SMART INVESTING NEWSLETTER
Homebuyers at Record Low, Bitcoin in 401k, Inflation Eases, Accredited Investor Explained, Buyer’s Market Ahead? U.S. vs Europe Biz, Kraken Stock Tokens & FICO History
Brent Wilsey • May 30, 2025
First Time Homebuyers Hit a Record Low
With the high cost of housing and higher interest rates, people trying to get their first home dropped to a record low around 23% in 2024. The average age of the first-time homebuyer has increased 10 years over the historical average to 38 years old. The median income is now $97,000 and the first-time home buyers are coming up with an average down payment of 9% of the value of the home. Many of these young buyers are using FHA loans, which require a very small down payment and according to research roughly 30% of all FHA mortgages have a debt service ratio of over 50%. This means more than half of these buyers’ incomes is going toward servicing debt. This could be a hard pill to swallow for young buyers with not much money left over for luxuries like vacations and new cars. However, if when they buy the home, they understand that if they really tighten their belts for the next three to four years, they will probably be fine. New home builders are doing what they can to try and get rid of the largest inventory of unsold homes on their lots since 2009. The median price of a new home is currently less than one percent higher than the median price of existing properties, which historically has seen a 17% premium. The home builders are using profits from their homes to buy down mortgages. Even though the 30-year mortgage was recently around 6.8%, home builders can buy these mortgages down which led buyers of new homes to a rate around 5%. Buying down these rates has cost home builders about 8% of the purchase price of the home. This reduces their profits but better than the alternative of sitting on unsold homes with a carrying cost for the builder. I don’t see this situation getting better anytime soon because I’m not looking for a large decrease in mortgage rates and incomes over the next year will probably increase somewhere around 3 to 4%. We continue to believe the rapid increase in the price of homes over the last few years will not last and it will now take some time to get back to normal market. Maybe we will see a better real estate market in 2027 or 2028.
Is Bitcoin coming to your 401k?
I have been concerned with bitcoin and crypto as a whole for several years for many reasons including fraud, illicit activity, and the fact that there is really no way to derive an intrinsic value for it since there is no earnings, cash flow, or anything really backing the asset class. I was disappointed to see the current Labor Department removed language that cautioned employers to exercise “extreme care” before making crypto and related investments available to their workers. They cited “serious concerns” about the prudence of exposing investors’ retirement savings to crypto given “significant risks of fraud, theft, and loss.” While this isn’t necessarily a full-on endorsement for placing crypto in 401k plans, it definitely seems like the administration is continuing on its path to try and normalize crypto as an established asset class. Even with this change in language I would be surprised to see a huge surge in cryptocurrencies within 401k plans. Ultimately, ERISA bestows a fiduciary duty on employers and company officials overseeing 401k investments and that means legally employers must put the best interests of 401(k) investors first and act prudently when choosing which investments to offer (or not offer). Given the extreme volatility within crypto I believe it would be a huge risk for these companies to offer it as it could open them up to lawsuits if there are major declines. We’ll have to see what other changes are made as time progresses, but I don’t believe crypto has any place within a 401k plan at this time.
Inflation report shows continued progress
The personal consumption expenditures price index, which is also known as PCE and is the Federal Reserve’s key inflation measure, showed an annual increase of just 2.1%. Core PCE, which excludes food and energy, showed a gain of 2.5%. Both results were 0.1% below their respective estimates. Overall, inflation has continued to cool and is now quite close to the Fed’s 2% target. The question that remains is how will tariffs ultimately impact inflation? An economist from Pantheon Macroeconomics said that he believed core PCE would peak later this year between 3.0% and 3.5%, if the current mix of tariffs remained in place. I would say it is difficult to forecast the tariff impact since we don’t know what will ultimately be passed on to the end consumer. It will definitely be interesting to see what numbers look like in the coming months, but ultimately, I believe most of the concerns around inflation are overblown and even if the rate for PCE is around 3%, I don’t see that as being problematic for the economy.
Financial Planning: What it Means to be an Accredited Investor
An accredited investor is someone who meets specific income or net worth thresholds—such as earning over $200,000 annually ($300,000 with a spouse) or having over $1 million in net worth excluding their home—and is allowed to invest in private securities offerings not registered with the SEC. These investments, which include private REITS, private equity, hedge funds, and startups, often promise high returns but carry significant risks such as illiquidity, limited transparency, and the potential for total loss. While many of these offerings are only available through fiduciary advisors—who are legally obligated to act in their clients’ best interest—investors must still exercise caution. Fiduciary duty applies only in certain contexts (such as investment advice) and may not extend to related areas like insurance or commission-based products. Additionally, what qualifies as “acting in your best interest” is often subjective and open to interpretation. Working with a fiduciary does not guarantee protection, and investors should remain vigilant, ask questions, and independently evaluate any recommendation. Also, private investments aren’t necessary better than public investments, so just because you qualify as an accredited investor doesn’t mean you should be investing in private securities.
Is a buyer’s market coming to the housing market?
Interest rates on mortgages have stayed pretty much above 6% since September 2022 and it doesn’t look like they’ll be falling anywhere close to 6% anytime soon. But for those looking to buy a new home, we could be looking at a homebuyer’s market soon. It’s not here yet, but there are signs that the number of homes listed for sale this spring has increased, while sales have actually decreased. Nationally, existing home sales are down 2.4% through April while the number of properties for sale has increased by 5.1%. Unfortunately for buyers, prices for homes are still high and mortgage rates have increased which has led to affordability still being a major problem. On a national level about 20% of home sellers cut prices on their homes in April, which was the largest amount of price cuts since April 2017. Zillow expects a national drop on average of 1.4%, but areas where there is higher priced homes and rising listings, the drops could be larger. Areas where there are second home owners could also see declines as many of them are sitting on a lot of equity in that house and they may not be using it as much as they thought they would. This could lead them to take advantage of that equity and sell at a reasonable price. Unfortunately, for the entry-level homebuyer competition is still fairly high and supply remains quite low, but that could change in the future as well. If you’re a buyer waiting to buy a home, I would be patient and keep your down payment in a high-yield money market, which should pay you around 4% while you wait to get that home that you want. Patience pays off in investing and home buying.
The U.S. is far ahead of Europe in Business
People love to travel to Europe to see history and maybe drink the French or the Italian wine, but when it comes to growing the economy Europe is far behind the US. Going back 50 years the US has created 241 new companies worth more than $10 billion, Europe pales in comparison creating only 14 new companies of that size over the last 50 years. Europe continues to fall behind the U.S. in productivity, 35 years ago the average EU worker produced 95% of what Americans did. Fast-forward to 2025 and Europeans now produce less than 80% of an American worker. It’s surprising that even though Europe has 449 million people, which is over 100 million more than the US, their economy is now 1/3 smaller than the US economy. Investors and entrepreneurs in Europe say the obstacles that prevent growth are a timid and risk adverse business culture, strict labor laws, regulations that stifle any type of growth and a smaller pool of venture capital. It is estimated that European businesses spend 40% of their IT budgets on complying with regulations. Also, many of these companies are confused as 2/3 of European businesses don’t understand their obligation under the EU AI act. I suggest to take this as an important history lesson for younger people who may think that more government is good. More government does not produce a growing economy and if you and your children want a higher standard living going forward, it takes hard work and competition, not government regulation and control.
Crypto Exchange Kraken is going to offer digital tokens backed by stocks
I can’t believe that this is happening, but it is and crypto exchange company Kraken said it would occur within the next few weeks. The company will be rolling out digital tokens that are supposed to be back by stocks such as Apple, Tesla, Nvidia and other popular companies. This also includes ETFs, like the SPDR S&P500 and the SPDR gold fund. These will not be available to US investors, but it is instead for other countries around the world to invest in US stocks. This is supposed to be easier than the current way of investing in US stocks through local brokerages. These digital tokens will be referred to as Xstocks And will be on the Solana Block chain platform. It is expected that Kraken’s partner, Backed Finance, will acquire new shares of stock as these tokens are sold to back up the value of the digital tokens. Trading of these digital tokens will be allowed 24 hours a day seven days a week. I’m concerned this could cause extreme volatility for some of these stocks as they may need to be purchased in large quantities each week day morning based on the activity that occurred while the market was closed. I think some crazy things could happen. I see huge concerns here and lots of room for fraud as it could be discovered the digital tokens are not backed by the correct number of shares. Maybe my thinking is old-fashioned but just seems to me if I’m going to invest in a company, I want to actually hold shares in that company not have someone acting as a middleman. I think unfortunately people trading these digital tokens don’t care about true investing and it’s just going to be more speculation. I do hope they fail like the crypto company Binance did when they tried the same thing back in 2021. The regulators around the world felt like Binance did not have the correct licenses to do this. But don’t worry, Kraken is regulated by the Wyoming division of banking and has a special purpose depository banking license. Well, that should make investors feel a whole lot better, right?
The History of FICO
Most people have heard of a FICO score, however I’m sure most have no idea how it was established and also that it is a public company that has performed very, very well over its history. The company was started back in 1956 by an engineer named Bill Fair and a mathematician named Earl Isaac. Each put in $400 of startup capital and it took two years to sell their first credit score. The name of the company is Fair Isaac company, which is where they came up with the FICO score. 31 years later on July 1987, it went public and sold 1.4 million shares at $9.50 per share. The stock now trades around $1650 for a total return of about 17,200%. There are very few investments that could come even close to that type of return. The company does not collect money directly from the customers who receive their credit score, it generally comes through application fees and is paid by the lenders. The company has what is known as inelastic demand, which unlike many other companies they can raise prices and the customers will still pay for their service. Sounds like a little bit of a monopoly to me. They are used by 90% of US lenders and do over 10 billion credit decisions a year. They do over $30 billion a year in sales with only 3700 employees. The free cash flow of the company increased by 30% to $607 million last year and it bought back $822 million of stock. The company sounds very attractive; however, it trades it around 40 times forward earnings, which is rather pricey and the slowdown in the real estate market could hurt the company going forward.
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.
Do stock dividends give you better returns? With the S&P 500 currently paying a dividend of only 1.1%, which is the lowest in about 25 years, people may wonder if they should even care about dividends. In 2024, dividends were only 36% of profits, which was 20 points below the average going back nearly 100 years. Looking at return figures, if you go back 65 years, reinvested dividends did account for roughly 85% of the S&P 500’s total return. With the market at all-time high valuations, investors should not give up on investing in companies that pay good dividends, but they also should do plenty of research to verify the dividend is strong and will last. And never ever buy a company just because it pays a dividend! When looking for companies that pay dividends, look for stocks with new or increasing dividends because since 1973 they returned on average 10.2% versus 6.8% for those companies that did not increase their dividend. Over the same timeframe, those stocks not paying dividends had a return of only 4.3%. Remember when looking at investing in dividend stocks to check that the company has a good amount of cash flow, a reasonable payout ratio to pay that dividend and a strong balance sheet that does not have excessive debt and a good amount of cash for liquidity. How will the US government shutdown affect you and the economy? Over the last 50 years, the government has shutdown 21 times with the longest being December 2018 when it lasted 34 days. The shutdown will affect mostly those consumers who are traveling with experts from the travel industry saying it will lose about one billion dollars a week. Think about all the national parks that will be closed and the frustrations at the airports will probably curtail travelers' enthusiasm for traveling. Even with all the negative headlines, stocks tend to do well during a government shutdown with the average three month return after the shutdown at 9.5% and one year later at 22.4%. I would not encourage people to think they will get a 22% return this time around because of the valuation on the stock market these days. Unfortunately, bonds don’t do as well with the three-month return being a -37% and a one-year return on bonds being a -10.7%. What this means is during a government shutdown generally long-term interest rates increase as bonds fall, and this would be detrimental to the housing market as we would then see mortgage rates increase if history repeats itself. On the shorter end of the yield curve, the Federal Reserve who sets short term interest rates will be handicapped because they will not be getting economic information such as the labor report and other government data to make their decision for interest rates cuts. It is possible if the shutdown is still ongoing at the end of October, the Federal Reserve may not cut interest rates because of the lack of data. The million-dollar question of how long it will last is a difficult one to answer as no one knows for sure but it appears since both sides are so far apart, they will not come to the negotiating table and until some negativity starts showing up in the economy there is not much pressure on the politicians. That means this shutdown could be one for the record books and could perhaps last a month or two! Public debt looks strong, but private debt not so much Public debt, which are bonds that trade on the public market, is looking rather strong based on the small yield margin between investment grade and speculative grade securities compared with the risk-free government debt. In September, $207 billion of corporate bonds were issued and that’s the fifth highest monthly amount on record. Year to date returns for those holding public corporate bonds stands between 7 to 8%. Private debt on the other hand is starting to have issues as companies such as Tricolor Holdings, which is a lender to individuals with low credit ratings, filed for chapter 7 bankruptcy in September. The debt holders may get something, but when a company files chapter 7 bankruptcy, the government receives their money first along with the attorneys and then what is left over if any, goes to the debt holders then equity holders. Also, last month an auto parts company called First Brands filed for chapter 11 bankruptcy, they had $6 billion of leveraged loans outstanding. This could be the beginning of an avalanche of defaults in private credit as I believe if the economy continues to slow down, these products will have some major problems. Hopefully you weren't sold anything that deals with private debt, equity or real estate by your broker. Financial Planning: Updated Tax Brackets for 2026 For 2025, married couples filing jointly will see their standard deduction rise from $31,500 to $32,200 with an additional $1,650 per spouse for those age 65 or older and a new $6,000 deduction per spouse for households with adjusted gross income (AGI) under $150,000, bringing the total possible standard deduction to $47,500. The 12% federal tax bracket will now apply to taxable income up to $100,800 (up from $96,950), and the 0% capital gains and qualified dividend threshold will increase to $98,900 (from $96,700). When calculating tax liability, AGI minus the standard deduction equals taxable income. For retirees, this means the $150,000 AGI level is an especially important threshold to stay under. It unlocks the extra $6,000 standard deduction, keeps all ordinary income in the 10% and 12% brackets, and ensures that capital gains and dividend income remain tax-free. These inflation adjustments give married couples, especially retirees and middle-income earners, more room to keep their income in lower tax brackets and reduce their overall taxable income going into 2026. Why would any company set up manufacturing in the country of India? I say that because their rules are ridiculous when it comes to running corporations. India's government is a Sovereign Socialist Secular Democratic Republic. The country is having problems with manufacturing because of how difficult it is for a company to leave India if the manufacturing plant is not profitable. It is estimated in India it takes an average of 4.3 years to completely close a factory because of the control of the government. There are laws from the government that if a company wants to shut their factory, the state government can refer it and dispute the closing of the factory at an industrial tribunal. In other words, you can’t just close your factory and go somewhere else unless the government says you can. The unions in India also have additional ridiculous requirements, which General Motors experienced when they tried to close their factory. The union insisted they either guarantee a new owner that would provide jobs for all of the workers or a severance package that paid out full-time salaries and medical benefits until retirement. I thought things had gotten bad here in the U.S. because of the push to socialism but take a look at India and one can see how bad socialism can be to a country. I doubt the growth in India can match the growth of the United States long term as I believe capitalism is a much better system. The clock is ticking on home energy tax credits Because of the One Big Beautiful Bill that was passed, at the end of the year many home energy tax credits will be gone. So, if you’re thinking of appliances that save energy or heat pumps or solar systems you need to act fast. The big question you should ask here, is it worth it? If you’re looking at adding a new natural gas, propane or oil furnace, hot water boiler, or air conditioning units, if they meet certain energy efficient standards you could get a $600 tax credit. Heat pumps are supposed to be pretty efficient, and you could get a tax credit up to the limit of $3200, which is around 30% of the cost of the unit and installation. Does your electrical panel look rather scary, and are you concerned about a fire? Here you can also get a $600 credit with an electric panel costing somewhere between $2000-$4000. If you’re not sure what is the best for your home, there are certified contractors or auditors that will assess your appliances, heating and cooling systems, insulation, lighting, and pretty much anything else that could save you money with tax credits. There is a cost for the audit that generally ranges from $300-$500, but you can receive a tax credit of $150 which comes from the energy efficient home improvement credit. Are you being too cheap? When we are younger, we are taught to be careful with our money, watch our pennies and don’t overspend. But as you grow your net worth over time, there may be certain levels where you can loosen up a little bit. I’m not talking about going crazy and that you should go on a spending spree, but using rules of thumb that maybe prove you don’t have to watch every penny. Research from a professor at the University of Michigan’s Ross School of Business found 15 to 25% of people have trouble spending money. Unfortunately, the opposite holds true as well and about 15 to 25% of people have no trouble spending money and they actually overspend. While that is a whole separate problem, here we’re talking about the people who have trouble spending money. The rule that has been established is called the 0.01% rule. What it states is that you should not fret over spending something that cost 0.01% of your net worth. If you have a $1 million net worth exclusive of your home and you’re debating about buying something that would cost up to $100 that would make you happy, don’t worry about it spend the hundred dollars. I will caution people this does not mean you do this every day or apply the same thought over and over again as that can add up in the long term. This concept of what I'll call realistic spending is designed to relieve some stress as you should not beat yourself up about spending an extra hundred dollars once in a while. I myself have lived with very frugal spending since I had a paper route when I was a boy and will now apply this rule going forward. I’m sure this will make my wife happier and there will be less disagreements about some purchases going forward. For young people today, financial stability comes before marriage Up until probably 20 to 30 years ago, couples got married and worked together to afford to buy a home and build a nest-egg. But with the young people of today, that has changed to where they would rather hit financial stability, advance in their careers and then get married. The current median age for a first marriage in 2024 was 30 years old for men and 29 years old for women. Going back just 17 years, a man was getting married for the first time at 28 and women at 26. During that same timeframe, there was a 9% decline in first marriages among 22- to 45-year-olds. Women over the years have improved their relative economic position while men have been pretty much staying the same. What this has done to marriages is that the man is no longer the ultimate breadwinner and therefore a woman does not need to get married just because a man makes more and he is not needed to bring home the bacon. Those with a college degree have a higher rate of getting married than those without one, but even that rate has been declining. 25 years ago, 68% of those who got married had a college degree or greater and that has only fallen to 64% today. Those with less than a college degree saw rates fall from 62% to only 53%. While there are many blue-collar jobs that pay very well, some women may not want to marry someone who does not have a college degree if they have one. I would love to get women’s comments on how they feel about this. Do you need a daily money manager? With the population getting older and more people having wealth as they hit their later years, the need for a daily money manager makes sense for many elder Americans. A daily money manager is a financial professional who provides personal financial services. The service they provide would include bill paying, reconciling checking accounts and investment statements, organizing tax documents, negotiating with creditors and even reviewing medical insurance papers. Be aware they’re not an investment advisor and should not be giving investment advice. This industry has grown rapidly over the last few years, and there are now Certified Daily Money Managers known as CDMMs. These are professionals who have advanced knowledge of the management of personal financial matters and have earned the certification through meeting the eligibility requirements along with passing an extensive exam that was developed by the American Association of Daily Money Managers. What you can expect to pay for a Daily Money Manager can range anywhere from $30-$150 per hour depending on your geographic location, the services they provide, and the CDMM‘s expertise. When looking for a daily money manager, be sure to ask for references and verify their bonding. It should also be important to understand how they’re going to bill you and when asking about a consultation, verify that it is a free consultation. Could there be a nuclear reactor on the moon in four years? It sounds ridiculous being such a short timeframe, but Sean Duffy, who is acting administrator for NASA, wants to fast track an effort to place a nuclear reactor on the moon by late 2029. We are now in a race with China and Russia, who also want to claim the moon for nuclear power before we do. Why a nuclear reactor on the moon? It’s because a moon outpost could generate new scientific and economic activities around research, mining, and even tourism. There are challenges with a nuclear reactor with a big one being keeping the reactor cool. On earth, reactors are built near bodies of water, which are used for cooling the reactor's core and can also dissipate heat into the atmosphere. On the moon there is no water or air so they will have to use large radiation panels to disperse the heat and heavy radiation shielding to protect the lunar environment and astronauts from the radiation. With private industry in the U.S. and expertise from companies like SpaceX, which is run by Elon Musk, and Blue Origin, which is run by Jeff Bezos, I think the moon is the limit. Maybe that saying is no longer applicable since the moon is not that far out of reach any longer.
Is a reduction in cardboard demand a warning sign of a slowing economy? The simple answer is yes, but it also is one of many indicators we are seeing. Cardboard is used in many items in the economy from pizza boxes to the multiple items you get delivered from online stores. The numbers show that box shipments after reaching record highs during the pandemic are now down to levels not seen since 2016. If you look at a per-person basis, the numbers are pretty staggering, as they are down over 20% from their 1999 peak. Part of this decline could be from companies like Amazon that have reduced cardboard consumption by shipping some items in paper and plastic mailers and potentially even becoming more efficient in their packaging practices, I remember seeing many times a box inside of a box. From what I can tell, I think they no longer do that, which would be a big reduction in cardboard. The price of container board has been on the rise over the years, which can cause users of cardboard to reduce their consumption as the price of corrugated sheets has risen 30% from six years ago to $945 per ton. I would not predict based on this data about cardboard that the economy is heading into a recession, but it is something definitely worth adding to the list to remember! Will the revenue from AI cover all the debt and expenses it created? AI is definitely part of the future, but has overbuilding surpassed the revenue that it can create? When one steps back and looks at the numbers they are staggering. Over the past three years, major tech firms have committed more funds towards AI data centers than it cost to build the U.S. interstate highway system that took 40 years to build. These numbers are even adjusted for inflation. In the next five years, the AI infrastructure spending will require $2 trillion in annual AI revenue. If you think that’s a lot of revenue you are correct. In 2024 the combined revenue of Amazon, Apple, Alphabet, Microsoft, Meta and Nvidia did not hit $2 trillion. It is also five times the amount of money spent globally on subscription software. Consumers have enjoyed the free use of AI, but it appears for businesses paying more than thirty dollars a month per user is the breaking point. AI executives claim the technology could add 10% to the global GDP in the years to come. With that thought they are saying the benefit comes when it can replace a large number of jobs and that the savings would be enough to pay back what they invested. My question is, if you’re replacing all these jobs, consumers will have less money to spend and probably won’t need or care about AI. There are many history lessons about bubbles that did not pay off because of the over excitement on inventions with such things as canals, electricity and railroads just to name a few. People may remember the excitement over the Internet and the building of tens of millions of miles of fiber optic cables in the ground. The amount spent was the equivalent to about one percent of the US GDP over a half a decade. The justification from the “experts” was that the Internet use was doubling every hundred days. The reality was only about 1/4 of the expectation came to fruition with traffic doubling every year. Most of the fiber cables were useless until about 10 years later thanks to video streaming. A report out of MIT said they found 95% of organizations surveyed are receiving no return on their AI product investments. In another study from the University of Chicago showed that AI chatbots had no significant impact on workers earnings, recorded hours or wages. I still believe AI will be here to stay, but the question is have the expectations gone too far? I think they have! Finally, some scrutiny on private investments from the SEC! The SEC has an investment advisory committee that was formed back 15 years ago that provides guidance to the regulator. Recently, the committee approved a set of recommendations on how to deal with the private market and protect the less sophisticated investors. The recommendations cover the key problems with private investments for investors, which include how they come up with valuations, how complex they are and that they are not a liquid investment. I thought it was also a wise move that they recommended the SEC demand better disclosures and also who can and cannot invest in private markets. I was very happy to see that they’re not just putting across the board if you have a net worth of X amount you can invest in private investments. The recommendation was based on the investor's level of investment sophistication. I’m hoping the SEC comes up with these rules quickly before more people find themselves in a private investment that they cannot get out of and perhaps lose all their money. Today would not be soon enough to pass this legislation. My recommendation is if you’re not in any type of private investments, don’t go into them! No matter how good your broker makes it sound, remember he or she is likely getting a big fat commission to put your money into these high-risk investments. Financial Planning: Keeping more of your Home Sale Proceeds Selling your primary residence can result in a substantial profit, but the IRS provides a valuable tax break to help offset that gain. Individuals can exclude up to $250,000 of capital gains ($500,000 for married couples filing jointly) if they’ve owned and lived in the home for at least two of the past five years. Be careful not to confuse this with selling an investment property, which does not qualify for the primary residence exclusion. Instead, gains from investment property sales may be deferred using a 1031 exchange, where the seller reinvests the proceeds into another investment property. By contrast, with a primary residence sale, you can use the proceeds however you like, and the gain is excluded up to the allowable limit without any reinvestment requirement. Importantly, even if your income exceeds the thresholds for the 3.8% Net Investment Income Tax (NIIT) ,$200,000 for single filers or $250,000 for joint filers, the portion of the gain excluded under this rule is not subject to NIIT. Only any gain above the $250,000/$500,000 exclusion could be subject to the tax. Most states, including California, conform to the federal exclusion, meaning they also will not tax gains up to the $250,000/$500,000 limit. For those expecting taxable gain, timing the sale in a year with lower income can help reduce the capital gains tax rate, since some or all of the gain may fall into the 0% or 15% capital gains brackets. It’s also wise to keep records of capital improvements such as remodels, additions, or system upgrades since these increase your cost basis and reduce the taxable portion of any gain. With proper planning, documentation, and a clear understanding of these rules, many homeowners can sell their primary residence while minimizing or even avoiding capital gains tax. Looks like some investors are getting the message that the stock market is too high. Money market funds recently hit an all-time record of $7.7 trillion, showing that some investors are concerned about the overvaluation of the markets. This is good that all investors are not throwing caution to the wind and are satisfied to put some of their money into short-term funds, earning 4%, while they wait out the potential storm heading our way. It appears that since 2022, money market funds have seen a nice increase considering they were just around $5 trillion at that time. If you’re wondering if nearly $8 trillion in money market is a large amount, go back to 2017, that year there was only a little over $2.5 trillion in money markets. Investors in money markets will experience over the next month or so probably a quarter percent drop in their yields, but that should not be enough to scare them into risker assets at this time. I would hope that from the reading that I did, it appears that some investors are just being cautious and putting 20 to 30% of their money into money markets, while keeping the rest invested. A 100% allocation in money markets is never a good idea. I think holding that 20-30% allocation is a prudent move at this time because no one knows when the storm will come. It could come tomorrow or next year, but we are confident a storm is coming, and I believe it's better to be prepared for it. Don’t blame rising food prices just on tariffs Last month consumers saw fruit and vegetables increase 2% and prices for apples and lettuce in particular climbed 3.5%. Tomato prices climbed another 4.5% on top of July's 3.3% increase. Beef prices continued to climb as they saw an increase of 2.7% and coffee climbed 3.6%, which now makes it 21% more expensive than one year ago. Before you jump all over the President and say this is all because of the tariffs, you have to look at it from the perspective of the farmers. Yes, some of the cost increase is from tariffs, but the cost of fertilizer in August was up 9.2% from the previous year. Labor costs have also risen, but it’s hard to get an exact figure since roughly 40% of agricultural workers were undocumented. The reason for rising food costs is not just the higher costs for production, but distribution and higher transportation costs are also having an impact as well. Weather this year has not been in favor of the farmer and has caused some disruption with harvest and livestock production. Unfortunately, going forward, it is predicted that these issues will continue to push the price of food higher for the near future. That means for those going grocery shopping, you need to continue to compare prices and look for the sales. AMEX raises platinum card fee 29%, is it worth it? It was only a matter of time before AMEX raised their fee on their Platinum Card after Chase raised their fee on the Sapphire Reserve Card to $795. If you want the status of having an AMEX Platinum Card, it will now cost you $895, a 29% increase from the $695 they were charging before. The AMEX Platinum Card came out over 65 years ago in 1958 with an annual fee of just six dollars. The marketing AMEX does is phenomenal and I think many will continue to hold the card and pay the extra $200 because the company has increased the rewards by $2000 to $3500. Holders of the card will still get access to airport lounges and seats at fashion week events in New York, which I’m not sure how that benefits holders around the country. But what holders may not realize is these other perks like the $600 hotel credit is $300 every six months. This is true with many of the perks you get like the $300 reward at Lululemon is really only $75 a quarter. If you buy all your stuff at Christmas time, you only get a $75 credit. Don’t expect to receive $200 off your next Uber bill for that Black car ride, it is only $15 a month, except for December when you get an additional $20. The highest earning 10% of Americans accounted for 49.2% of all the spending in the second quarter of 2025, which is the highest on record since 1989 when they began keeping track. I have a hard time believing that these people with that income are going to spend time going on the website and doing all the accounting to keep track of their credits to maximize their rewards. I think many hold it just because of the status that comes with the card. Myself, I like my 2% cash back reward on all my purchases from my Wells Fargo credit card. I don’t have to keep track of anything; I just get a nice check in the mail when I ask Wells Fargo to send it. I save $895 every year because my annual fee on the Wells Fargo Active Cash Card is zero. I like clean and simple when it comes to my credit card rewards. Which way are mortgage rates heading? That’s a big question many people ask and I wish I could say with certainty I could give you the exact direction, but all I can do is give you information to hopefully allow you to make a more intelligent decision if you’re dealing with a mortgage. People wonder why mortgages are tied closer to the 10-year Treasury than the Fed short-term overnight interest rate, which is impacted when the Federal Reserve cuts rates. The reason for the tie to the 10-year Treasury is that the expected amount of time a homeowner will hold their mortgage before either selling their house or refinancing that mortgage is longer term. The only tool that the Federal Reserve has to really move the price of mortgages is purchasing Mortgage-Backed Securities, which they did back in 2008 and during Covid in an effort to restart the housing market and help improve the overall stability. When the Federal Reserve purchased Mortgage-Backed Securities, they kept interest rates low on mortgages, and it encouraged people to buy homes and refinance their mortgages to put more money in their pockets. The reason I don’t see that happening now is even though the housing market is slow, if they stimulated the market further, they could increase inflation, which is not the goal of the Fed at this time currently. Based on the information I see I believe we will see mortgage rates in a current trading range up or down around a quarter of a percent for the next six months or so. Will the revenue from AI cover all the debt and expenses it created? AI is definitely part of the future, but has overbuilding surpassed the revenue that it can create? When one steps back and looks at the numbers they are staggering. Over the past three years, major tech firms have committed more funds towards AI data centers than it cost to build the U.S. interstate highway system that took 40 years to build. These numbers are even adjusted for inflation. In the next five years, the AI infrastructure spending will require $2 trillion in annual AI revenue. If you think that’s a lot of revenue you are correct. In 2024 the combined revenue of Amazon, Apple, Alphabet, Microsoft, Meta and Nvidia did not hit $2 trillion. It is also five times the amount of money spent globally on subscription software. Consumers have enjoyed the free use of AI, but it appears for businesses paying more than thirty dollars a month per user is the breaking point. AI executives claim the technology could add 10% to the global GDP in the years to come. With that thought they are saying the benefit comes when it can replace a large number of jobs and that the savings would be enough to pay back what they invested. My question is, if you’re replacing all these jobs, consumers will have less money to spend and probably won’t need or care about AI. There are many history lessons about bubbles that did not pay off because of the over excitement on inventions with such things as canals, electricity and railroads just to name a few. People may remember the excitement over the Internet and the building of tens of millions of miles of fiber optic cables in the ground. The amount spent was the equivalent to about one percent of the US GDP over a half a decade. The justification from the “experts” was that the Internet use was doubling every hundred days. The reality was only about 1/4 of the expectation came to fruition with traffic doubling every year. Most of the fiber cables were useless until about 10 years later thanks to video streaming. A report out of MIT said they found 95% of organizations surveyed are receiving no return on their AI product investments. In another study from the University of Chicago showed that AI chatbots had no significant impact on workers earnings, recorded hours or wages. I still believe AI will be here to stay, but the question is have the expectations gone too far? I think they have! China controls roughly 85% of the global processing in rare earth materials. Can the USA compete? It really is not a question; the USA has to compete or else our economy and our country will be in dire straits perhaps as soon as the next decade. There are 17 rare earth elements with names that most cannot pronounce, but they’re becoming more important because they are used in catalytic converters, to refine oil, and even polish glass. The big one that is not really thought of as rare earths is magnets. Magnets account for about 40% of total rare earth demand because they are used in many items like iPhones, electric vehicle batteries, and even the F-35 fighter jets. There are now some public companies in the U.S. like MP Materials coming on strong and they have their own mining and processing plants. The US government has taken through warrants a $400 million preferred equity stake in the company, which now makes the US the largest shareholder. As time goes on, we will see other types of incentives for rare earth companies in the United States. China got so far ahead of us because of the red tape and permitting that was required in the US. China fast tracked many of their mines and processing plants to get them up and running, while here in the US the plans sat on someone’s desk waiting for approval. It should also be noted in China the government is the largest shareholder in some of these mining companies, and they are willing to take small margins like 4%, which would be unheard of in the United States. Going forward, I think you will see less red tape and a faster permitting process with rare earth minerals so we can have more rare earth minerals here and not be held hostage to the communist Chinese government in the future. Back to the office has hit a slowdown! Companies like Amazon, JPMorgan Chase, and Dell have pretty much gone back to having most employees in the office five days a week and there are companies like Paramount Studios and NBC Universal that told employees to commit to coming to the office five days a week or else take a buyout. With that said, there are still your diehards out there who got used to working from home and are refusing to go back to the office full-time. Some companies like Amazon ran into trouble when they required employees to come back to the office full time as they forgot to match up the number of people coming back to the number of desks for people to sit at. Also, there weren't enough parking spaces and even video conferencing rooms were overflowing. To get the diehards back, it may take some more time. Numbers show that if they want perfect attendance from their employees that are still working from home, they can get that with the employees coming in one day a week. But when they start asking for three days or more per week, that is when the resistance starts, and the success rate falls below 75%. If the economy does slow down, you will see a higher compliance because employers will want employees to be more efficient, and employees would likely be more scared to lose their job as getting another one quickly would be more challenging.
Investors have a false sense of safety in the stock market A psychologist by the name of Gerald Wilde came up with the term homeostatic years ago and I believe this is totally relevant in today's market. It essentially means that when the environment comes to feel safer, people’s behavior becomes riskier. A great example he used was people will probably drive faster in a big SUV than in a little tin can of a car. Relating it to today's market, investors seem to feel safer because of the long bull market. As the market continues to rise in the longer term, investors' appetite for risk increases. They do not realize that their behavior is risky because they have a false sense that the market will not drop. While the risk of their investments is high, because of the confirmation day after day of the market going up, they don’t feel that they are taking any risk. From my perspective, the risk just seems like it continues to climb as people chase quick returns. AS an example, out of 672 launches of new exchange-traded funds so far this year, according to FactSet, 28% are tied to a single stock and 25% are leveraged and at least three seek to double the daily gains or losses of cryptocurrencies! You may not want to believe it, but there is a lot of risk in markets today and this could all end very poorly for those gambling in the market. Ultimately, there are two different types of investors, one is the long-term investor who is investing to build long-term wealth, while the other investor is in it for entertainment and they enjoy the roller coaster ride with the thrill of gains and the pain of the losses. This is a lot like the addiction that gamblers get. The difference is that long-term investors have odds of nearly 100% when it comes to making money over the long-term. Unfortunately, for those who do a lot of trading and take the higher risk road, well the odds of making money over the long term is closer to zero. If you check the prices of your stocks, I would say much more than a few times a year, you’re probably in it for the entertainment and will probably make poor emotional decisions when difficult times come, and they will! IPOs look hot, don’t touch them, you’ll get burned! So far in 2025 there have been over 150 IPOs which if you’re not familiar with the term, it stands for initial public offering. These IPOs have raised about $29 billion so far this year and it is a nice increase in the total number of IPOs when compared to recent years. At this time last year, just 99 IPOs had occurred and in 2023 it was even worse at 76. The exciting news reads “first day gains are averaging 26%, which is the best since 2020”, but it’s important to understand that those eye popping first day gains are not based off of the first public trade but rather are gains on shares that were issued prior to heading to the market. Unfortunately, you as an investor have little to no chance of getting those shares as you generally see these go to your institutional investors and high net worth clients of Fidelity, Charles Schwab and other big firms. So, if you can’t get the shares before they begin trading is it worth riding the bandwagon? I’m going to explain why the answer is a solid no. First off look at an ETF called Renaissance IPO (IPO). Back in 2021 it hit a high around $75 a share and by 2023 it fell to about $25 a share. With the recent frenzy in IPOs, it has climbed back above 50, but that is still a disappointing return to say the least. Also, this means any investors who bought it in 2021 through 2022 are still underwater. There is generally a ton of volatility around these trades considering when companies do an initial public offering, they’re only releasing 15 to 20% of their equity many times and they often come with an initial lockup period of around 180 days, which really reduces the number of shares that are trading. Also, make no mistake that the investment bank that is issuing those shares has an obligation to try to get the opening price as high as possible to get full value for their clients. If it’s an oversubscribed IPO, the demand will be higher than the supply, and the price will rise. Unfortunately, that means the company left money on the table that they could’ve put in their pockets rather than letting investors benefit from those gains. I believe investing in IPOs is a high-risk game, not to be played with by the average investor. A good example is Newsmax, which was a hot IPO with an issuing price of $10 a share that very quickly went to $265, as of today it is trading around $13 a share. A lot of people have lost their shirts, and I doubt they will get them back. To me the safer play to benefit from the increased number of IPOs is the banks handling this process considering they should be seeing a nice increase in profits. This would include your large players like JPMorgan Chase and Goldman Sachs. As of now there are other highly anticipated IPOs that could occur over the next year with names like robo-advisor Wealthfront, crypto firm Grayscale Investments, financial-technology firm Stripe, and sports apparel and betting company Fanatics all potentially hitting the public market. What's going on with the real estate market? This week we got both existing and new home sales for the month of August and there was a stark difference in the reports. The headline number for new home sales showed an increase of 15.4% compared to last year, while existing home sales were up just 1.8% over that timeframe. The first important consideration here is new home sales can be extremely volatile on a month-to-month basis, and they make up a smaller portion of overall sales. Pre-pandemic, new home sales were normally around 10% of total sales, but with the limited listings in recent years they have been closer to 30% of all sales. One other reason for the large difference is how the reports are calculated. New home sales look at people that were out shopping and signing deals in August, while existing home sales look at closings in the month, which means these were deals that were signed in June or July. Interest rates may have played a factor here as rates for the 30-year fixed mortgage were around 6.7-6.8% in June and July vs around 6.5-6.6% in August. This also doesn't include the fact that many homebuilders offer lower rates to entice buyers. The supply of new homes also looks much better for buyers considering there was a 7.4-month supply in August and that was down from a nine-month supply in July. This compares to a 4.6-month supply for existing homes in the month of August. Homebuilders have a much larger need to move homes quickly as many of them don't want them sitting on their balance sheet as that can create risks. This compares to the average home seller that may not have a need to sell their home and when looking at the crazy market from just a couple years ago, I believe many of them have unrealistic expectations for how much their homes are worth and how fast the property will sell. Homes are staying on the market longer at around 31 days on average, which compares to 26 days last year. These factors have led sellers to either pull their listing or even delay listing in the first place. One similarity between the two reports was the annual price appreciation with the median price on existing home sales climbing 2% to $422,600 and the price on new home sales climbing 1.9% to $413,500. These high prices and higher mortgage rates have continued to impact the first-time buyer as their share in the existing home sale market was near historical lows at 28%. With everything considered here I still believe the housing market will remain on a slow upward trajectory with limited supply continuing to battle against affordability concerns. Financial Planning: Insurance Vs Investments When building a financial plan, it’s important to recognize that investments and insurance serve very different purposes. Insurance is designed to protect against loss. Life insurance provides for your family if you pass away, health insurance shields you from crushing medical bills, and auto insurance protects you financially from accidents or damage. You pay a known cost, the premium, to avoid a potentially devastating unknown cost, which makes insurance a valuable safety net. Investments, on the other hand, are meant to grow wealth and produce income. Stocks, bonds, and real estate help your money work for you overtime. While they can experience short-term volatility and uncertainty, most high-quality investments are built on solid foundations and have historically rewarded patience; those who can tolerate the ups and downs are almost guaranteed to come out ahead in the long run. The confusion comes when insurance products, like permanent life policies or annuities, are marketed as investments. While they may promise guarantees or cash value, they usually come with high fees, low returns, limited flexibility, and lots of fine print, making them poor substitutes for true investments. That doesn’t mean insurance is bad, it simply means it works best when used for protection, not growth. The healthiest financial plans keep the roles clear: use insurance to protect and use investments to build wealth. Mixing the two often results in an expensive compromise that doesn’t perform well on either front. Should you be able to do a sleepover at the house before you buy it? Buying a house is a big commitment and recently some buyers have asked sellers if they can stay overnight for one night if not longer. The argument is you get to test drive a car before you buy it, why can't you do the same thing when you're buying a home, which is your biggest purchase. Some buyers and some agents are open to the concept, others are not. It appears to be trending with your higher price homes, but even some mid-price homes see buyers make this special request to "test drive" the house. It is up to the seller and sometimes they will allow it if the buyer is willing to pay a reasonable rent and if they have the renter's insurance to cover any liabilities. The concept is unconventional but is catching on and can really make the buyer very comfortable with their buying decision. Sellers have to be careful of all the liability that can come with this process and the person that is buying the house should be checked out thoroughly before you let them stay in your house. The real estate market is changing, I remember just a few years ago during Covid there were people buying houses sight unseen, which is very dangerous. Now with a slowing real estate market, it is more friendly to buyers, and they can ask for and many times get extra things such as staying in the home to make sure it fits their needs. Adult children living at home could be hurting your retirement The most recent data from 2023 shows 18% of adults ages 25 to 34 years old were still living at home with their parents. Another survey by the American Association of Retired Persons, also known as AARP, found that 75% of parents were still providing some form of financial support to at least one adult. The average amount of support per year was $7000. If you notice, that is the same dollar amount as the contribution limit for an IRA for your retirement and just think how nicely that will compound in the years to come. This is putting a larger burden on people in their 50s or 60s since many people had children later in their lives as opposed to back 50 years ago when people had children in their 20s. For the first time on record, there are more babies born to a woman over 40 at 4.1% of all births than to teenagers which was 4% of all births. If you’re going to have a baby in your 40s, that child will still be living with you in your 50s and maybe even your 60s. So, what can parents do about it? Be upfront with your children about your situation. In most cases, kids don’t understand about saving for retirement and they probably have no idea about your current financial situation. Let them know that you need to save for retirement because you don’t want to be a burden on them when they get older and there’s no reason why they can’t chip in financially as part of the household. Even if you only charge them $500 a month to help out, that is $6000 a year that you can contribute to your retirement account. A mistake that people make is thinking it’s not a problem and they can work forever but sometimes your health issues prevent you from working into your 70s. You need to be realistic about how long you can work. It is also very important to invest wisely with good investments because you’ll probably need more than you think when you retire. The reality is when you hit retirement there is not much help and your own children may be struggling with their family. I always say prepare for the worst and hope for the best. Are corporate managers being overworked? At first glance, if you’re not a manager, you might think they get paid more and they should work more. Which is true to a certain degree but unfortunately in the long term the business and the employees suffer if managers are overworked. A research firm Gartner showed that in 2017, one manager managed roughly five employees but data from 2023 show they were managing 15 employees. Corporate boards and upper management view less managers and employees as a sign of company strength as they can make more money with less people. But the reality is when a manager has more people to manage, they are unable to spend as much time with each employee, which means they have to cut out things such as helping employees with career goals, building a relationship with that employee or helping with productivity in their jobs. Some managers are using AI tools that will handle routine approvals and not spending any time with employees going over important items. Going back to 1950, Peter Drucker came up with and developed a management style where managers set objectives, motivated workers and helped develop them throughout their careers. Managers were not just supervisors but would build trust to inspire employees and help them understand their sense of purpose with the company they were working at. The theory worked very well for nearly 70 years, but now many employees feel less engaged because they don’t get feedback from their managers. In a recent Gallup survey, more than 50% of employees don’t really know what is expected of them. Across US public companies, the number of managers has dropped by over 6% in just the last three years. This may be great for the bottom line; however, I think long-term it will hurt productivity as employees become lost in the corporation or move on to another job because there’s no connection to the company or a manager. The Fed is cutting interest rates, and you may think what a great time to refi your mortgage. Not so fast.... Before you call your mortgage broker to refinance your mortgage it’s important to understand the difference between the federal reserve cutting rates, which is the cost of overnight money versus mortgage rates, which generally tracks the yield on 10-year treasuries. A good example was one year ago in September 2024 when the Federal Reserve began cutting interest rates. At that time the 30-year mortgage was about 6.2%, but even as the Federal Reserve cut rates three times over the next few months, mortgage rates climbed above 7%. So many people were able to refinance their mortgages when rates were low so many people do not stand to even benefit from lower mortgage rates. If your rate is below 6% you likely would not see any benefit from the current rate environment, but if your rate is above 7%, it may be worth exploring. Just make sure you understand all the costs associated with refinancing and I would again make sure you don't pay points at this time. If the broker is quoting you a rate in the 5's, that is likely too good to be true, and you are likely paying unnecessary costs. What does benefit from the Federal Reserve reduction in short-term rates are what are known as HELOCs, which are home equity lines of credit. Rates still remain somewhat high on these products, but with the reduction it may be tempting to tap that credit line. I always tell people to be careful doing so, because if rates go up again your interest costs will also rise. It generally makes sense to use these lines to pay off other high interest debt or for home improvement expenses. The big thing here is you need to remain disciplined and have a plan on how you will repay the credit line. Credit card rates also closely follow the Federal Reserve rates, and while a decline in the APR may be nice, borrowing with credit cards long term should be avoided as the cost of debt will still remain high on these products. How to get more out of your short-term money with the Federal Reserve cutting interest rates If you’ve been lazy with your investments and have just been throwing a lot of money into money markets or high yield savings accounts that were paying around 4%, you are going to start seeing those yields drop due to the Fed rate cuts. The question is what should you do now? The good news is you’ve got a few weeks before it begins to hit your money markets. First off, ask yourself a question, do I really need that much liquid in a money market? It is generally advised to have somewhere between 3 to 6 months in easily accessible funds, but ultimately it really depends on your situation. One area investors can look at for this short-term money is short-term bond funds, which can be found as mutual funds or ETFs. The yields will be slightly higher between 4.1 to 4.3% and your yield will stay higher for longer since those bonds don't all mature at once and are spread out over varying time periods, but as rates continue to fall these rates will also fall. As bonds mature those funds will likely be used to repurchase other bonds at now lower interest rates. Since you are going out a little further on the yield curve, the rates should still be more promising than the money market accounts. The big thing you need to understand here is the duration risk and the further you go out on the yield curve, the larger the impact rising/declining rates have on the price of the bonds. If it is truly for short term money, I wouldn't use any ETF or mutual fund that has maturities that go out more than a few years. Be sure to comb through all your accounts, like your checking accounts and your brokerage accounts as sometimes you may not realize how much you have sitting there, earning very little for you. Make sure you move your liquid funds to either a higher yielding money market or again the short-term funds and then longer-term monies should be utilized for investing. You can also search the Internet for high-yield savings accounts but be sure to read the fine print that you’re not getting a teaser rate and then next month you’ve got to do the process all over again. Also, you may want to look at some financial institutions that have CDs from 6 to 12 months. Some financial institutions may need to increase their capital and will pay slightly higher rates to get that money into their institution. Be careful not to go over the FDIC insurance limit just in case that institution was to fold. Some of them will even offer a CD for a certain timeframe but may have a special provision to get the money out without a penalty. Again, be careful of being enticed into long-term or higher yielding bonds that have greater risk due to the rating and duration. If the yield sounds too good to be true, it probably is. Going to an elite college does not guarantee you’ll be in the top 1% of earners in the United States I believe parents and some high school counselors put way too much weight on kids going to elite colleges like Harvard or any one of the Ivy League schools. It seems like both parents and counselors feel that going to an elite college guarantees success and will get you into the top 1% of earners in the country. That current threshold comes with earnings of around $700,000 a year. Yes, going to an Ivy League school does give one a slight advantage, but if you look at the numbers such as a study that looked at the CEOs of the Fortune 500 companies, only 34 of the CEOs came from elite colleges. Both Duke University and Brown University had three graduates on the list, but so did Ball State, Louisiana State and San Diego State University along with many other similar schools that would be viewed as less prestigious. David Doming, who is an economist at the Harvard Kennedy School, did a study on the differences between those students attending an Ivy League school versus selective public flagship schools like Ohio State, UCLA and the University of Texas. What he discovered was in the beginning of their careers those that attended an elite college did outperform those who did not. They were 60% more likely to have earnings in the top 1% and they were three times as likely to work for a prestigious employer, such as a top law firm or consulting firm, but when looking at the average income of Ivy league graduates it was pretty close to the public flagship schools. It was also revealed that not all graduates were chasing a job on Wall Street, some big consulting firm, or the most recent Silicon Valley startup. Most students, when they graduated, stayed close to where they either grew up or graduated from. It was also pointed out that employers generally want employees who remain with them for a while, and sometimes when you have a student that comes too far from home or where they graduated from, they end up leaving. What generally doesn’t make the headlines is the number of students who work hard and outperform the elite school graduates that sometimes might feel they don’t have to work as hard when they get to the interview or in the job. If you look at most successful people that are in the top 1%, the one thing they generally have in common is they do not just work the basic 9-5 and put in 40 hours a week. Not everyone wants to work 50 to 70 hours a week, but if you love what you do and you have the discipline you may not need that degree from Cornell University to be in the top 1% of earners.