K-Shaped Recovery, Alternative Investment Traps, Dividend Stocks? Dynamic Pricing, AI Disrupts Publishing, GM Loses Ground & More

The K-Shaped Economy May Be Improving 

If you’re unfamiliar with the term, the upper arm of the “K” represents higher-income Americans, who are spending more and generally doing better. The lower arm represents lower-income consumers who have been struggling with higher prices and tighter budgets.

But there are signs the lower end of the K-shaped economy may finally be improving.

Treasury Secretary Scott Bessent recently argued that the K-shaped economy is over and that we’re moving toward what he calls a “C-shaped economy,” where lower-income workers are beginning to catch up.

That may sound like a bold statement, but there are some encouraging signs behind it.

Economists have pointed to stronger hiring in the spring and early summer, which has allowed more Americans to change jobs. Changing jobs often comes with higher wages, giving lower- and middle-income households more income to spend.

There has also been improvement in wage growth at the lower end of the income spectrum as after-tax wages grew at an average 5.2% annual pace in July for lower-income households. This marked the first time since December 2024 that after-tax wage growth for lower-income households surpassed higher-income households. Higher-income workers are still seeing strong wage growth as well. So, I wouldn't say the K-shaped economy has completely disappeared, but the bottom of the K may be starting to move upward.

Another positive is the impact of the Big Beautiful Bill. Provisions such as no tax on overtime and no tax on tips can put more money directly into workers' pockets. This led to good refunds for many people and some people have also changed their withholding to increase their take-home pay rather than waiting for a large refund at tax time next year.

That makes perfect sense. Why give the government an interest-free loan of thousands of dollars when you could have an extra couple hundred dollars in your paycheck every month?

There are other encouraging signs. Data shows the share of households paying off their credit card balances each month is increasing, while savings remain above 2019 levels when adjusted for inflation.

We’re also seeing some evidence that consumer spending is becoming less concentrated among higher-income households. In the month of July, spending on credit and debit cards rose 5.4% for lower-income households year over year compared to growth of 4.3% for higher-income households. That’s important because consumer spending accounts for roughly 70% of U.S. GDP.

If lower-income consumers are finally seeing their incomes improve, paying down debt and rebuilding their financial cushion, that could broaden economic growth beyond the wealthier consumer.

I’m not ready to declare the K-shaped economy dead. There are still significant differences between how higher- and lower-income Americans are doing, and housing affordability remains a major problem.

But perhaps the more important point is this: The bottom half of the K may finally be starting to move upward. If that continues, it could create a much healthier economy in the second half of the year, with GDP growth potentially around 2.5% in the third and fourth quarters. Maybe the economy isn't completely C-shaped yet, but it may be starting to bend in that direction.

How to protect yourself when someone tries to sell you alternative investments

You may already know this, but there are some brokers out there who are very good salespeople and unfortunately, they may be more concerned about their commission than your financial well-being.

It’s estimated that over the next three to four years, another $2 trillion of client assets could flow into alternative investments. I’ve talked at length about the high fees, which can be 2% or more, and the fact that your money could be tied up for 10 years or longer. Even when you are allowed to get your money back, the redemption process can be very slow.

If you still believe an alternative investment makes sense for you, here are some questions you should ask the person selling it to you.

First, what is the manager’s track record? Don’t just take their word for it. Verify the track record and make sure you understand what they actually managed. Someone who successfully managed a small fund may not have the same results when they are suddenly managing multiples of that amount.

Second, how will I receive my tax information? A lot of investors are surprised at tax time when they receive a K-1 instead of a 1099. K-1s can make your taxes more complicated and often arrive much later than a 1099. That can mean waiting to file your taxes or even having to file an extension. Understand the tax reporting before you invest.

Third, how do I get my money out? Ask exactly what the redemption rules are. How long is the lockup? How much notice do you have to give? Are there penalties or restrictions Don’t assume you can access your money whenever you want.

Fourth, what happens if things go wrong? What recourse do you have if the investment loses money or the manager does something wrong? You may discover that you signed an arbitration agreement that prevents you from taking the firm to court. In some cases, the investment may even be governed by laws outside the United States.

Fifth, how much does the broker and their firm get paid? Ask directly: “How much do you earn if I invest in this? Does your firm receive additional compensation for recommending it? If so, how much?”

And there are two other questions I think everyone should ask. “Knowing my financial situation, do you really think it makes sense for me to tie up my money for 10 years?”

And perhaps most importantly: “Anything you are telling me verbally, please put it in writing.” If they won’t put it in writing, you should seriously question what you’re being sold.

I believe alternative investments are much riskier than people are led to believe and you need to understand the fees, liquidity, tax consequences, and incentives of the person selling them to you. Never let a salesperson rush you into an investment you don’t completely understand.

Should You Invest in Dividend-Paying Stocks or Not? 

Over the last 15 years, the dividend yield on the S&P 500 has been cut roughly in half from more than 2% to just over 1%. Some investors may say, “Who cares? My total return is much higher, and I don’t need the dividends.” But they may be missing an important part of investing, especially as they get older and closer to retirement.

Dividend-paying stocks can provide a valuable source of cash flow. Qualified dividends also receive favorable tax treatment compared with ordinary income. That tax advantage, particularly when compared with interest from U.S. Treasuries or CDs, is worth considering.

Another benefit investors sometimes overlook is dividend growth. Many companies increase their dividends over time, sometimes every year, as their earnings and cash flow grow. This can potentially provide investors with a growing stream of income. Investors appear to be taking notice. Morningstar has reported that dividend-focused funds have attracted billions of dollars in new money over the past two years.

Using dividend funds is one option, but at Wilsey Asset Management, we prefer investing in individual companies because we believe it can provide a higher yield while giving us more control over the companies we own.

Of course, a high dividend yield alone doesn't make a stock a good investment. We look at several factors to manage risk, including:

• The company’s payout ratio based on earnings and cash flow to make sure the dividend is sustainable.

• The company’s debt and interest expense to make sure it isn’t overly burdened by high-interest payments.

• The valuation of the company to make sure investors aren't paying too much for its earnings.

Investors should also remember that dividends are never guaranteed. Companies can cut or even temporarily suspend their dividends when their business requires them to preserve cash.

For that reason, diversification is important. We believe investors should consider owning at least 12 to 15 different dividend-paying companies across multiple industries rather than relying heavily on just a few stocks.

Dividend investing isn't just about the yield today. It’s about the potential for income, dividend growth and total return over time. As investors get closer to retirement, that income can become a much more important part of the overall investment strategy.

You could be paying more for products because of something called dynamic pricing. 

Most people assume that when they see a price online, everyone else is seeing the same price. That may no longer be the case.

With AI and the enormous amount of data companies can collect, retailers can learn a surprising amount about you. They may know your browsing history, location, the type of device you’re using, your purchase patterns and even how long your cursor stays over a particular product.

They can also potentially determine whether you’re a college student, a businessperson, or a senior citizen. They may also know what competing apps or websites you use. The thinking is simple: If you’re not shopping around, a retailer may believe you’re more willing to pay a higher price.

You may be thinking, Isn’t this illegal?

According to the Federal Trade Commission, it appears to be somewhat of a gray area. The FTC has recently addressed the use of consumer data to personalize prices and has said that businesses need to be transparent about what information they’re using and when they’re using it to personalize an offer. My guess is this will be like many other disclosures: We’ll see them, but most people won’t take the time to read them.

So, what can you do to protect yourself? Shop around. Before making a purchase, compare the same product on at least two or three different websites. Don’t assume the first price you see is the best price.

And here’s the interesting part: retailers may know you’re shopping around. If they can see that you’re comparing their price with competitors, they may have an incentive to offer you a better deal. In other words, the same technology that could potentially be used to charge you more could also work in your favor.

AI Is Creating Turmoil in the Book Publishing Industry 

AI is disrupting many areas of our lives that we’ve become accustomed to and the book publishing industry is no exception.

The publishing industry is struggling with a difficult question: How much AI should authors be allowed to use?

Some authors believe books should not be created by machines. Last year, 70 well-known authors signed a pledge opposing the use of AI to generate books.

But the major publishing houses, including Random House and HarperCollins, aren’t necessarily taking such a hard-line approach. They’ve discovered that AI can be extremely useful for authors, particularly when it comes to research. It can also make it possible to publish more books, which can obviously be lucrative for publishers. There are even programs publishers can use to detect whether AI was used in a book, such as the Pangram program.

At the same time, the industry is trying to combat something known as “slop books.” These are books produced very quickly, often with little creative value, simply to generate a quick profit. AI has made it much easier to produce these types of books at scale.

One study found that roughly 20% of e-books on Amazon contain substantial AI assistance.

So, the big question is: How much AI is too much? Should AI not be used at all? Should it be limited to research and helping authors brainstorm and organize their ideas?

Personally, I think AI can be a great tool for research, but it shouldn’t be used to write the book for you. The creativity, ideas and actual writing should still come from the author.

That said, I wonder if those resisting AI in writing today are making the same mistake car companies once made when they resisted the assembly line because they wanted to continue hand-building cars.

We may not like technological progress. It can feel uncomfortable and even scary at times. But history has shown us that you can’t stop it. AI is going to continue changing the way we work and create. The people and businesses that learn how to use it effectively and adapt to it will likely be the ones who benefit the most.

GM May Lose the Title of No. 1 Auto Seller in the U.S. 

General Motors has held the No. 1 spot for auto sales in the United States for 100 years, but that streak could be coming to an end. Toyota is closing in, and based on sales through July, GM has sold only about 100,000 more vehicles than Toyota.

At first, that sounds like bad news for GM. But I actually think it’s a positive development.

For years, GM sacrificed profits in an effort to remain the No. 1 automaker. The company frequently relied on large rebates and discounts to move vehicles off dealer lots, which helped sales but hurt profitability and contributed to GM’s financial struggles.

That strategy has changed dramatically under CEO Mary Barra, who took over in 2013. The goal is no longer to sell the most vehicles, it’s to make the most money.

GM has moved away from low-priced cars and sedans with thin profit margins and focused more heavily on larger, higher-margin SUVs and trucks. Vehicles like the Cadillac Escalade and Chevrolet Silverado can generate significantly more profit than lower-priced models.

Compare that with Toyota, which sells popular vehicles like the Corolla and Camry in the roughly $24,000–$30,000 range. GM is selling trucks that can cost around $50,000 or more, while high-end models like the Cadillac Escalade can surpass $100,000.

In many ways, GM has become more of a premium automaker, competing more directly with companies like Mercedes-Benz and BMW.

One challenge GM is facing is factory utilization. Its utilization rate has fallen to about 73% this year, down from 78.5% in 2024. Automakers generally want factory utilization around 80%–85%, while Toyota is operating at roughly 92%.

GM plans to add new models to its production lines, which should help improve factory utilization and spread its costs over more vehicles.

So, yes, it may be a little disappointing that we won't be able to pound our chests and say General Motors sells more vehicles than anyone else in America.

But if you're a GM shareholder, I think you should care a lot more about profitability than bragging rights. And so far, shareholders have been rewarded with a significant increase in GM's stock price.

Would you buy health insurance at your local Costco? 

Costco offers its members just about everything, from groceries and gas to travel services. Now, the company is looking at getting into health insurance.

Costco is partnering with SCAN Group, a nonprofit health insurer, to potentially offer Medicare plans to Costco members. Medicare is a massive industry, representing more than $600 billion a year for insurance companies.

The partnership will initially launch in just two states, along with a Medicare Supplement plan in another state. Costco and SCAN Group have not disclosed which states or locations will be included because of regulatory restrictions while they wait for approval from the Medicare agency.

Costco is always looking for ways to increase sales while adding value to its membership, so this seems like a natural extension of the business. What surprised me is that the insurance won't just be sold inside Costco stores. It will also be available through traditional channels, including insurance agents and websites.

My understanding is that you will still need to be a Costco member to purchase the insurance, although the companies have not released all of the details yet. At this point, there are no financial details on pricing or exactly how the partnership will work, and no launch date has been announced.

I would expect this to be another successful Costco venture. The company works extremely hard to find products and services that provide value to its members, and health insurance could be another way to strengthen the Costco membership.

If the stock didn't trade at more than 40 times forward earnings, you'd probably see Costco in our portfolio. Unfortunately, at that valuation, the stock is simply too richly priced for us.

Would you buy an iPhone or iPad if you knew it had Chinese chips inside? 

There should be no surprise that the AI boom is creating a shortage of chips and other technology components. And as always, when demand outpaces supply, prices tend to rise. That’s exactly what companies like Apple, HP and Acer are dealing with as they look for ways to keep costs under control.

One company benefiting from this trend is Chinese chipmaker CXMT, which has reportedly seen its revenue increase by roughly 700% over the past year and now holds about 7% of the global chip market.

This goes beyond simply buying a cheaper component and people should understand that we are in a technology race with China, and whoever wins that race could have a major advantage in determining who becomes the world’s dominant economic power. That’s a race the United States cannot afford to lose.

There are also concerns that relying on Chinese-made chips in major American technology products could create risks beyond the supply chain. Critics worry that increased access to American technology companies could potentially provide Beijing with valuable know-how that could eventually benefit its military and technology development.

I would hope companies like Apple think beyond short-term profits when making these decisions. Apple is one of America’s largest and most influential companies, and where it chooses to source critical technology components matters.

Saving money on chips today may seem like a smart business decision, but we need to consider what that dependence could mean for the United States in the long run.

If You Want Prosperity, Texas Is Showing the Country How to Do It 

Most people want the same things: a good job, a comfortable life, and the ability to provide for their families by working hard and playing by the rules. Unfortunately, some states and cities seem to be moving in the opposite direction.

Texas is showing what can happen when a state focuses on attracting businesses, workers, and investment. Texas is now home to 57 Fortune 500 companies, surpassing California at 56 and New York at 53.

Look at JPMorgan Chase. The bank recently completed a $2 billion headquarters in New York City, but it now employs about 32,000 people in Texas compared with roughly 30,000 in New York. I'm sure the planning for that New York building started years ago, and no one had a crystal ball to predict what 2026 would look like. But the growth in Texas is hard to ignore.

Dallas is booming, and Texas continues to attract major financial institutions. Next year, Bank of America is expected to open a new 30-story regional headquarters in Dallas, complete with a rolling stock ticker on the side of the building displaying quotes from the Texas Stock Exchange.

Texas is no longer just about oil.

Over the past decade, Dallas' financial industry has added roughly 100,000 employees, bringing employment in the sector close to 400,000. Texas is also building more natural gas plants than the next seven states combined.

And for those who favor renewable energy, Texas is doing plenty of that too. Solar power in Texas accounts for about 20% of U.S. solar production, while the state accounts for roughly 28% of U.S. wind energy production. I'm not a big fan of wind energy, but you have to give Texas credit for following the market where the demand is.

The formula isn't complicated: Don't excessively tax people, don't bury businesses in unnecessary regulations, and create an environment where companies want to invest, build, hire, and grow.

Texas has no traditional corporate income tax, compared with California's 10.8% rate. Texas does have margin tax, but the rate is just 0.75%.

Texas is also becoming increasingly attractive to corporations from a legal standpoint. In 2024, Texas became an even bigger draw for companies after a Delaware judge struck down Elon Musk's $56 billion Tesla compensation package. Texas has since strengthened its corporate laws, including provisions that generally make it more difficult for shareholders with less than 3% ownership to bring certain lawsuits or submit shareholder proposals.

Whether you agree with every one of Texas' policies or not, the results are difficult to ignore. Businesses are moving there. Jobs are being created. Investment is pouring in. And cities like Dallas are continuing to grow.

California and New York may eventually find that high taxes, expensive regulations, and policies that make it harder to do business come with a price. I'm pretty confident Texas and the people who live there will continue to do well. And ultimately, that's what most people want: the opportunity to work hard, build something, enjoy their lives, and provide a good life for their families.

California Is Finally Doing Something About Its High Gas Prices 

California is finally taking a step that could help address one of the biggest problems facing consumers: the state’s extremely high gasoline prices.

About 10 years ago, California began moving aggressively to reduce oil consumption, including policies that contributed to refinery closures and were intended, in part, to push consumers toward electric vehicles. But here’s the problem: California’s oil consumption was roughly 1.8 million barrels per day 10 years ago and it’s still around 1.8 million barrels per day today.

You can argue that without the growth in EVs, consumption might be even higher. But there’s still a legitimate question: How much have California consumers paid over the past decade for a strategy that hasn’t meaningfully reduced oil consumption?

Now, there is some good news. Phillips 66 and two partners have approved a roughly $5 billion project to transport gasoline, jet fuel and diesel from Texas to California. The proposed 900-mile pipeline would have the capacity to move about 230,000 barrels per day.

And believe it or not, Governor Gavin Newsom is supporting the project. He likely understands that California has some of the highest gasoline prices in the country and that the state needs more reliable fuel supplies.

The timing is important. Phillips 66 shut down its Los Angeles-area refinery in October 2025, which had been producing roughly 139,000 barrels per day. Then, in December 2025, Valero closed a refinery, which had been producing about 145,000 barrels per day.

That’s nearly 284,000 barrels per day of refining capacity gone. If you do the math, you can see we’re still coming up short by about 50,000 barrels a day, but it is definitely a step and the right direction.

The bigger issue is California’s long-term energy strategy. Forty-five years ago, California was a major oil-producing state. Today, the state imports a huge portion of its oil, with some estimates putting the figure as high as 75%. California now leads the nation in importing oil, what a proud stat that is. California even receives oil shipments from countries including Saudi Arabia, Iraq and the United Arab Emirates.

If California wants lower energy costs, it needs to recognize a simple economic reality: you can’t continually restrict supply and expect prices to fall. This pipeline is a step in the right direction. But California still has a long way to go if it wants to make energy more affordable for its residents.