Tariffs Push Back, 401(k) Investors, Contradicting Inflation Readings, Credit Score Boost Before a Mortgage, Car Technology, Tesla, AI, Quantum Computing, Bootlegging Eggs & US Dollar Weakening

US retailers push back against tariffs

I believe it is good news retailers are not pushing back against the US, but against countries where they buy products from. Companies like Home Depot, Walmart and Target are pushing back against production coming out of China. If a tariff is 10% the companies are pushing for the country to pick up the total cost and when tariffs jumped to 20%, they are getting push back on reducing costs by that amount but still having China producers pick up at least half.

The companies are also looking at their profit margins and what they are doing is not increasing prices across the board, but perhaps raising prices on other items that are in higher demand and only raising the price slightly on products with less demand. The companies are also absorbing some of the cost themselves as opposed to passing the entire cost onto the consumer. In the end, the producer, the company, and the consumer will all absorb part of these tariffs and there may not be that much of an increase in price for many of these products.

Unfortunately, I’m sure the regular media will find some products that went up dramatically and only discuss those. The big companies are also pushing for alternative places to produce products if China will not negotiate any reduction at all. Some companies are looking at producing the products here in the United States, which would be a win all the way around and I believe it would be the best thing for the United States.

Are 401(k) investors starting to panic?

A 401(k) is designed to be held for many years and should not be traded based on short term news. Unfortunately, the past month has seen the most trading activity in almost 5 years for 401(k)s. Individual investors added over $30 billion to money market funds in the first week of March alone. That type of activity in money markets has not been seen in the past year.

In the first couple weeks of March, trading in 401(k)s was 400% above the normal level as people watched the market decline and they let their emotions take over as they headed to money markets. This is a huge mistake! Decision making seems to be politically driven. If people like the current administration, investors are seeing it as a buying opportunity. On the other hand, if they hate the new administration investors are either looking at going to cash or maybe shifting their investments internationally. Your retirement account is for the rest of your life and an investor should not be making decisions based on the current administration’s actions considering it’s such a small blip in the timeline of 30, 40 maybe 50 years of investing.

Investors should go back to the basics and realize they are investing into American companies based on their earnings and what they are paying for those earnings. The country and the economy will always ebb and flow, but to try and figure out the best time to sell and buy has always been a losing game in the long term. If you have in your 401(k) good quality investments that are not overpriced, don’t worry about the short-term movements on a month-to-month basis. You should think about your investment plan not just year to year, but 5, 10, 15 years down the road, maybe even longer.  

Inflation readings and consumer expectations are telling two different stories

The Fed’s preferred measure of inflation known as the core PCE showed an increase of 2.8% in the month of February, which was above the expectation of 2.7% and last month’s reading of 2.7%. Headline PCE includes the volatile categories of food and energy and showed an increase of 2.5%, which was in line with expectations and matched January’s reading.

While the core PCE was a little hot, I don’t believe that rate of inflation is overly problematic. It would likely not be enough to get the Federal Reserve to lower rates, but it also would not be concerning enough for them to even consider increasing rates. Their wait and see approach is likely still in place and I’m optimistic, even with upcoming tariffs, there should be room to lower rates as we procced through the rest of 2025. Many consumers on the other hand seem very concerned about inflation with the final reading of the University of Michigan’s consumer sentiment survey showing expectations for inflation at a 5% rate one year from now and over a five-year horizon, the outlook now is for 4.1%.

This marked the first time since February 1993 the reading was above 4%. I do believe these respondents are way off on their forecast and would be shocked if it came to fruition as that would be more than double the Fed’s 2% target. We talked about why we don’t like this survey in the past, but in case you missed it, the survey is tiny. It appears the survey typically interviews around 600 households each month for the preliminary report and around 800 for the final report. Considering there are over 130 million households in the US, I just don’t see the survey as a strong indicator. 

How to Boost Your Credit Score Before Applying for a Mortgage

Your credit score plays a crucial role in qualifying for a mortgage and determining the interest rate you'll receive. In recent years, lenders have introduced additional credit score tiers when setting interest rates. Previously, a score above 740 was considered excellent, qualifying borrowers for the best rates. Now, two higher tiers exist for scores above 760 and 780, offering even better terms. While making on-time payments is essential for maintaining a strong credit score, it may not be enough to reach or stay above the 760 or 780 thresholds. One key factor influencing your score is credit utilization—the percentage of available credit you're using at any given time.

It’s generally recommended to keep this below 30% (e.g., if your credit limit is $10,000, keep your balance under $3,000). However, before applying for a mortgage, paying off all credit cards completely and reducing your utilization to 0% can boost your credit score by 10 to 30 points—potentially elevating you into a better rate tier. To maximize this benefit, don’t just pay your statement balance by the due date (which you should do anyway). Instead, pay your total outstanding balance down to $0 before your statement period closes.

Most credit card issuers report your statement balance to the credit bureaus, which determines your utilization rate. After paying off your cards, maintain a $0 balance for at least a couple of weeks to ensure your updated score is reflected. During this time, use cash or a debit card for purchases to prevent new charges from affecting your utilization. This simple strategy could save you thousands of dollars on your next mortgage or refinance by securing a lower interest rate.

Has car technology become too difficult?

I remember the days when it was so exciting to get a new car. The smell of the car, the feeling you got driving the car, looking at the car, it was such a joy! But today, there is so much technology you may own a car for two or three years and still not understand everything the car does. Some of the items that drivers like are wireless phone charging pads, heated and ventilated seats, rain sensor wipers, and one I have not seen, which is built in vacuum cleaners.

On the other side, what gets people aggravated is a touchscreen that can take multiple taps before getting what you need making you wish for the old twist of a knob or press of a button. The touch screens are very dangerous when you’re driving because sometimes, you’re focusing on the screen and taking your eyes off the road. A couple of tips, your base model without all the bells and whistles can retain more of its value at the end of a lease because the high-tech is less valuable in the used car market.

Be aware if you get into a fender bender or a cracked windshield as all those cameras and sensors that are built in will add to the cost of your insurance because repairs are much more expensive than just replacing an old bumper or windshield that did not have technology.

Don’t you wish you shorted Tesla stock on December 17th?

Obviously, it’s always easier to look back after the game and say you should’ve done this or should’ve done that, but whether you’re playing a basketball game or investing in stocks you still have those feelings after the fact. Had you known and shorted Tesla stock on December 17th, which was its closing high, you would have done really well considering the shares have lost about $700 billion in value since then and short sellers have made profits of $16 billion. While it’s easy to sit here and see that should have been done, we don’t recommend shorting because it has an unlimited risk as no one knows how high the stock will go.

Will Tesla drop further from current levels? It is possible because the stock is not cheap but on the other side of the coin, Elon Musk always seems to pull a rabbit out of the hat to help the stock reverse course and go back up. It is possible there are no more rabbits left in the hat, but there is the potential for more news about robotaxis and self-driving Tesla cars. I still would feel uncomfortable investing in any company with a P/E ratio over 100, but if you think the stock will drop further, you can short the shares. This means you borrow the shares today and pay for them at hopefully a lower price down the road, which is where you make your profit. If it sounds too risky or too confusing, we agree with you and no matter how exciting or how much money you think you could make off shorting we recommend you stay on the sidelines.

AI does not benefit all companies

AI, which is also known as artificial intelligence, may not be the best thing for every company. I say that because while it may give their stock or the company a short-term boost, it may cost them more money in the long run which could hurt the business. Remember AI uses a lot of data to produce various responses and if the company has not been collecting data over the past few years, there is no way to train AI models to do things more efficiently. If the company hasn’t collected that data and now, they want to do it, it would take a lot of time and money to go back and re-create quality data to be used by an algorithm for accuracy.

It should also be noted because of the short-term history of AI, many management teams lack experience or knowledge about building an in-depth AI strategy. This could cause more expenses from trial and error by the management teams and executives who make up an AI strategy that is perhaps not only misguided, but may not be able to be executed and benefit the company. This could waste millions maybe billions of dollars depending on the size of the company. If the company you’re investing in does not have an AI strategy, don’t be too concerned as it should come eventually. For now it may be best to stay the course with what has worked well in the past and slowly build out a great AI strategy for the long term. 

Understanding quantum computing

While it may seem like it, quantum computing did not just come out last year. It’s actually been around for about 25 years. In the year 2000, Microsoft brought on a physics professor named Chetan Nayak to build the first quantum computer. Microsoft is not alone in this endeavor as many of the major technology companies are trying to build the first practical quantum computer.

The reason why quantum computers are worth all the expense and time is they expect big leaps forward in areas such as medicine, which should bring in billions of dollars, maybe hundreds of billions of dollars to the first company that develops a well-functioning quantum computer. Quantum computing will be much faster because it won’t use classical bits that are either a zero or one. Quantum computing uses a bit known as qubits that can exist in both states at the same time. This is similar to a transmission in a Lamborghini that can already be in the next gear while it’s still in the current gear. This means quantum computers could perform certain calculations at the same time and exponentially faster.

The future while it can be exciting it can also be quite scary. Quantum computing, AI, and robotics could change life for the good or the bad for many people in the US and around the world. I’m sure it was very exciting but concerning during the industrial revolution that began around 1760 in Great Britain and lasted about 60 years before the next industrial revolution came in the early 1900s. The rapid changes we are seeing reminds me of the old saying that the only thing that stays the same is change.

There’s a new hobby, bootlegging eggs

Back in the early 1930s during prohibition, bootlegging alcohol was a big thing. Bootlegging is the illegal manufacturing, distribution or sale of a product. Because of the high cost of eggs, people have started to cross the border in border towns like San Diego from Mexico bootlegging eggs for sometimes less than two dollars a dozen, which is a huge savings from grade A large eggs that average $5.90 in the US. It sounds like a great idea, but it is illegal and if you get caught, you are an egg smuggler.

Besides looking for drugs or other illegal substances, eggs are now something border agents are searching for. Border officials say they have seen a 36% increase in egg smugglers. People that get caught say they were unaware that it was illegal to transport eggs across the border, many people don’t know there are many things that one cannot bring across the border. If you get caught smuggling eggs, you may have to pay a $300 fine and they will confiscate the eggs and destroy them.

Why is the US dollar weakening?

While interest rates on the long end have pulled back somewhat, which can cause some weakness in the dollar I still find it rather strange that the US dollar is declining against the euro. I say that because our economy is still rather strong. When I was reading the Wall Street Journal last week, I noticed an article titled “The dollar is tested by uncertainty” but below that article was one titled “Tariff threat jolts Europe’s wine industry”. It is pretty certain that the landscape of tariffs for Europe will be changing going forward, it will hurt their economy more than ours and that should take away the gain in their currency. I believe it is very unlikely that there’ll be any sharp decline for the US dollar in the near term.

One area of strength for Europe will be their move to increase military spending. This should boost their economy and also maybe benefit ours if they purchase some military equipment from our large defense contractors. It is also important to note that the current administration has talked about having a weaker dollar because that would make our exports less expensive for the world to buy and it would make the world’s products more expensive for our consumers. In other words, it would give the US products a better competitive landscape in the world economy.