Job Market, Office Space, Facebook Scams, Retirement Savings, Sell Gold Buy Platinum, JOLTs Reports, Brain Computers & Gambling

You don’t always need to pick the hot technology stocks to get great returns Investing is very emotional and it’s always nice to be part of the crowd and buy the hot stocks like Apple, Alphabet and Amazon, but they are not always the top performers. Sometimes your boring, undervalued companies can do very well. As an example, Apple over the years has performed nicely, but over the last five years the gain was 114%. Not a bad return, but if you held a boring company like Tractor Supply over the same five years, you would have a gain of 119%. Even an old insurance company like Allstate over the last five years was up 115%. Five years ago, if you saw the value in a company called Tapestry, which owns Coach and Kate Spade, your return was over 545%. Apple's not the only big tech company that was surpassed by these boring companies. If you look at Amazon over the last five years, you’ll see a return of only 49%. One other area that is often discounted is that many of your boring companies are also paying dividends and generating cash flow that can be used to purchase other equities on sale. You may be thinking Apple does pay at dividend but it's important to note the yield is only 0.45%. Sometimes being boring is good and not being so concentrated in the hot stocks can pay off in the long run. I especially think this will be the case as we look out over the next 5-10 years! Another weak job report likely solidifies a Fed rate cut August non-farm payrolls increased by just 22,000, which was well below the estimate of 75,000. This weak report also comes with another month of negative revisions as employment in June and July combined is 21,000 lower than previously reported. Healthcare and social assistance continued to lift the headline number as the sectors added 31k and 16k jobs respectively. Many other areas in the report actually saw declines with payrolls in construction falling 7,000, manufacturing declining 12,000, and professional and business services dropping 17,000. Government also saw a decline of 16,000 jobs and I worry this is a ticking time bomb since employees on paid leave or receiving ongoing severance pay are counted as employed in the establishment survey and those that opted to take the government’s offer at the beginning of the year will start coming off severance pay as the deal lasted through September. The most recent data I saw was that 75,000 federal employees took the offer, but not all were accepted into the program. I guess we will see the actual data and its impact over the next couple of months. With the weakness, I was surprised to see leisure and hospitality produce a gain of 28,000 jobs in the month. While much of this sounds concerning, the unemployment rate held relatively steady at 4.3% and that doesn’t incorporate the fact that 1.9 million or 25.7% of all unemployed people were jobless for 27 weeks or more. My belief is that many of those that have been unemployed that long are skewing the data as I can’t imagine they have been looking for a job that hard. With the unemployment rate low and deportations potentially weighing on the supply of workers, I just don’t see how it would be possible to maintain strong job growth given the limited supply. Because of this I still don’t remain overly concerned by the weak showing. Even with my lack of concern, this will likely lead to a Fed rate cut this month with markets now essentially putting odds for a 25-basis point cut at 100% and even a 50-basis point cut is now on the table with markets putting those odds at 12% after the job print. That’s up from a zero percent chance on Thursday. Should you panic over the job opening data? The Job Openings and Labor Turnover Survey showed job openings fell to 7.18 million in the month of July. This was below the estimate of 7.4 million and also marked the lowest reading since September 2024. It was only the second time since the end of 2020 that job openings came in below 7.2 million. While this may sound troubling, I believe it just illustrates how crazy the labor market got after Covid. If we look at job openings before 2020, nearly 7.2 million openings would have been a great number. In 2016, job openings averaged 5.86 million; in 2017, job openings averaged 6.12 million; in 2018, job openings averaged 7.11 million; and in 2019, job openings averaged 7.15 million. So, while the headline may sound troubling, I still believe we could have job openings fall into the low 6 million range and it wouldn't be problematic, especially given the fact that unemployment remains extremely low. Even with that, I do believe the Fed will use this as further evidence of a softening labor market and that will give them the excuse to cut rates at the meeting this month. I'm still not convinced that is the right move, but we did hear from Fed Governor Christopher Waller, who is supposedly on the short list to replace Powell as Fed chair, that he believes there should be multiple cuts over the next few months, saying interest rates today are perhaps 1.0 to 1.5 percentage points above their “neutral” level. American luxury brands are destroying Europe’s luxury brands It appears that European luxury brands like Gucci, Hermes and LVMH have increased their prices beyond what the average consumer is willing to pay. Currently, American consumers are spending the lowest share of discretionary income on luxury goods since 2019. The European luxury brands seem to have their heads in the clouds thinking American consumers would pay any price for a luxury purse from Europe. I think they have now discovered that the American consumer has reached their limit. Two luxury American brands have benefited from the ignorance of the European luxury brands. Both Ralph Lauren and Tapestry, which owns Coach and Kate Spade, have seen their sales increase. A chart of these luxury brands stocks shows European brands dropping while American brands have been increasing. One may be thinking now is the time to step in and buy Tapestry or Ralph Lauren, but with the recent stock increase they are no longer a great value as Ralph Lauren trades at over 20 times forward earnings and Tapestry is now over 19 times forward earnings. I would take a different side of the coin as I believe investors should understand that the European luxury brands will likely not just sit on their hands and do nothing and they will likely try and win back market share. With the increase in prices over the years I’m sure the profit margins are very fat, and they may have a good amount of space to do some heavy discounts to get their market share back. Both Tapestry and Ralph Lauren are dealing with the current tariff situation and that could hurt their profit margins going forward as well. On a side note, in years past we have warned people paying the high prices for European purses that they would not appreciate as much if at all. I have not researched it, but I feel pretty confident that if sales are down as much as they are, the resale on those expensive purses has probably dropped as well. Financial Planning: Mortgage rates reach 2025 low Mortgage rates have fallen to their lowest level of the year, reaching levels not seen since last October. Throughout 2025, 30-year mortgage rates have fluctuated between 6.5% and 7%, and as of Friday, September 5, they dipped as low as 6.29%. While this presents an opportunity for buyers and homeowners considering a refinance, caution is warranted. Rates are still likely to experience volatility even as the broader declining trend continues over the next several years. In 2024, mortgage rates actually rose at year-end despite the Federal Reserve implementing three rate cuts. In 2025, it is widely expected that the Fed will cut again in September, with additional cuts likely by year-end. This current window of lower rates may be worth taking advantage of, but paying upfront points may not be wise just yet, as there will likely be future opportunities to capture even lower rates. Warren Buffett’s Kraft Heinz deal is coming apart after 10 years! Not everything Warren Buffett does turns gold and he readily admits that he does have mistakes. In 2015 he and a Brazilian private equity firm called 3G Capital had the idea to merge Kraft and Heinz, which they expected to do very well. Over the last 10 years, the stock has struggled though as it is down over 60%. It currently has a nice dividend yield of 5.7%, which helps reduce the loss, but needless to say investors have not been happy with the results from the combined entity. Kraft has been putting more into its faster growing businesses such as hot sauces, dressings and condiments, which consumers have increased their spending on. However, the other part of the business, which includes processed foods like lunch, meats and cheeses, has been in decline over the years. The announced split will create two new companies that are not currently named, and the hope is that the two companies will be worth more than the current $30ish billion market value. One company will primarily include shelf-stable meals and will be home to brands such as Heinz, Philadelphia and Kraft mac and cheese. This part of the business accounted for $15.4 billion in 2024 net sales, and approximately 75% of those sales came from sauces, spreads and seasonings. The second company would according to Kraft, be a “scaled portfolio of North America staples” and would include items such as Oscar Mayer, Kraft singles and Lunchables. That company would have had approximately $10.4 billion in 2024 net sales. Executive chair of the board, Miguel Patricio said, “Kraft Heinz’s brands are iconic and beloved, but the complexity of our current structure makes it challenging to allocate capital effectively, prioritize initiatives and drive scale in our most promising areas. By separating into two companies, we can allocate the right level of attention and resources to unlock the potential of each brand to drive better performance and the creation of long-term shareholder value.” Although this deal isn't expected to close until the second half of 2026, Warren Buffett and Berkshire Hathway have said they are disappointed by the announcement. This is important considering the fact that Berkshire remains the largest shareholder with a 27.5% stake in the company. The question is, could his disappointment lead to the selling of shares? While Buffett may not like it, there have been other successful recent splits like Kellogg and General Electric. Keurig Dr Pepper is also unwinding their 2018 transaction, but it is still unknown if that will be another success story. One reason businesses will acquire another company is to try to diversify their business and enhance the earnings going forward. Unfortunately, sometimes the opposite happens, and it creates more complexity that leads to business struggles and a suffering stock price. Normally, when the split is announced, the stock will increase in value as investors see the opportunity for more value, but that was not the case with Kraft as it looks like Buffett's disapproval created a large overhang and resulted in a stock price that fell more than 7% after the announcement. Would you fly with an airline that filed bankruptcy twice in one year? The airline I’m talking about is Spirit Airlines, which filed for bankruptcy in November 2024 and came out of bankruptcy in March of this year. It exchanged almost $800 million of corporate debt into equity. The executive team from Spirit is now saying they should’ve renegotiated the expensive leases they had before, and they still have over $2 billion in debt on their balance sheet. The management team also blames the airline market. They estimated that the discount airspace would rebound for them, but it did not. Your bigger airlines like United, Delta and American do have less expensive basic economy tickets, but they also have more profitable sales from premium seats and destinations around the world. Spirit seems to think that maybe management from Frontier Airlines will maybe pick them up even though they had no interest before. They also feel that maybe another airline will be interested. We will see stranger things have happened, but I know as a consumer I would not want to buy any tickets from Spirit Airlines that go out more than a few weeks because you could be holding a ticket that is worthless from a bankrupt airline. Water shortages around the globe sound scary, could it reduce meat and dairy production? It is rather scary that based on a report from the Global Commission on the Economics of Water, in just five years the demand for freshwater is set to exceed supply by 40%. Meat and dairy farms use water to hydrate their animals, grow crops to feed them and when the heat gets high, they use water to cool them off. The American Farm Bureau Federation says that farmers need to work on reducing the water consumption by up to 40% by getting moisture directly to each plant using drip irrigation. The reason why watering plants is so important is if there’s not enough water to grow the crops, then the farms and businesses will have to buy more feed, which is more expensive and would add to the cost of meat and dairy production. The American Farm Bureau Federation is hopeful that advancements in humidity sensing technology will help farmers understand how much each plant needs down to the last drop. Once again, technology will probably save consumers a lot of money going forward by helping farmers become more efficient in raising crops and animals.

Yet another warning on private investments! I remember hearing about a company by the name of Yieldstreet a few years ago and how it was a new way for smaller investors to get access to private investments and diversify away from stocks. The company promoted their platform with the tagline, “Invest like the 1%.” Unfortunately, it is now coming out that several investors may have lost everything they invested in the platform. One gentleman shared with CNBC how he invested $400,000 in two real estate projects: A luxury apartment building in downtown Nashville overseen by former WeWork CEO Adam Neumann’s family office, and a three-building renovation in the Chelsea neighborhood of New York. Each project had targeted annual returns of around 20%. After three years, Yieldstreet declared the Nashville project a total loss, which wiped out $300k of his funds and the Chelsea deal needs to raise fresh capital or it will face a similar fate. Unfortunately, he is not alone and CNBC reviewed documents that show investors put more than $370 million into 30 real estate projects that have already recognized $78 million in defaults in the past year. Yieldstreet customers who spoke to CNBC say they anticipate deep or total losses on the remainder. Looking into this platform in more detail, it’s crazy what they were doing. Their portfolio doesn’t just consist of real estate as there is also private equity, private credit, art, crypto, and other less common investments. It appears Yieldstreet makes money by charging a management fee of around 2% on invested funds. The craziest part to me though was in several cases, Yieldstreet went to its userbase to raise rescue funds for troubled deals and told members the loans combined the protections of debt with the upside of equity. But in one case, a $3.1 million member loan to rescue a Nashville project was wiped out after just a few months! One of the big problems with these platforms is professional large investors are more disciplined when looking at investing in this space and the smaller players may be getting the bad deals that are passed over by the more established players. It’s unfortunate to see people lose money like this, but this is why I avoid the private investment space. There is just not enough clarity and in many cases these platforms seem to be in it for themselves rather than for their investors. I will continue to invest in good, quality equities as I worry, we will continue to hear stories like this from investors who put money into private investments thinking they were investing in a safer asset, just to find out years later there is nothing left. Will tariffs hurt this holiday season? Here we are already at the end of August and before you know it, you’ll be thinking about putting out the Christmas lights and decorating your home. For the past few years, we have seen growth in holiday sales, but this year could be different as it appears from recent conference calls from CEOs at Walmart, Home Depot and Target that they are seeing the tariff increases starting to come through. During his recent conference call, the CEO of Walmart, Doug McMillon, said that the impact of tariffs has been gradually increasing to protect the consumer, but he also said that the company is seeing cost increases each week as it rebuilds inventories with new products post tariff. He also mentioned that they may not be able to protect the consumer from rising prices much longer. What is also bad about this is that retail sales may rise, but consumers will receive less product to put under the Christmas tree considering sales are not adjusted for inflation. This could be the delayed inflation that Jerome Powell and the Federal Reserve has been waiting for and unfortunately, it may show up when people begin shopping for Christmas gifts. Maybe there should not be an interest rate cut in September after all? Should you work in retirement? When many people are in their working years, they can’t wait to retire so they can do what they want to do. For some people that retirement works out well, but science has shown that there’s health benefits to working in retirement along with financial benefits. The health benefits would include more physical activity as you’re not laying around the house or sitting in the rocking chair on the front porch. Instead, you’re moving around walking places and staying active. Working also helps you stay connected with other people, which has been proven to extend your life. The financial benefits from working in your later years would include taking out less from your retirement accounts to maintain a good lifestyle. Also, you can hold off on Social Security which means you’d get a larger Social Security check when you do decide to collect. The type of work you do depend on you and some people in retirement have started a second career that is a job that they always wanted to do. Some people just work part time to stay active and involved. If you’re in retirement, you can take a low stress job because you don’t really need all the income to cover your expenses as long as you have the financial accounts/investments to do so. Financial Planning: The challenge of creating retirement income For decades, American workers relied on pensions, but today retirement security largely depends on defined contribution plans like the 401(k), where the burden has shifted to the individual saver. The real challenge comes when it is time to turn a pile of assets into a reliable, inflation-adjusted income stream that can last 20–30 years. Some retirees look to CDs and Treasury bills, which are guaranteed and currently pay about 4% interest, but they offer no appreciation to offset inflation and yields will likely decline as short-term rates drop. Corporate bonds may provide a slightly higher return, but they come with interest rate, credit, duration, and reinvestment risks that often outweigh the modest extra yield. Others consider annuities, which can create a pension-like income stream, but these require handing over principal, and because they are designed by insurance companies, the terms typically favor the provider rather than the investor. High-dividend stocks can also be appealing, but they may be a trap, as struggling companies often have elevated yields due to falling stock prices, which can be compounded further if the dividend is cut. On the other end of the spectrum, broad market indexes like the S&P 500 and Nasdaq have been popular for growth, but their dividend yields remain low, around 1.2% and 0.8% respectively, forcing investors to sell shares for income, and poorly timed sales can shorten portfolio longevity. Even dividend aristocrats, known for steadily increasing payouts, currently only yield about 2% to 2.5% on average. There is no simple solution, but one truth stands out: accumulating assets is very different than generating income from them. Retirees need a clear income plan before leaving the workforce in order to maximize both security and enjoyment in retirement. Why Bitcoin could never be a world currency One of the reasons that Bitcoin and cryptocurrencies increase in value is because of the thought that they will become a world currency someday. Let me explain one of the many reasons why that will not happen. As an example, let’s take a look at the Euro and how difficult it was to get the European countries to adapt to just one currency and let’s not forget about Brexit, where Great Britain dropped out of the European Union and the Euro? Think about this, the European Union is just 27 countries but there’s 195 countries in the world. There are many different income gaps, difference cultures and let’s not even talk about the differences of opinion on politics. There is currently an attempt at a global currency of sort known as the International Monetary Fund, better known as the IMF, which introduced the SDR, which are special drawing rights. There is problems with this already where it requires the United States to re-dominate its treasury bills into SDRs for any foreign central bank that asks and make a legally binding international agreement to reduce the US deficit whenever it is deemed excessive or to increase it whenever it is deemed insufficient. That’s what will put an end to the SDR‘s before it gets very far. What large government would want to be controlled by the world let alone have no control over a currency like Bitcoin? Who benefits from private investments in your 401(k), not you! I keep seeing more and more of a push to allow private investments in credit, equity and real estate into your 401(k). Let me give you a list of who the big benefactors are if private investments are allowed in your 401(k) and yes, it is the big fat cats on Wall Street. There are six main players: Apollo Global, KKR, Carlyle Group, Blackstone, Ares and Blue Owl Capital. These companies rake in high fees with Morningstar estimating them around 2.5% on average. I was disappointed on August 7th when President Trump signed an executive order that instructed the Department of Labor and the Securities and Exchange Commission to make it easier for company plans to offer private assets. A spoke person from the White House, Taylor Rogers, said the intent of the order is to reduce the regulatory burdens and litigation risk that impede American workers from achieving a competitive return. Considering the return for equities of the last several decades, I believe nothing could be further from the truth when looking at that statement. On August 12th, the Department of Labor rescinded a Biden era statement that said most companies are not likely suitable to evaluate the use of private equity investments. It’s a shame that has been reversed because most the business owners that I know don’t have the time to analyze investments enough to make decisions to allow them in the 401(k). Ultimately, employers have a fiduciary responsibility to their employees to make sure their retirement is safe and I worry if employers get to loose in allowing these into 401k plans, they could open themselves up to lawsuits down the road. There is hope as there’s an advocacy group called Americans for Financial Reform that says without strong guardrails, ordinary savers will pay the price of diminished resources in retirement and will more than likely be left holding the bag with these expensive private investments. I do hope the Department of Labor is opposed to making a quick issue on guidance and hopefully they will take their time in drafting formal rules. This could take months and after that it could take employers years to do the due diligence on these investments. Hopefully by that time, people will come to their senses as we may see another liquidity crunch like the Blackstone BREIT had in 2022 and 2023 or even potentially a collapse in some of the popular private investment funds. Why is the union trying to get into JPMorgan Chase? I would not have believed it unless I read it myself but yes, there’s a union called JPMC Workers Alliance that is trying to unionize the 300,000 employees at the big bank. I see no benefit at all for the employees and instead see it as more of a fee generator for the unions to collect union dues. It is doubtful this will go anywhere since employees overall are very happy at the bank and view it as a great place to work with good work/life balance and opportunities for advancement. The union‘s big gripe is in January all employees were required to go back to the office five days a week. The United States finance industry has the least amount of unions of any private industry. According to the Bureau of Labor Statistics, unions in the financial industry for the US is less than one percent at 0.8%. There are currently about 200 people that formed a private group about unionizing, but they have a long way to go to get the union into JP Morgan Chase. Well known CEO, Jamie Dimon, is defending his five-day work week in the office saying that when you work from home it is hurtful to younger generations and that virtual meetings are really nothing more than a bunch of distracted colleagues. He has said before, that before the return to office change, on Fridays he couldn’t get a hold of people by phone. It seems people these days feel like they deserve the freedom to choose when and for how long they are in the office. I don’t know where some of these people in their group get their information, but I’m sure many of them have never run a business. I know myself; I can’t count the number of times I needed to go to one of my employees in the office to speak about something right then and there and many times needed to actually see what they had. Waymo’s autonomous taxi services will now be available in New York City Waymo, which is owned by Alphabet, received approval to test up to eight autonomous vehicles in Manhattan and Brooklyn through late September, but at this time they are required to have a trained AV specialist behind the wheel at all times. If you’ve been to Phoenix, San Francisco, or Los Angeles, you may have seen these weird looking vehicles scooting around the streets. Waymo has now completed over 10 million rides in five major US cities and they claim to have a very strong safety record. New York City is not the end or the last city for Waymo as the company did say earlier this year, they plan on being in 10 new cities, which includes Las Vegas and San Diego. It seems we’re getting closer and closer to having autonomous driving taxis as a more normalized option. If you have not done so already, you may soon be getting into a car and there will be no one in the front seat. That will be kind of weird don’t you agree? Ivy League schools don’t appear to be the best investors You may beat yourself up over some investment you did that lost money. That investment may have been sold to you because of no market fluctuation and it sounded like a great idea. It appears the Ivy League endowment funds are pretty much in the same boat. Because of the excitement around private investments, endowments are really short on liquidity if they need money. Endowment funds have been moving sometimes over 50% of an endowment into non-liquid investments like private equity, private real estate, and private credit. Maybe the managers are younger and forgot about the 2008 Great Recession and how important it was to have liquid investments in the portfolio. They have really gotten away from the standard portfolio of 60% stocks and 40% bonds, which has brought investors a decent return in the long term. In fiscal year 2024, the National Association of College and University Business Officers revealed that endowments with over $5 billion in assets only held 2% in cash or money markets, 6% in bonds, 8% in US stocks and 16% in international stocks. If you do the math, you’ll see that only 32% of the portfolio was liquid, which means the other 68% was in non-liquid assets. Because of the investments in non-liquid assets, the endowments have had to borrow money to pay obligations. Brown with a $7.2 billion endowment borrowed $300 million in April and $500 million in July. Northwestern borrowed $500 million and Harvard borrowed $750 million in April. Also, in the spring of 2025 Harvard had to sell $1 billion of private equity funds at a 7% discount to the stated value. If the economy does hit a slow period or a recession, it could really wreak havoc on these endowment funds. I would say, don’t invest like the Ivy League funds, instead find good quality equities that are trading at reasonable prices and that pay nice dividends. I believe you’ll be far better off than the Ivy League folks. Europe is far behind in their economy 500 years ago, European nations conquered and ran as much as 80% of the planet. They shaped the globe as their wars killed millions of people and surprisingly it was the birth place of modern capitalism and the industrial revolution. Over the last 15 years though, their economy has essentially been treading water. Their share of the global economic output was 33% 20 years ago and as of 2024 it was only 23%. It is estimated to be their lowest portion of the global economy since the Middle Ages. Household wealth growth has also been a problem for Europe as it has grown by a third as much as Americans since 2009. Per capita GDP in the US is about $86,000 a year versus $56,000 a year for Germany and only $53,000 for the UK. You may think Europe is a great place to live, but Americans have a far higher standard of living. Here in the United States, we have over 50% more living space on average per person and four out of five Americans have air conditioning and clothes dryers at home. This compares to Europeans, where the numbers range between one-fifth and one-third. The high tax revenue needed to finance their welfare-spending could be causing problems. I was blown away by the fact that Europe’s welfare states account for half of the planet’s welfare spending. Looking at tax revenue as a share of economic output shows problems. It is currently around 38% in Germany, 43% in Italy, and 44% in France. The US is only at 25%. Their politics subsidize vacations, back to school equipment for children and public transit is free for everyone. A big problem is their workforce is at risk of declining due to an aging population. The average European is nearly 45 years old, compared with 39 for the average American, and the continent’s working-age population is predicted to fall by nearly 50 million by 2050. The question is who will pay all the tax revenue if there are less people working and more people collecting? We have our problems here at home in the US, but I worry Europe is on a troubling economic path. I was just in Europe, a couple weeks ago and what I saw of Spain and Portugal, I was not that impressed. It seemed every single piece of blank space new and old was covered with graffiti and I also noticed at the airport in Munich it was really dark as they appeared to only use half the lights to save energy. One may like to visit places in Europe for the history, but I believe over the next 10 years they’re going to have a meeting with reality that you cannot keep giving your citizens free stuff as less and less people work.

How much will EV car makers lose in credits? The nations Corporate Average Fuel Economy, or CAFE, standards are still in place; however, penalties for violating those standards have been removed. So obviously there’s no incentive for any car maker to abide by them. The National Highway Traffic Safety Administration is focusing on standards to try to make cars more affordable again. But the big EV car makers, I will call them the big three which are Tesla, Rivian, and Lucid will have some difficulties. The credits were tradable and the EV car makers were making a lot of money selling the credits to car makers who were not meeting the required standards. Tesla will probably be OK, but I think their stock could be at risk because the credits have amounted to more than $12 billion in revenue since 2008 and that essentially is pure profit. In the most recent quarter Tesla said a loss of the credit revenue will reduce revenue by about $1.1 billion. Rivian, whose stock price in May finally showed some sign of hope trading above $16 a share has now dropped back down to around $12 a share and has said they had received over $400 million in revenue over the years and the credits accounted for 6.5% of the total revenue in the first half of 2025. I do believe with the loss of the credits and lower gas prices, Rivian may have trouble staying afloat in future years. Lucid will probably be hurt the most as they said the credits represented a significant share of their revenue. I have not looked at this company recently, but I still believe their balance sheet looks very risky and this could be the final nail in the coffin for this business. A couple years ago the stock was trading around four dollars a share and it is now trading just above two dollars a share. I’m pretty confident we will not see this company around in the next two or three years. The winners in this situation are the legacy automakers that were buying the credit, GM for example has spent $3.5B since 2022 to purchase CAFE credits. Stay away from interval funds! I have been seeing more of these interval funds when we take over accounts for new clients and let me tell you I am not a fan of them. They appear to be normal mutual funds, but when you go to sell them, you find out you can only sell once per quarter. The other problem is when you enter the sell, the next day you realize you still own shares in the fund. The reason for that is product’s unique structure typically allows investors to redeem just 5% of a fund’s assets! I’m sure most people have no idea when their advisor or themselves buy these funds that they will be locked in them for years to come. For example, I first saw these about 4 years ago with a new client and we still have not been able to fully exit the position. The reason withdrawals are limited is because the funds generally invest in illiquid assets, so managers want to make sure investors can’t exit in masse and force the manager to sell securities at fire sale prices. As many of you know, we are not fans of illiquid investments because if things go south, you have no way of exiting these positions in an efficient manner. The allure here for many is that retail investors with less investible assets generally don’t have the same access to as many private equity, venture capital, real estate, and private debt deals, so interval funds enabled those investors with minimums as low as $1,000 to gain exposure to the space. I would not recommend investments in any of those assets, but it just appears these are sold as a way for people to invest “like the wealthy”. A big problem here is the fees are just crazy! According to Morningstar, of the 307 interval fund share classes currently available, the median fund’s total expense ratio is 3.02%. A big reason for the high fees is they include the cost of leverage, which these funds use in many cases to amplify returns…. That doesn’t risky! Even if we exclude leverage costs though, the median expense ratio is still 2.18%. Brian Moriarty, a principal on Morningstar’s fixed-income strategies team had some interesting things to say after researching the space. He concluded before deducting any fees or incorporating any leverage, there was little difference between private-credit interval funds and public bank loan mutual funds and exchange-traded funds. However, after incorporating leverage, interval funds have beaten traditional loan and high-yield bond funds, as they’ve had about 1.3 times exposure on average to such debt in a rising market, but the problem is they will also have that exposure in a falling one. Needless to say, you will not fund us buying any of these funds in our portfolios at Wilsey Asset Management! ESPN just launched a new streaming product and I’m more confused than ever! I like streaming because it gives more flexibility in choosing what you want to watch, but gosh there are so many different apps and so many different bundles to choose from now. I believe it has just gotten more and more confusing and companies seem to keep increasing the prices for their services. Just this year Netflix increased their prices for various tiers, but the tier with ads went from $6.99 to $7.99, Peacock went from $7.99 to $10.99, and Apple just recently went from $9.99 to $12.99. Apple has been aggressive with pricing considering in 2022 you could get the service for just $4.99 and I personally believe it may be the worst value as I don’t think their content justifies that price point. In terms of new services, ESPN just launched it’s new service to allow consumers access to its programming without needing to get cable, but the price is quite high at $29.99 per month. Fox also just announced its new streaming service for $19.99 per month. You add these services to other like Disney+, Paramount+, HBO Max, and Hulu and the costs seem to just get quite ridiculous. For me I don’t use all the services so I save money on streaming vs traditional cable, but during football season they really get you. Since the league splits its games among so many providers you’re almost forced to have Fox, ESPN, Peacock, Paramount+, Amazon Prime, and now even Netflix carries some of the games. I’m not even going to throw in Sunday Ticket into that mix, which now costs almost $480 for returning users. It’s now gotten to the point where I wish these sports leagues would just go direct to consumer to keep things simple. What do you think, has the complexities in streaming gotten out of hand? Financial Planning: Form SSA-44 to Reduce Medicare Premiums When you retire, your income often drops significantly, but Medicare bases its Income-Related Monthly Adjustment Amount (IRMAA) on your tax return from two years prior when you may have been earning much more. This can result in unnecessarily high Medicare premiums at the start of retirement. For example, in 2025, a married couple with income above $212,000 begins to trigger IRMAA increasing premiums by $1,000 to over $6,000 per person per year depending on how high the income is. If that couple retires and their income falls to less than $212,000, they would still be charged the higher IRMAA unless they file Form SSA-44 to report “Work Stoppage” as a life-changing event. By filing, Medicare will use their new, lower income to set premiums, potentially saving thousands of dollars per year. If you’re nearing retirement or have recently retired, beware of the Medicare costs and consider filing this form to avoid paying too much. A new week and another warning about risks with the S&P 500 Many investors feel comfortable with the S&P 500 because it keeps going up and investors feel that it will continue. We can’t tell you when it will decline, but I believe it will and let me give you some scary information when it comes to risks with the S&P 500. Technology now accounts for almost 35% of the index and that is an increase from 32% at the end of 2024. Seven years ago it was just 20%. You may be surprised by this, but tech companies like Meta, Alphabet, Amazon and Tesla are not considered technology companies. If you were to add those to the tech weighting, which I believe most people would consider them tech companies, technology makes up 45% of the entire index, that’s scary. Another concern with the overconcentration in the market is Nvidia with a market cap of $4.4 trillion, now accounts for 8% of the entire index. It’s crazy when you compare that number to the entire healthcare sector at $4.7 trillion and energy at $1.5 trillion, which is now just 3% of the index. With investing it is important to understand what price an investor is paying for the sales of a company. On a historical basis, paying 10 times for the sales of a business used to be considered way overvalued. Today, Nvidia trades at over 20 times 2025 sales and the hot stock Palantir is around 100 times sales. Healthcare, energy and financials are looking far more attractive trading at 15 times earnings rather than the top line sales. Tech companies trade at higher valuations because they generally have less expenses on capital expenditures like an energy company would have, but AI has changed that considering Alphabet will probably spend somewhere around $85 billion in expenses this year compared to only $52 billion in 2024. Meta is estimated to spend about $70 billion on capital expenditures, nearly twice the $39 billion it spent in 2024. No one knows when the big downturn will come, but I’m sure you’ve heard the old saying, the higher it goes the greater the fall. Investors need to be aware of what they’re paying for their investments and not think that it will continue to go up just because it’s gone up in the past. Is your 401(k) worth less than you would like? I’m sure many people would like to see their 401(k)s much higher than they are, but unfortunately that wish is not a reality for many people. Even though 401(k)s across the US now total over $12 trillion, there are still people that are way behind in saving for a good retirement. It is not the fault of the 401(k), it is generally the fault of the saver/investor. Why? Such things we have talked about in the past like not rolling over your 401(k) when you go to a new employer or taking early distributions for what you thought was an emergency. Workers who are 45 to 60 years old known as generation X have an average balance in their 401(k) of $192,300. It is not that much higher for baby boomers who are at or are very close to retirement and have an average balance of only $249,300. At our firm, we have used a 6% distribution rate for our income accounts over 25 years and even at that rate a retiree based on the baby boomer’s average balance would only receive $1245 per month in retirement. The 401(k) is a long term investment and it requires some sacrifice and discipline, but in my mind there’s no reason why a 25-year-old earning $60,000 a year should not become a 401(k) millionaire. Besides the obvious of not investing enough or taking money out during the accumulation phase of your retirement, poor investment decisions are a big problem as well. If a 401(k) investor can average even seven or 8% per year and invest 15% of their salary, which would include the company match, a $1 million 401(k) is easily obtainable. People become too emotional in their 401(k) when they see a drop of 10 maybe even 20% and they panic and move everything to the money market or bonds, forgetting that retirement is five, 10, maybe 15 years or farther away. We also tell people that even when you retire at 65 you still have at least another 20 or 30 years of investing and should not be all in bonds or money markets during retirement. If you have a good advisor, they should be there for you when times get difficult, which they will, and not just tell you to stay the course, but explain to you in understandable terms of why your investments may be down now and why they are still the right investments for the long-term. Target date funds have been pushed by many as an easy way to hit your retirement goal and nearly 60% of plan participants were invested in a single target date fund in 2024. That is an increase of 50% from just 10 years ago. The problem with target date funds is the fees can be excessively high and even if you pick the correct year for your target retirement date, you may find that you’re invested too conservatively and not have enough exposure to quality equities. At our firm, Wilsey Asset Management we do not recommend target date funds but more of a managed approach using value investing, which has proven to be a great investment strategy for many years. A warning for 401(k) investors! There is a lot of pressure to allow private investments into 401(k) plans and I believe these will benefit the fat cats on Wall Street more than the individual investor. I highly recommend that you avoid these high fee, high risk investments. The federal government is reducing taxes and some states are now going to increase their taxes. Not all states will do this, but if you live in Washington, Rhode Island, Connecticut, California, or New York, in 2026 you may see higher state taxes. The states will generally be going after couples with a combined income of over $500,000 or individuals making around $250,000. The way states will likely try to get more revenue is by increasing tax rates on annual incomes, capital gains, or putting levies of some sort on luxury vacation homes. We won’t even imagine what their plan is for estate taxes. It is possible that even though many politicians of these states don’t think it will happen, many high income people may decide to move to another low tax state. I have seen this happen before and with states like California already having the highest tax bracket at 13.3%, if they increase the tax rate further and start taxing people on their second homes, it may make sense and save people tens of thousands of dollars by moving to another state. I think politicians are blind to this and don’t realize that these high-income individuals spend a lot of their income on purchases and services. When they leave the state, that is revenue that other businesses have lost and that does not include the lost revenue on sales tax and wages other people earned from those purchases and spending that came from those higher income individuals. Stock buybacks could be the highest in over 40 years With markets at all-time highs, why would public companies be buying back their stock? It is unfortunate, but many times they’re not looking at the true value of what they’re paying for their own stock but are trying to boost their stock price by buying their own stock. It is forecasted for 2025 that stock buybacks will hit $1.1 trillion and that is a high going back to 1982. However, if you look at the number on an inflation adjusted basis, I think you would find it is not that spectacular. Also, with market capitalizations higher for many companies, the percent of the outstanding shares being purchased may not be that large. So, while the headline looks good about companies buying back a higher dollar amount of stock, a smart investor will look at how much the company is paying for the stock and how much the buyback is reducing the shares outstanding. Bed Bath and Beyond is returning, but not in California Two years ago, Bed Bath & Beyond filed for bankruptcy as the business struggled with inventory, debt and cash flow and they had to close their doors. You may remember Marcus Lemonis, who was the star of the show on CNBC called the Profit. He’s a smart businessman and has run many businesses and now he is the executive chairman of the new Bed Bath and Beyond. He is very excited about bringing Bed Bath & Beyond back and will be opening roughly 300 stores nationwide within the next couple years. The first opening will take place in Nashville, Tennessee on August 29th and I was glad to see him stand up to California and say they will not be opening any stores in the state because California is one of the most over regulated, expensive and risky environments to run a business compared with anywhere in the United States. He says California has made it harder to employ people and make a profit as a business. He was accused of not wanting to pay his employees, but he said that was not true and they pay their employees very well but they don’t want to have the state of California tell them how to run their business. Even though there will be no brick and mortar locations, the company will still have an online presence for people in California. He also said he is tired of California bragging about being the 4th largest economy in the world, but yet taxes it’s citizens and businesses at unreasonable rates. There have been other businesses that have left California and I think that trend will continue with less businesses coming to California until Sacramento wakes up to the reality that people and businesses have pretty much had enough and California needs to get its state finances in order and stop wasting money! The markets loved Powell’s speech in Jackson Hole, BUT....! After Federal Reserve Chairman, Jerome Powell, spoke at Jackson Hole, the markets surged as they apparently loved what they heard. Like everyone else we are very pleased with the movement in our portfolio, but we are also realistic and people must understand that there’s a lot of time between now and the Federal Reserve meeting that starts September 16th when the Federal Reserve meets to determine what to do with interest rates. When I listened to the speech, two things stood out to me. First, I could hear concern about the most recent employment numbers, but I also heard concern about the tariffs and inflation. What really concerns me and should concern you as well is September 16th is a couple weeks away and during that timeframe, we will get the PCE report (Personal Consumption Expenditures Price index), a jobs report that will be released on September 5th, and also another CPI report (Consumer Price Index). This is important data and if there is more signs of inflation from the PCE and the CPI and improvement in the jobs numbers, it is possible that Chairman Powell will decide to stay the course and hold interest rates where they are. So enjoy the nice increase, but we still recommend being cautious and remember valuations are really high for many stocks.