Should the Fed still use the PCE as its inflation guide? The consumer remains strong, Can the new Apple CEO keep the stock gains coming? Your annuity may not be as safe as you think! & More

Should the Fed still use the PCE as its inflation guide?

I’ve talked a lot about the shelter index being misleading when it comes to inflation, especially when looking at the CPI, but the PCE has its flaws as well. The Federal Reserve has a 2% inflation target and uses monetary policy, which includes adjusting the Fed Funds rate, to tackle its dual mandate of maximum employment and stable prices. A big problem I see with the PCE is that healthcare now accounts for roughly 16% to 17% of index. This comes as an aging population led healthcare spending to be the single largest contributor to consumer spending in 2025. It surpassed housing and utilities in early 2023 as the fastest growing category in the PCE and by Q3 of 2025, it contributed nearly a full percentage point to overall economic expansion and accounted for nearly half of all spending growth. While it’s important to keep an eye on healthcare inflation, the Fed’s tools won’t be able to have a major impact on the sector like let’s say the housing sector. So, let’s say inflation stays around 3%, but a large reason for that is healthcare inflation. If the Fed hikes rates, it will have little impact on inflation and in fact it could have a huge negative consequence on other areas of the economy and push us into a recession. A big reason I remain worried about healthcare inflation is labor costs. It doesn’t appear we have enough workers to meet the demand for these jobs. On the positive side, the sector has provided stability and growth when looking at payroll data. In 2025, it added 686,000 jobs, which was more than all the gains in nonfarm payrolls. The question is though, can this continue without substantial wage inflation considering by 2030, we will have more people over the age of 65 than we do that are under18. I’m not sure how exactly we can rein in healthcare inflation, but I don’t believe monetary policy would provide a meaningful solution.

Even with all the noise, the consumer remains strong

March retail sales showed a nice increase of 4.0% compared to last year and while gas stations were a large contributor growing 18.1% due to higher gas prices, excluding them from the report still would have resulted in a good increase of 2.9%. The only areas that saw declines in the report were motor vehicle and parts dealers, which were down 2.1%, and furniture and home furnishing stores, which were down 0.8%. Areas of strength included nonstore retailers, which were up 10.1%, electronics and appliance stores, which were up 5.2%, and clothing and clothing accessories stories, which were up 7.2%. Food services and drinking places saw growth slow, but there was still a positive increase of 2.4%. It’s not just the retail sales report that showed strength, Bank of America pointed out debit and credit card spending climbed 4.3% in March, the most in more than three years. While a 16.5% jump in spending at gas stations was a large reason for the increase, there was still “healthy growth” of 3.6% excluding gas. We also heard from Wells Fargo CEO, Charlie Scharf, in an interview with Bloomberg Television and he said the U.S. economy remains “extremely strong” and that loan demand is solid, consumer delinquencies are well controlled, and businesses entered this period in strong financial shape. He also said consumer spending continues to grow between 5% and 7% year-over-year. Even with all the noise, the consumer is what drives the US economy, and it appears people remain resilient in their spending, which is a major reason why I believe the economy remains healthy.

Can the new Apple CEO keep the stock gains coming?

With the stock trading at a forward price/earnings ratio of around 32 times, I’ve got to say it’s going to be a very difficult task. Keep in mind over the last 50 years the average forward P/E ratio for the S&P 500 has been between around 15 to 19 times, nowhere near 32. I’m also reminded of a similar situation where a prominent company with such great stock success was taken over by a new CEO and the 16-year return was only 27% including dividends. That company I’m referring to is General Electric when Jack Welch retired and the new CEO Jeffrey Immelt who was handpicked by Jack Welch took over. Things could be different this time when the new CEO of Apple takes over on September 1^st but again given the current valuation it will be difficult. John Ternus is a mechanical engineer and was head of the hardware division. An engineering degree now represents the highest percentage of degrees among Fortune 500 CEOs, exceeding the number of CEOs with an MBA. I do have some question marks around the choice though as there have not been that many new successful products that have come out of Apple. We’ve had the AirPods and the Apple Watch, but they’ve had some major failures with the Vision Pro headset and are trying to build a self-driving car that they lost billions of dollars on. Mr. Ternus, who is 50 years old, is well liked and is said to have a friendly demeanor along with the engineering confidence, but will he have the magic that Tim Cook had finding ways to squeeze more value out of supply chain? Mr. Cook was also a great political negotiator working with President Barack Obama to President Trump and even made deals with China’s president that has kept the company going. Mr. Ternus does have has some big shoes to fill and a large mountain to climb. I just don’t believe Apple will see returns anywhere near the past returns they saw under Cook when he took over in 2011 and the stock grew by roughly 20 times.

Your annuity may not be as safe as you think!

Many people that are sold annuities are told by the broker that they are 100% safe and to be frank they would probably say almost anything to collect their big 7% or 8% commission. But the Treasury department has concerns and is talking to state insurance regulators about the large amount of private loans that insurance companies are using in their portfolios. Back in 2024 even the National Association of Insurance Commissioners, which is also known as the NAIC and is the organizing body for regulators for every state in the US, had stated ratings that insurers had on private credit and investments were consistently overinflated. They have since pulled the report from the website. Large redemption requests from individual investors that want to pull their money out of many private loan funds are starting to show up in other areas like pension funds and insurance companies. The insurance industry holds about $6 trillion in invested assets and roughly $1 trillion or about 17% is now in private credit investments. The insurance industry uses what is known as private letter ratings and can also assign a risk score to the investment. In a study that examined 109 private letter ratings that NAIC officials received in 2023, in 106 of those cases the private rating was higher than the NAIC. To make matters worse, 17 of the cases gave an investment grade private letter rating to assets that the NAIC considered junk or below investment grade. It is especially important to look out for the smaller firms that use smaller rating agencies like Eagan – Jones as opposed to your bigger rating agencies. The smaller firms tend to rate things much higher than the NAIC, sometimes as much as three notches higher, which really disguises the risk of what the annuity you hold is invested in. I’ve said for years that we will someday see an insurance company file for bankruptcy and those investors who invested blindly into annuities because of a salesperson’s recommendation will probably be disappointed to see that they lost all their earnings and perhaps even some of the principal. I unfortunately think it’s too late for some of these insurance companies that have invested into risky assets to turn the situation around quickly. 

Financial Planning: Traditional or Roth

Choosing between traditional and Roth contributions comes down to one key question: will you be able to withdraw or convert that money at a lower tax rate than your rate today? Traditional contributions work best if the answer is yes, since you get a tax break now and pay less later, while Roth contributions are better if your future tax rate will be the same or higher. Many people enter a lower tax bracket starting at retirement and lasting until required minimum distributions (RMDs) begin at age 75, but this low-tax window is limited. There’s only so much pre-tax money you can withdraw or convert each year before moving into a higher bracket. For example, while working someone may be in the 22% bracket and will drop to the 12% bracket in retirement, giving them some room to access that tax-deferred money at a lower rate. However, the threshold between the 12% and 22% brackets is about $100k of taxable income for joint filers, and other income sources like Social Security and pensions will take up some of that room. If those sources result in taxable income of $50k, then only another $50k can be withdrawn or converted from retirement accounts before being pushed from the 12% bracket back up to the 22% bracket.  If there is $1 million in pre-tax retirement accounts growing at 10%/year, that annual appreciation of $100k is much more than can be converted meaning the account balances would continue to grow. When RMDs begin, the taxable distributions would push income into the 22% bracket or higher and potentially trigger IRMAA. Situations like this are common when retirement account balances are large, and Roth contributions should be heavily considered while working unless the taxpayer is in the highest brackets (32% or above).

How do 2025 tax refunds look after April 15th?

The 2025 refunds were supposed to be higher than the 2024 tax refunds and they were. For 2025 the tax refunds were about $335 billion and that will be paid out in the first half of this year. Roughly 30% of people who filed their taxes did file for an extension beyond April 15th, which is about 20 million taxpayers. It is expected that most of these people will not be getting a refund. The data also revealed that people living paycheck to paycheck file as early as possible to get their refunds compared to higher income filers who wait closer to April 15^th. This could be because of some complexity with their returns. Some people who I have talked to personally that work in the hospitality industry or put in a lot of overtime are getting the biggest tax refunds. Unfortunately, because of the higher gas prices, people with lower incomes may be holding back on doing some purchases at retailers, restaurants, and auto dealers. Some may use the refunds to pay down their debt because another report showed US households that are concentrated in lower income ZIP Codes had higher delinquency rates, and those people may use the refund to pay down some debt, which is not a bad idea. The downside is it will not help stimulate the economy.

Why Bitcoin investors should not celebrate the increase in price

Over the last few weeks Bitcoin has come back from around $66,000 and is now around $75,000 depending on the day. If you’re investing in Bitcoin, you may be happy because you’re making money, but you need to realize a big part of the rise appears to be from the war in Iran. Because of the current situation, the crypto ecosystem in Iran is growing fast because of the sanctions and the devaluation of their currency. By using Bitcoin they’ve been able to conduct trades, purchase weapons and commodities, and stockpile more funds for future weapons. It is estimated from the most recent data that roughly $7.8 billion of crypto is being used in the Iran economy and it also appears that Bitcoin is the main crypto they use. The IRGC which is the Islamic Revolutionary Guard Corps is the most active user of Iran’s cryptocurrency market. They have been using what small amount of electricity they have to mine Bitcoin. Using Bitcoin and cryptocurrency has made it easy for Iran to settle cross border trades and settlements that allow the IRGC to continue their military actions. This makes it more difficult for the United States to enforce sanctions and other non-military ways of preventing them from continuing to build a nuclear weapon. We have said before that crypto was used for criminal activities and this is a major one that is showing up. I would not be proud to hold any Bitcoin or any other cryptocurrencies knowing that you’re supporting the IRGC which continues to promote death to America.

Careful that newly built home is not what you think it is

It’s no surprise to anyone that the cost of a home is extremely high, but new home builders still need to sell homes and make a profit to stay in business. It is getting harder and harder to sell new homes, for the month of March home sales declined 3.6%, which was the lowest level going back to June 2025. Home builders have decided to cut costs where they can to give you a less expensive home, but in reality, you’re getting a cheaply built home. There are things to look out for if you’re buying a new home or you know someone that is. Check the cabinets as they may no longer be using hardwood but particle board instead as it is a much cheaper option. Look at the countertops, you may see that they are much thinner than they used to be, perhaps only 3/4 of an inch and may not be of the same quality from the past. If you like a lot of natural light in your house from windows, you may find that the windows are not only getting smaller but also, they’re putting less of them in a new home. In 2015, the average number of windows in a home that was built was 21, it is now expected to fall to 18 within the next year. Be sure to knock on all the doors, you may hear a hollow sound as they’re installing much cheaper doors that can be very thin and lack any type of soundproofing. You may also notice when you walk into the kitchen not only a cheap faucet, but the appliances like the refrigerator and stove may be very low end. It’s also surprising that the median square footage of a new family home has dropped from 2466 ft.² in 2015 to 2153 ft.² in 2025. That is about 13% smaller. There’s not much one can do other than buy an existing house that was built maybe 10-15 years ago, but you may pay up for that quality. You can also buy the new home and just realize that you’ll have to do a remodel much sooner and maybe replace that vinyl floor with tile along with purchasing some new kitchen appliances sooner rather than later. Always remember that purchasing a home is probably the largest financial decision you’ll ever make, and you should be patient to avoid making a bad decision. 

Give the dishwashers some respect and higher pay

In a survey from the National Restaurant Association, they said 44% of sit-down restaurants surveyed had fewer than average applicants for kitchen support positions. CEOs of big restaurant chains like Darden and First Watch Restaurants Group say one of their top concerns is getting dishwashers to clean the dishes in the restaurants. The average pay for a dishwasher is around $32,500 a year and ranks in the bottom third of restaurant jobs. It is also noted that restaurant and other related service workers quit at the highest rate of any industry that is tracked by the federal government. A market research firm called Black Box Intelligence says that replacing hourly restaurant workers now costs $2700 up from $2300 in 2024. With a crackdown on illegal immigration dishwashers are now in high demand. This could be a good thing for the dishwashers because if demand is high and the supply is low, the nationwide average of $32,500 a year needs to find a level where people would love to work as a dishwasher. My guess is that number would need to push somewhere around $40,000 a year and they should also be treated with more respect because without the dishwashers, the restaurants would have to close.

More younger couples than ever are forgoing marriage and just cohabitating

Some people seem to think what’s the big deal, it’s just a piece of paper but that piece of paper can mean a lot if things don’t work out 8 to 10 years down the road. There are currently over 20 million adults in the US living together without any legal bond of marriage, which is over a 40% increase from the 14 million in 2009. When couples are married and things don’t work out there are state laws that are followed on how to dissolve marriages. While it could be good or bad at least there is some process. For unmarried couples, it is just the court’s interpretation of case law. You may think if you stay together long enough and hold yourself out as a married couple you’ll be protected under common law marriage, but it’s only a few states that do that including Texas and Kansas. California is not one of the states that recognizes a common law marriage, no matter how long you’ve been living together. It can get even more difficult than divorce when you cohabitate for such things as dividing assets, how to handle visitation of children, and even the beloved pet becomes a major concern today. The person usually with less assets and lower income is the one that many times gets nothing. Couples that cohabitate need to be very careful about using joint accounts as it just goes from bad to worse when it comes to joint property and investments.