leading economies in the world, there are roughly 4650 import restrictions, of which the US has roughly 1000. The EU, China, Canada, Mexico account for roughly 700 restrictions with the other 15 countries accounting for 3000 restrictions. Some people feel the United States is being aggressive by adding all these tariffs to products coming in to our country, but when you look at the numbers and the facts, it appears we are just playing catch-up and we are way behind the rest of the world as they have been putting tariffs on our products going into their countries. I don’t understand why we are singled out as being such a bad country and unfriendly to other countries just because we want free trade in the world. I’m sure if they dropped their tariffs, we would do the same. Jobs Report shows some positive news on a difficult day for the market With all the news around tariffs and trade, it’s almost like everyone forgot that a jobs report was released on Friday. Job growth remained very healthy with nonfarm payrolls increasing by 228,000 in the month of March. This easily topped the estimate of 140,000 and was a nice increase compared to February’s reading of 117,000. The previous two months did see negative revisions of 34,000 in the month of February and 14,000 in the month of January. The unemployment rate did tick higher to 4.2% from last month’s reading of 4.1%, but this was largely due to an increase in the labor force participation rate. A major positive on the inflation front was wage inflation came in at annual rate of 3.8%, which was down from last month’s reading of 4.0% and was more in line with a healthy level that creates growing wages but puts less pressure on inflationary forces. I was surprised to federal government positions declined by just 4,000 in the month, but yet a report Thursday from Challenger, Gray & Christmas indicated Doge-related layoffs have totaled more than 275,000 so far. Apparently, the BLS noted that workers on severance or paid leave are still counted as employed, which would have a large impact on the employment numbers. It will be interesting to see how the employment situation shakes out in this category and if the private sector can absorb those lost jobs. It’s hard for some to look through the noise of all the trade announcements, but I still believe the economy is in alright spot and the growing concerns for recession may be overblown. Chinese car maker, BYD, is growing by leaps and bounds Chinese car manufacturer, BYD, has been around producing cars since 2003, but over the last few years it has really produced vehicles that have sold very well. In 2024, the company sold 4.3 million vehicles, which put it in sixth place for car sales behind Toyota, Volkswagen, Hyundai-Kia, General Motors and Stellantis. BYD produces both electric and hybrid plug-in cars and has a new fast charging system that claims it can give an EV about 250 miles of range after just five minutes of charging. The car also has a driver assistant software system called “eyes of God” which is available on all models, even the model that sells for under $10,000. That has put them ahead of Tesla, which is going through a difficult regulatory approval here in the US. I do believe caution in this space is a good thing as I’m sure we will see somewhere in the near future where the BYD cars have accidents due to a faulty system. With all the buzz surrounding these BYD cars, they have now hit $107 billion in sales, which is roughly $10 billion more than Tesla’s $97.7 billion in sales. Tesla still makes a better profit coming in at $7.1 billion for the year versus the $5.5 billion in profit for BYD. While Tesla is having some difficulty with sales here in the US partly due to Elon’s political affiliation, I’m sure in China they are having even more difficulty competing with BYD. In 2024 China had record car sales of 31.4 million, which is double the US car sales of 15.9 million. Tesla only accounted for 6.1% of China’s vehicle sales but yet it is 32% of the company’s total sales. If I was a Tesla shareholder, I’d be worried that BYD will continue to take market share away from Tesla. This would then likely hurt sales and profits going forward. What is a Solo 401(k)? A Solo 401(k) is a retirement savings plan designed for self-employed individuals or business owners with no employees. Also known as an individual 401(k), this plan offers significant tax advantages and higher contribution limits compared to other retirement accounts, such as SEP-IRAs. One major advantage of a Solo 401(k) is the ability to contribute as both the employer and the employee. For 2024, the contribution limit as an employee is $23,000 (or $30,500 if age 50 or older), which can be made on a pre-tax or Roth basis. For employer contributions, the limit is up to 25% of compensation, bringing the total maximum contribution to $69,000 (or $76,500 for those 50+). Many plans now allow employer contributions to be made on a Roth basis as well. To be eligible, you must be a business owner with no full-time employees, which includes sole proprietors, independent contractors, freelancers, and small business owners. However, spouses of business owners may also participate, effectively doubling the possible contribution. Another key benefit is that a Solo 401(k) can be paired with backdoor Roth contributions, making it an attractive option for high-income earners looking for additional tax-advantaged savings. This offers a distinct advantage over Traditional IRAs and SEP-IRAs, which can trigger taxes on backdoor Roth conversions. A Solo 401(k) is an excellent retirement savings tool for self-employed individuals due to its high contribution limits and tax benefits. Additionally, some business owners may still be eligible to make a 2024 employer contribution if completed before the tax filing deadline. Marriage rates are down, looks like men are to blame. Sorry to blame the males, but it looks like young men of today between the ages of 18 to 40 need to step up their game, and I’m not talking about their video game skills, which seem to be part of the problem. The young women of today more than ever want a career and family as well, but want to share the responsibilities with her husband. Most of the younger men want a wife to do the cooking, cleaning and raise the children, even if their wife is making more money and working just as much. Surveys of men and women are not looking good for more marriages going forward. In 2022 just 34% of single woman were looking for romance compared with 54% of single men. Compare that with just three years earlier when 38% of single women and 61% of single men were looking for romance. In another interesting survey from Pew Research Center, in 2019 31% of women thought that marriage was not that important to fulfill their life compared to 28% of men. By 2023 it changed pretty dramatically as 48% of women said that being married was not too or not at all important for a good life compared with 39% of men. Some of the complaints from women included the lack of ambition from men and their ability to support a family. In 1995 college education was pretty equal considering roughly 25% of men and women between the ages of 25 and 34 had a bachelor’s degree. In 2024, 47% of women between 25 and 34 had a bachelor’s degree compared with only 37% of men. According to a Georgetown University report, those with a bachelor’s degree have lifetime earnings potential of $1 million more than those that don’t have a bachelor’s degree. I need to point out I am a strong advocate that not everyone needs to go to college, but that doesn’t mean you don’t have to work hard. There are many trade professions now when you work hard, you can make up the difference of a bachelor’s degree over the lifetime of earnings. The key here though is hard work! Maybe part of the problem for marriage declining is because there are too many options out there on dating apps and people think there’s always something better out there. Or maybe the family dynamic has changed and more single people will have babies without the normal marriage process. My concern is with the current birth rate at 1.62 per woman in the United States, we are not replacing our current population and unfortunately from the data and the survey that I’ve seen, it’s only getting worse. Maybe after reading these guys will step up their game? China produces a lot of stuff There is no doubt that China is a major manufacturing country, but that could be a problem for the United States and the rest of the world. I thought the United States did a pretty good job of producing ships, but that is not the case. China produced 33 million gross tonnages of ships in 2023, which was more than half the global production. The US share was about 0.1% which is not even a blip on the radar. It seems the only way that the United States can get any major gains in manufacturing is going to be through automation and robotics. We simply don’t have enough people to work in a factory or who want to work in a factory. If something doesn’t happen within the next few years, China will not only be a dominant power, but also have the ability to make products to enhance their economy and become the world leader. Let’s hope that the tariffs can change the future and keep the United States as the dominant power in the world! Labor market continues to normalize Job openings in the month of February of 7.57 million missed the estimate of 7.6 million and were down 194,000 from January’s reading. While this may sound disappointing, it’s important to remember unemployment remains extremely low at 4.1% and there are still 1.07 job openings for every available worker. We should also remember that Covid created a lot of distortions in our economy, including the labor market. We saw a huge influx in job openings as the labor market was rebuilding after Covid and we are continuing to soften to a more normal level. If we look at job openings in 2019, which was still a very healthy labor market, they averaged approximately 7.15 million for the year and 7.57 million was the high-water mark. The weakest number came in December that year when job openings came in at 6.40 million. I’ve said this before, but I’ll say it again, I still believe there is plenty of room for the labor market to soften before it becomes problematic. Farmers will get hurt badly in the trade war Unfortunately, farmers in the United States will feel a lot of pain from the trade war. It is estimated by the Department of Agricultural that US farmers export about $171 billion per year. Just over the last few months, China, Canada and Mexico have put levees on almost $30 billion of US agricultural exports. It could get worse before it gets better. China is a big importer of pork produced in the United States, including a variety of pork meat and other items that Americans do not consume such as hearts, livers, tongues, and some other organs as well. With the additional 10% tariff that China put on their imports, it now stands at 47%. China also placed 15% tariffs on US chicken, wheat, corn, and cotton. Soybeans, fruit, vegetables, and dairy now have a 10% tariff. Canada hit makers of processed foods such as wine, sugar, baked goods and distilled spirits with a 25% tariff. Immigration changes could also have a major impact on the industry as illegal immigration made up about 42% of crop farm workers between the years 2020 and 2022. This will likely increase labor costs for farmers and that’s if they can even find enough workers to work the fields. Automation needs to come quickly for farmers to help with these challenging circumstances. Hopefully the current administration will have farm aid like they did before when they enacted tariffs at that time. The aid to farmers was a $28 billion program, this time around it may need to be higher than that. Farmers appear to be optimistic overall on the program and hope their sacrifices today will benefit them down the road, but their patience could run thin after 9 to 12 months. I do think the trade war should be over by then. Wall Street paid out $47.5 billion in bonuses last year Wall Street has been known to pay out big bonuses when the markets do well and that was the case for 2024. The average bonus on Wall Street last year was $244,700, which was a 31% increase from $186,100 in 2023. The only year that was slightly higher was 2021. It is no surprise this is a big win for New York City as the $47.5 billion will generate roughly 20% of the city’s total economic activity and create roughly $275 million more in revenue. The state of New York will also benefit bringing in roughly an additional $600 million more in state income tax. The way things currently look for 2025, the bonuses will not be as high as they were in 2024 due to market activity, reductions in staff, and a slow start for mergers and acquisitions which are off to the slowest start since 2009. What is hurting the markets and the M&A activity is the concern over tariffs, which I think will be with us until June of this year, maybe even September. I think the players on Wall Street should hold off on any big purchases as I just don’t think they’ll see big bonuses for 2025. It also looks to me that the greed on Wall Street is high. If you go back twenty to twenty-five years ago, a good bonus then averaged $100k - $125k.