Looks like it is over for the Mag Seven stocks, Is using part of your 401(k) for a down payment on your home a good idea? AI will create jobs that have not even been imagined yet, Start Social Security Early to Invest? & More

Looks like it is over for the Mag Seven stocks

The name Magnificent Seven came out in 2023 by a strategist from Bank of America named Michael Harnett. The idea is the name came from a classic western movie featuring seven heroic gunfighters and their push to save a small town. But just like other hot themes like the Nifty 50 back in the 60s and BRIC where you had to be invested in the emerging markets of Brazil, Russia, India and China, it looks like the Mag Seven glory days are over. In 2025, only two companies, Alphabet and Nvidia, outperformed the S&P 500. Microsoft, Meta, Apple, Amazon, and Tesla were no longer called stock market stars, and I believe this year will be another year of underperformance for most of these players. The Magnificent Seven still accounts for 36% of the S&P 500’s market cap, which is why I believe the S&P 500 will not have a great year in 2026. It will be hard for investors to give up these companies because as they look in the rearview mirror, they feel they're worth their value because they made very good returns in the past. However, just like the Nifty 50 and other hot investment themes throughout history, everything comes back to the mean. The question for many is what will be the next hot investment idea? No one knows for sure but I’m confident someone on Wall Street will come up with some exciting name for investors to chase and they'll tell them not worry about the fundamentals of the business.

Is using part of your 401(k) for a down payment on your home a good idea?

The President is trying very hard to stimulate the housing market and allow younger people to buy their first home. One idea that has been tossed around is allowing people to use their 401(k) for a down payment. People can currently borrow from their 401(k) and I often hear uninformed people say it’s a great thing because you get to pay yourself the interest. Briefly, it is not a great idea because those "interest" payments don't account for the negative impact of the opportunity for what those funds could have grown at. You also don't get a tax deduction when paying the loan, and then you pay taxes on distributions at a later date, so it also has a negative tax impact. Outside of 401k loans, how’s the administration looking to help first time homebuyers? Kevin Hassett, who is director of the National Economic Council, threw out one possibility that a homeowner could put 10% of the equity of their home into a 401(k). That may make your 401(k) balance look artificially high because as the home grows in value so does that 10%. The problem I see is when it comes to retiring that 10% cannot provide retirement income. I still believe the best way to fix the affordability problem is to increase the supply of homes to match the demand, which would reduce prices.

AI will create jobs that have not even been imagined yet

There are jobs that are starting to be seen and developed as AI becomes more involved in business. One example is someone has to make sure that the systems are kept up-to-date and function properly. There’s also going to be people that have to understand the technology thoroughly and then translate the output, so managers, judges, regulators, or anyone else that is using it understands the answer. Experts will have to understand such things as self-driving vehicles and how the technology works. Say there is a car accident with two self-driving cars, who determines who’s at fault? There will need to be experts that understand the self-driving technology and then try to explain the situation. The AI system will have to be checked from time to time to verify that the AI system did not produce results that were unfairly skewed in one direction or the other. Once that is discovered, another expert would have to know how to fix and eliminate those problems using new data that helps eliminate the bias. Training is another area of opportunity. As people’s jobs change, they will need training in the new technology. The expert trainer would also use the technology to figure out what teaching style works best for the individual. Yes, the future is always scary because of the unknown, but innovation continues onward creating new opportunities and problems that need to be solved.

Financial Planning: Start Social Security Early to Invest?

When evaluating when to start Social Security, there are generally two schools of thought. Either collect early at age 62 to invest the funds or wait until age 70 for a larger monthly benefit. Proponents of waiting argue that the age-70 benefit is roughly 77% higher than collecting at 62 and that deferring protects against longevity risk. Regular people and some financial advisors alike believe this is the superior strategy. A recent article in the Wall Street Journal takes this stance, stating that many retirees will live until age 85, so collecting at 70 increases guaranteed income and reduces market risk. However, the article illustrates its conclusion using an inflation-adjusted return assumption of –3% on invested funds. While technically possible, such an outcome is extremely unlikely over a 23-year period (ages 62 to 85), especially because the analysis applies returns to monthly payments over time rather than a lump sum, meaning the cash flows would benefit from dollar-cost averaging rather than suffer from sequence-of-returns risk. In reality, retirees who collect at 62 rarely invest the benefits directly; instead, they reduce withdrawals from an existing portfolio, preserving capital that can compound and generate additional income to offset the lower Social Security benefit. When the math is examined with multiple expected returns, a retiree is better off collecting at 62 if they live to age 78 assuming a 0% return, age 84 with a 5% return, age 94 with an 8% return, and any lifespan with a 10% return. Ultimately, the decision is less about maximizing guaranteed income and more about understanding expected returns, cash-flow dynamics, and the opportunity cost of delaying benefits.

What are the big tech companies doing about the potential shortage of energy in the future?

Energy is becoming a big problem for companies like Alphabet, Amazon, and Meta that are trying to build AI infrastructure. They are spending billions to build these data centers, but if there’s no power to run them, they’ll become useless. The current energy grid is becoming strained, and the government has warned they will not let the big tech companies take energy away from residential customers. Projections for US utility consumption have been increasing rapidly from just five years ago. The projection five years ago was demand would increase to 2 billion megawatt hours (MWh) by 2035, which is up from about 1.9 billion MWh now. However, as time goes on and more is understood about the energy needs for AI projections are rising and it is now estimated that demand will be closer to 2.4 billion megawatt hours, a 20% increase. To try to meet the increasing demand for energy, tech companies are looking at alternative sources. Alphabet recently paid $4.75 billion along with taking on an unknown amount of debt for a renewable energy company called Intersect Power. Amazon is looking at buying a solar project with battery storage capacity in Oregon, but the concern with solar powering AI is with the constant energy needs from data centers, if there’s no sun for a while, where do they get the energy from? The companies are also looking at what are known as SMR's, which stands for small modular reactors and yes that would be nuclear power. This too is a major high-risk use of capital, and the price tag here can run anywhere between $500 to $600 million. I have often worried along with many others what if the whole AI business slows down like when they overbuilt piping for the Internet during the dotcom boom. You would then see these big tech companies take massive hits which would negatively impact their stocks and shareholders would see steep declines in their portfolios. I hope that doesn’t happen, but this is something that an investor must be aware of.

Some important financial misconceptions

People believe that wealth is determined by how much you earn. The reality is, it is not necessarily how much you earn, but it is how much you are able to save and invest. There are many people that have high incomes that overspend and lack planning, which results in a low net worth. People believe they don’t need a budget as it’s too restrictive and it’s only for people with smaller incomes. I believe people should have a budget, no matter what their income is because it helps them see where their money is going and also keeps them from living above their means. You may think It is important to keep track of your small daily expenses and it is true that every penny counts, but more time should be spent on decisions about one’s housing, transportation, and a consistent habit for saving and investing as that has a much bigger impact on your overall financial well-being. Another big misconception is to get rid of all your debt and having debt is not a good idea. It's important to understand the difference between good debt and bad debt. Good debt is used for investments that appreciate over time such as a home. It also can make sense to use debt for fast depreciating assets, like cars and trucks as long as you can get a low interest rate. Bad debt is generally for credit cards or when used for non-essential items.

Can Saks Fifth Avenue come back after bankruptcy?

Saks Fifth Avenue, which opened in 1867, was iconic in New York City. A large reason for their downfall was they overcommitted themselves by paying $2.7 billion to buy luxury retailer Neiman Marcus, which has been around since 1907 with roots tied to the oil tycoons of Dallas. The hope was that the two companies combined would do better, but they haven’t. In a chapter 11 bankruptcy the stores will keep operating, but you probably will see some locations close that are less profitable. The company owes massive amounts to their suppliers like high-end retailer Chanel is owed $136 million and Kering is owed $60 million. These companies distribute high-end names such as Gucci and YSL to Saks. Unfortunately for Saks, they are not the only suppliers that are owed millions of dollars as the list has gotten quite long. Many high-end brands are not very excited about the situation and may not distribute any new product to Saks or Neiman Marcus stores until they get paid, which may not happen. There’s now a restructuring plan that involves about $1.8 billion, which will likely need to be repaid at high interest rates. Both Saks and Neiman Marcus have had difficulties since the 90s when specialty stores came out for high-end consumers, and e-commerce changed shopping for many. Looking forward, I don’t see how this company will come out of this restructuring. They’ve already sold the land beneath two other top stores in Beverly Hills and San Francisco for $100 million. With high interest payments of well over $100 million per month and sales declining by 13% I don’t see how this company will turn things around with no one giving them any inventory to sell and high interest payments. In the next year or so we could see a chapter 7 bankruptcy, where the company liquidates all the assets and pays off what liabilities it can.

No matter who wins the bid for Warner Brothers, the movie theaters lose

Warner Brothers has been known for a large production of theatrical films as the company released around 22 per year in the pre-Covid years of 2015 to 2019. But if Netflix were to win the bid for Warner Brothers, they have been vocal in the past about their dislike for theatrical distribution. The company has softened somewhat on that position, but it is doubtful they would do any releases close to 22 per year. Paramount would be the better option for the movie theaters as it has said it would release over 30 theatrical movies a year from the combined Studios of Paramount and Warner Brothers, but this would still likely be a step down from what two independent studios would produce. Stocks for movie theater companies like Cinemark and AMC Entertainment have dropped recently, but one positive for them is that the current negotiated theatrical releases from Warner Brothers would have to be honored going out to around 2029. Even with that, I would not run out and buy any movie theater stocks at this point as the industry has been struggling even before this major change. In 2025 the domestic box office was just over $8.3 billion, which was roughly the same as 2024 but around 25% below the $11 billion that was earned prior to Covid. 

Too much refinancing of mortgages could push mortgage rates higher

On the other side of mortgages are investors that have an expected rate of return. When borrowers refinance quicker than expected, investors can end up getting their money back too soon and then need to look for somewhere else to invest. Because of these rapid payoffs, they may also want additional compensation for the refinancing risk to obtain the high yield they were receiving before. What that means is a wider spread between the yields on mortgage bonds and benchmark treasuries. The historical average since the Great Recession for the spread between the 10-year treasury and the 30-year mortgage is 1.7%, but over the last few years it has been around 2-3%. After the announcement that the administration will instruct representatives to buy $200 billion in mortgage bonds, the spread to narrow to under 2%, but I'm curious to see if that lasts. The pace of refinancing has increased dramatically over the years, as nearly half of mortgages are refinanced with an interest rate of only 0.75% lower. 10 years ago, that rate was only about 33%. Non-bank mortgage firms like Rocket and UWM have really gained share over the last decade as banks have turned to different lending avenues like credit cards that are more profitable. Back in 2016, banks had some 60% of the mortgage market, but today the banks’ share has dropped to 25% and UWM and Rocket have about as much share as all the banks combined. With the focus on mortgage lending this has led to a better retention rate for non-bank mortgage firms, but it is still low at only 29%. This compares with a retention rate for banks that’s around 15%. 

Your white-collar job is gone; should you switch over to a blue-collar job?

It can be a tough decision for someone with a college degree to think about a blue-collar job and getting dirty doing hard labor, but that is not all blue-collar jobs. A The nice thing about many blue-collar jobs is they will not be replaced any time soon by AI. Automobile repair shops are having a hard time finding service advisors for assessing damage, estimating the cost to fix cars, and overseeing the process. It is estimated the starting salary is around $60,000, which may be below one's current pay, but a Chief Executive Officer from a large body shop company with 650 shops says in 18 months advisors could be earning $120,000 a year. After a few more years, they could move up to a director and oversee several locations and earn around $200,000 a year. Because the shortage is so great, they’re not talking about decades to make that kind of money but just a matter of years. Sales and service is another area that professional people could be a great asset for a company as their experience with meeting deadlines and professionalism is what many companies like home remodeling companies would love to have.  A 40-year-old that has good communication skills and the ability to meet deadlines and budgets on time would be a great asset for many blue-collar type companies. Just because one has a bachelor's degree in marketing or communications doesn’t mean they can’t use their skills to benefit blue-collar type companies that create, build and service consumers. With the direction that AI is going, you may not have a choice in learning a new skill.