Retail Resilience, Retailer Stable Coins, AI’s Web Impact, Widow’s Penalty, Entrepreneur Optimism, Vanishing Miles, Market Fragility, Alt-Meat Decline, Avoid Going Public & At Home Bankruptcy

Will the stock market crash? With the market continuing to march higher and setting record high after record high, I do worry more and more that a crash could be coming. It doesn’t mean it will happen tomorrow, next week, or maybe even this year, but I do believe the risk to reward of investing in the S&P 500 at this point is not favorable when you take all the data into consideration. I have talked a lot about the fact that the top 10 companies now account for nearly 40% of the entire index and the forward P/E multiple of around 22x is well above the 30-year average of 17x, but there are also less discussed factors that are quite concerning. There is something called the Buffett Indicator that looks at the total US stock market value compared to US GDP. Buffet even made the claim at one point that this was “the best single measure of where valuations stand at any given moment." The problem here is that it now exceeds 200%, which is a historic high and well above even the tech boom when it peaked around 150%. Another concerning measure is the Shiller PE ratio, which looks at the average inflation-adjusted earnings from the previous 10 years in relation to the current price of the index. This is now at a multiple around 39x, which is well above the 30-year average of 28.3 and at a level that was only seen during the tech boom. While valuation isn’t always the best indicator for what will happen in the next year, it has proven to be a successful tool for long term investing. Unfortunately, valuations aren’t my only concern. Margin expansion is even more frightening as the reliance on debt can derail investors. Margin allows investors to buy stocks with debt, but the big problem is if there is a decline and a margin call comes the investor would either have to add more cash or make sells, which causes a further decline in the stock due to added selling pressure. Margin debt has now topped $1 trillion, which is a record, and it has grown very quickly considering there was an 18% increase in margin usage from April to June. This was one of the fastest two month increases on record and rivals the 24.6% increase in December 1999 and the 20.3% increase in May 2007. In case you forgot, both of the periods that followed did not end well for investors. Looking at margin as a share of GDP, it is now higher than during the dot-com bubble and near the all-time high that was reached in 2021. One other concern with the margin level is it does not include securities-based loans, which is another tool that leverages stock positions and if there is a decline could cause added selling pressure. Unfortunately, this data is not as easy to find since they are lumped in with consumer credit. The most recent estimate I could find was in Q1 2024, they totaled $138 billion and with the risk on mentality that has occurred, my assumption is the total would be even higher now. We have to remember that we now are essentially 18 years into a market that has always had a buy the dip mentality. Even pullbacks that occurred in 2020 and 2022 saw rebounds take place quite quickly. This has created a generation of investors that have not actually experienced a difficult market. I always encourage people to study the tech boom and bust as it was devastating for investors. The S&P 500 fell 49% in the fallout from the dotcom bubble and it took about 7 years to recover. Investors in the Nasdaq fared even worse as they saw a 79% drop and it took 15 years to get back to those record levels. Unfortunately, this isn’t the only historical period that saw difficult returns. If you look back to the start of 1964, the Dow was at 874 and by the end of 1981 it gained just one point to 875. This was an extremely difficult period that saw Vietnam War spending, stagflation, and oil shocks, but it again illustrates that difficult markets with little to no advancement can occur. So, with all of this, how are we investing at this time? We are maintaining our value approach, which generally holds up much better in difficult markets. For comparison, the Russell 1000 Value index was actually up 7% in 2000 while the Russell 1000 Growth index fell 22.4% that year. We are also maintaining our highest cash position around 25% since at least 2007. I continue to believe there are opportunities for investors, it just requires discipline and patience. One other person remaining patient at this time is Warren Buffett. Berkshire now has near a record cash hoard of $344.1 billion and the conglomerate has been a net seller of stocks for the 11th quarter in a row. I’d rather follow people like Buffett at times like this over the Meme traders that have become popular once again. Consumers are doing a better job managing their credit card debt Data released by Truist Bank analysts show that card holders of both higher and lower scores are doing a better job paying their bills on time. This is based on a drop in the rate of late payments from last quarter. Also improving is debt servicing payments as a percent of consumers disposable personal income. The first quarter shows debt-servicing payments were roughly 11% of disposable income, which is a strong ratio to see considering that level is below what was typical before the start of 2020 and it’s far below the 15%-plus levels that were seen leading up to the Great Recession in 2008. According to Fed data, card loan growth was only 3% year over a year, which could be due to lenders increasing their credit standards. Stricter standards also made it more difficult for subprime borrowers to obtain new credit cards considering the fact that as a share of new card accounts, this category accounted for just 16% of all new accounts. This was down roughly 7% from the last quarter in 2022 when it was 23%. Consumers may also be more aware of the high interest costs considering rates stood at 22% as of May. There has been a decrease in rates from the peak last year, but Fed data reveals before interest rates began rising in 2022 interest rates stood at 16% for card accounts. If the Fed were to drop rates a couple of times between now and the end of the year, we could see a small decline in the rate. With that said borrowing money on a credit card and accruing interest is a terrible idea as even a 16% rate would not be worth it! Real estate investors may be supporting the real estate market. This may sound like a good thing, but this could be dangerous long-term since investors don’t live at the property. It would be far easier for them to default on the mortgage and let the house go into foreclosure or sell at a price well below market value just to get their investment back. So far in 2025 investors have accounted for roughly 30% of sales of both existing and newly built homes, which is the highest share on record. This is according to property analytics firm Cotality and they started tracking the sales 14 years ago. Most of these investors were small investors, who own fewer than 100 homes as they accounted for roughly 25% of all purchases. This compares to large investors which accounted for only 5% of purchases of new and existing homes. Within the small investor space, the stronger category is those with just 3-9 properties as this group has accounted for between 14 and 15% of all sales each month this year. The data also shows that the large investors like Invitation Homes and Progress Residential have become net sellers in the market and are selling more properties than they are buying. This is likely due to reduced rents from the high competition in the rental market and a softening of the overall real estate market in certain areas that has not provided the expected return that they wanted. I do worry that the small investor here has less access to good data and is less disciplined with their investment strategy. They are likely buying homes because real estate has been a good investment for the last several years, but if the market were to turn, they would be more likely to panic and sell and they may not have the means to continue holding the real estate. I do believe if interest rates remain, housing prices could remain stable or perhaps even drop a little bit. It’s important to remember long term mortgage rates generally stem from longer term debt instruments like a 10-year Treasury, rather than the short-term discount rate set by the Fed. Financial Planning: When and How a Refinance is Helpful After several years of elevated mortgage rates, steady declines have made more homeowners candidates for refinancing, but a smart decision requires looking beyond the headline interest rate. The first question is whether the refinance actually reduces the rate, and if so, what third-party closing costs and discount points are involved. Every mortgage carries these costs, and paying points may not make sense if rates are expected to fall further and another refinance could be on the horizon, especially since few 30-year mortgages last their full term before a sale or another refi. The structure of the new loan also matters: should costs be paid upfront or rolled into the loan balance, and how long will the loan likely be kept? The real goal is to borrow at the lowest overall cost over the life of the loan, factoring in both the rate and the cost to obtain it. A lower rate and payment may feel like a win, but without careful structuring, it may not be the most cost-effective move, something mortgage brokers often overlook when focusing solely on rate reduction. Here’s a real example from just last week. A homeowner with a $580,000 mortgage at 6.875% and a $3,900 monthly payment has the opportunity to refinance to 5.5%, lowering the payment to $3,500 with no additional cash due at closing, and saving roughly $80,000 in total interest over the life of the loan. At first glance, this looks like a no-brainer. However, this structure would only be ideal if the homeowner never had another chance to refinance, which is unlikely given their current rate of 6.875%. In this case, all costs were rolled into a new loan balance of $616,000—an increase of $36,000—explaining why no cash was required at closing. A better approach might be to refinance to a rate only slightly lower than 6.875%, still reducing both the monthly payment and lifetime interest, but without dramatically increasing the loan balance by rolling in discount point costs. Refinances can continue as long as rates are expected to decline, and the best time to pay points is in a “final” refinance when rates are no longer expected to drop so the benefit can be locked in for the long term. Is any man worth a $24 billion pay package? I’m obviously talking about the new pay package that has been put together for Elon Musk to stay at Tesla. The company is trying everything to keep him focused on Tesla as opposed to the many other endeavors that he ends up getting involved in. Mr. Musk said it is not about the money and that he doesn’t want to commit to a company and then a year or two later be thrown out by a group of activist investors who want to go a different direction than he does. If Mr. Musk were to receive this pay package, which would be about 96 million shares worth approximately $24 billion, he would have to stay at the company for two years either as CEO or as some other type of an executive head. At the end of the two years, he would have to pay $2.2 billion to vest the roughly 96 million shares. It also appears at that time the company would have to take some type of accounting charge for the roughly $24B. This could all change if the Delaware Supreme Court rules in favor of the previous $50 billion worth of stock options that was approved by shareholders, but has faced roadblocks as courts felt Mr. Musk had too much influence with the directors in that deal. While I’m not a fan of the overvaluation of the stock, I have to say it is a great company and has done great things. I do believe much of the top talent would leave if Mr. musk decided to leave and that would likely lead to many problems for the business. I also believe if he was not part of Tesla, the stock would take a huge hit, perhaps as much as a 50% decline! Small companies buying crypto, what could possibly go wrong? The crypto craze has caught on with some small businesses, including small public corporations likely trying to boost their stock price. In the last couple of months almost 100 companies have announced that they will be raising almost $50 billion to buy bitcoin and other cryptocurrencies. Since the beginning of 2025, almost $90 billion dollars has been raised to purchase cryptocurrencies on their balance sheets. You may be wondering if this is a smart move, I have to say no and it appears to be done for greed. There have been reports of companies’ stocks jumping 200 to 300% after the announcement only to fall back very close to the price before the announcement. It appears some company executives were able to profit on these moves as it has been reported some executives sold shares after making the announcement, giving them a nice windfall before the stock dropped. I thought it’s interesting to note that Meta and Microsoft had shareholder proposals to see if their shareholders wanted to add cryptocurrencies to their balance sheets. The shareholders voted it down by a wide margin. The board of directors also recommended voting against the idea. The craziness of cryptocurrencies continues and I will continue to remind people, the only reason why bitcoin continues to go up is people continue to buy it. Unfortunately, most are only buying it due to the fear of missing out, rather than for a fundamental reason, which never ends well. Company reports show the consumer is still doing well We look at a lot of data to get a pulse on the consumer, but sometimes the best source is to see what businesses are saying, especially consumer focused businesses. This past week we got earnings from several companies that rely on the consumer and overall, the economy still looks healthy. Uber reported bookings for mobility were up 18% compared to last year and bookings for delivery were up 20% compared to last year. I was surprised it’s a pretty even split with mobility accounting for $23.76 B of revenue in the quarter and delivery accounting for $21.73 B of revenue. CEO of Uber, Dara Khosrowshahi, also added, “At this point, we’re not seeing weakness in the consumer. It’s steady as she goes, and for Uber, that’s great news.” Shopify also had good news with Q2 sales surging 31% year over year to $2.68 B. Shopify President, Harley Finkelstein, said, “So far we’re seeing no slowdown from the tariffs and that includes up until early August, where we are today. The millions of stores on Shopify are doing really, really well.” Looking at Disney, the company had some weakness in the traditional TV business, but the experiences segment, which includes theme parks, resorts, cruises, and some consumer products, did very well. Revenue for this segment was up 8% to $9.09 billion and domestic theme parks were even stronger with revenue up 10% to $6.4 billion. There was an increase in spending at theme parks and higher volumes in passenger cruise days and resort stays. The CFO, Hugh Johnston, said, “I know there’s a lot of concern about the consumer in the U.S. right now. We don’t see it. Our consumer is doing very, very well.” There are companies reporting softness and concerns, but I do believe the consumer as a whole is still doing alright at this time. Proof that increasing the fast-food worker minimum wage in California hurt more than it helped Politicians in Sacramento a year ago thought it would be a great idea to help people out working in the fast-food industry by giving them a raise to $20 an hour. Our concern when it was announced was that businesses would have to either increase prices or cut staff and use automation, or maybe a combination of the two. Based on recent numbers, 18,000 fast food workers have lost their jobs and employment in the fast-food industry is down 3 to 4% because employers are putting more money into automation versus hiring new employees. This is sad because many of these jobs were helping out kids in high school or college. I always thought it was a great space for kids to earn a little bit extra money and now many of those jobs are gone. Minimum wage is always a tough subject to discuss, but ultimately businesses need to make a profit to survive and if labor costs become too problematic businesses will look for other alternatives. Luxury brands still seem to be struggling It has now been two years since luxury brands like Christian Dior, LVMH and Cartier, just to name a few, started having problems with declining sales and struggling stock prices. It appears younger consumers, like Gen Z shoppers have really exited the luxury space considering last year sales to this cohort fell 7%, which is roughly a $5.7 billion decline in spending and the biggest pullback of any of the generations. Evidence of continued problems for these retailers was LVMH’s 9% decline in Q2 sales from one year ago. Those in generation Z were born between 1997 and 2012 and their ages range from 13 years old to 28 years old. This group grew up with the Internet, smart phones, and social media and may not be into high fashion as much as what is going on digitally. They also seem to be more excited about experiences rather than material items. This could also hurt prices in the secondhand market as the appeal to pay thousands of dollars for purses or other luxury brands seems to be declining. The secondhand market is currently booming with demand as consumers realize they can get luxury brand items below the initial cost. It should also be noted that for the last few years, the economy has been doing rather well and that has likely helped increase prices. Unfortunately, it’s possible that some of these luxury items that people paid high prices for end up selling them for $.50 on a dollar or maybe even less when a slowdown in the economy appears.

Should you be concerned by the jobs report? The July jobs report showed nonfarm payrolls grew by 73k, which missed the estimate of 100k. Unfortunately, the news got even worse as you dug into the report. The prior two months saw major negative revisions as June was revised from 147k to just 14k and May was revised from 125k to just 19k. This amounted to a total negative revision of 258k when looking at the two months combined. Another negative was job growth in the month of July was heavily reliant on health care & social assistance as the category added 73.3k jobs in the month. This means that this category essentially carried the report as the total jobs created in the month topped the full headline number. There were some other areas that saw growth with retail trade adding 15,700 jobs, leisure and hospitality adding 5k jobs, and construction adding 2k jobs. Unfortunately, there were more categories than normal that saw declines with information falling by 2k jobs, government was down 10k jobs, manufacturing declined by 11k jobs, and professional and business services declined by 14k jobs. While all this sounds negative, I still wouldn’t panic over this report. The main reason is the unemployment rate remains historically low at 4.2% and layoffs have not materially increased. I would even make the claim that the unemployment rate is healthier than it appears. Of those that are unemployed, the average weeks unemployed now totals 24.1 and those that have been unemployed for more than 27 weeks jumped to 1.82 million, which is about one-quarter of all the unemployed. If you have been out of work more than 27 weeks, how hard have you really been looking or are some of those really just retired now? It seems we are in an environment where companies are keeping their employees and limiting new hires. With more clarity on the trade deals and tariffs now, that could help stabilize the labor market, but my main concern is are there enough qualified candidates to truly fuel job growth? A large problem we have discussed in the past is an aging population that has seen assets climb tremendously, which has enabled many near retirement age the luxury to retire. While I don’t want to say this is a negative, the working age population or those between 25 & 54 remained near historical highs around 83%. One positive in the report I didn’t discuss yet was the fact that wage inflation came in above expectations at 3.9%, which is nice considering the decline in inflation we have seen this year. While again I may sound negative on this report, I want to be clear that there is no reason to be overly concerned yet, I would be interested to see how the next few reports look before being worried about a potential recession in the near term. Job openings declined in the month of June The June Job Openings and Labor Turnover Survey, commonly referred to as the JOLTs report, showed job openings declined to 7.4 million, down 275,000 from the prior month. While this may sound problematic, it is important to remember this is still a historically healthy level for job openings and it comes against a back drop of a historically low unemployment rate. I have said this for many months, but I believe there is even further room for job openings to decline without there being a problem for the labor market. Taking that concept one step further, I would be quite surprised to see growth in job openings from here. The main reason for that is there just aren’t enough people to fill those openings especially since it appears many companies are choosing to retain employees rather than look for new ones. I say this because layoffs continue to remain quite low. In the month of June, they totaled 1.6 million and really since 2021 they have maintained that level with the average monthly total since January 2021 standing around 1.57 million. If we look pre-covid, from December 2000 (when the data first started) to February 2020, layoffs averaged 1.91 million per month. Even though you will always hear news about various companies implementing layoffs, I believe we remain in a healthy labor market with good unemployment and low layoffs. This healthy labor market remains one of the key reasons for why I believe the economy will remain in a good spot for the foreseeable future. GDP came in stronger expected, another good sign for the economy! While Q2 gross domestic product, also known as GDP, jumped 3% and easily topped the estimate of 2.3%, the numbers were not as strong as the headlines indicate. With the tariffs having a large impact on trade and business inventories, this report is the opposite of Q1 when actual results were much better than the headlines showed. In Q1 companies were likely trying to get ahead of tariffs so they were trying to load up on inventory and import a lot more foreign goods than normal. This led to a 37.9% increase in imports during Q1 which subtracted 4.66% from the headline GDP number. In Q2 we saw a complete reversal as imports fell 30.3% and added 5.18% to the headline GDP number. The change in private inventories was also extremely volatile during these last two periods considering it added 2.59% to the headline number in Q1, but subtracted 3.17% from the headline number in Q2 as many businesses were likely working through excess inventory. I bring all this up not to say that the GDP report was bad and in fact it was still a good number, but rather to show the messiness in the numbers for the first two quarters. We should not see the type of volatility that we have seen in trade going forward as it normally has a small impact on the overall report. The main reason I see Q2 GDP as a good report is because the consumer, which is the main driver in the long-term, held up well. There was a small 1.1% increase in services spending and goods saw an increase of 2.2%. Considering we are primarily a service driven economy; I do worry the goods spending could have been further pull forward in demand as consumers try to get ahead of price increases from tariffs. This could have a negative impact on consumer spending going forward as they may not need to purchase as many goods. With many areas of the report normalizing as we exit the year, I’m still looking for GDP growth that would likely be in the 1-2% range. Should Banks be responsible when their customers get scammed? It’s a sad thing to see someone in their 60s or 70s get scammed out of their life savings. Unfortunately, there are many online scams now and it appears they just keep growing. According to the FBI, in 2024 online scams totaled $16 billion, which was a 33% increase from 2023. A big question that people have been asking is should banks be the ones that are held responsible when it comes to preventing their customers from making poor investment decisions or losing money in online romance scams? Banks are already trying to prevent money laundering, terrorist financing and other types of fraud that is costly for the banks to maintain. Adding another oversight would be another expense for the banks, which could lead to costs elsewhere in the banking system to make up for those added expenses. From the consumer standpoint this could also lead to frustration when trying to get money for legitimate purposes as it could lead to longer review periods for certain transactions or if your account were to get flagged who knows how long it would take to get that resolved. As an example, let’s say a teller sees the same person coming in taking out large sums of money on a regular basis, should the teller stop the activity? Again, if it was for legitimate purposes, wouldn’t that be frustrating? What something like this would likely mean for banks is they would have to set up departments to review the situations of potential scams and take many hours to discuss with bank employees, the customer and maybe even family members why the withdrawals are taking place. No surprise here, but attorneys in some states have begun going after the banks saying it is their obligation to protect their clients’ assets. There are laws that were passed in the 70s that requires banks to report suspicious money laundering activity and even required banks to screen for fraudulent activities and reimburse customers for stolen funds. However, it’s limited to criminal impersonations of a customer to get unauthorized access to their accounts. This is different than many of the scams we are seeing today where the customers themselves are taking the money from their own account and sending it to the scammer. In my opinion, the best thing to do is educate people about these scams and if you have parents, be sure to have conversations with them about them before they happen. Financial Planning: The Secondary Benefits of Roth Accounts While the primary advantage of Roth accounts lies in their tax-free growth and withdrawals in retirement avoiding potentially higher tax rates, there are several powerful secondary benefits worth considering. First, Roth IRAs are not subject to Required Minimum Distributions (RMDs), which means retirees can keep their money growing tax-free for life. In contrast, traditional pre-tax retirement accounts force RMDs beginning at age 75, whether the funds are needed or not. These mandatory withdrawals must be taken as taxable income and cannot be reinvested into another tax-advantaged retirement account. The most similar alternative is a regular taxable brokerage account, where earnings such as interest, dividends, and capital gains are subject to annual taxation—ultimately reducing the net return over time. By avoiding RMDs, Roth accounts allow retirees to maintain greater control over their tax situation and preserve more wealth in a truly tax-advantaged environment. Second, Roth accounts are far more advantageous for heirs. While both Roth and pre-tax retirement accounts are now subject to the 10-year rule—requiring inherited accounts to be fully distributed within 10 years of the original owner's death—the tax treatment is vastly different. Pre-tax inherited accounts are fully taxable to beneficiaries, which can push heirs into higher tax brackets as they’re forced to withdraw large sums over a relatively short period. In contrast, inherited Roth accounts allow for the same 10 years of tax-free growth, but the entire balance can be withdrawn tax-free at the end, providing greater flexibility and preserving more value. Third, for individuals whose estates exceed the federal estate tax threshold, Roth accounts offer superior after-tax value. Both Roth and pre-tax accounts are included in the taxable estate, but Roth funds retain their full value since they are not subject to income tax when withdrawn. These features make Roth accounts not just a retirement planning tool, but also a strategic asset for legacy and tax-efficient estate planning. Is Japan really giving the United States $550 billion? I’m sure you’ve seen the headlines about the trade deal with Japan and how they are going to give the United States $550 billion. When you dig into the details, they are kind of giving us $550 billion, but in reality, it is made up from equity, loans and loan guarantees from the Japanese government. This will not happen all at once as the money will come in as deals begin. I need to point out that the government of Japan already has a debt to GDP that far exceeds the debt situation we have here in the US. The deal has been agreed to in principle, but there is no firm contract at this time. The concept of what the President is trying to do is a good one for the United States, but I do wonder about the longevity of this sovereign fund. This fund will be controlled by the President of the United States and it will allow him to decide where to invest the money. It will be guided by the Commerce Department US Investment Accelerator, Michael Grimes, whose team will identify investments and make sure the funds are used properly and quickly for the investment. While this concept may sound great, what happens when a new president gets elected in 2028? They could potentially scrap the whole deal or divert funds to other projects that may not be part of what was initially intended. Although there are questions about this deal, it is still a big benefit since 90% of the profits will go to United States. Where will the profits come from you may wonder? The US fund would construct a facility for any corporation and lease it to the corporation and keep 90% of the leasing revenue as profit. If this works, this would be great for the United States to build infrastructure and enhance industries such as energy, semiconductors, and even ship building or really whatever appears to be a good investment with no taxpayer dollars. I hope the fund stays the course and other funds from other countries come into the sovereign fund to build the United States to new levels. AI is benefitting online counterfeit goods There are many positives to AI, but there are also a lot of negatives if it falls into the wrong hands. It used to be a little bit easier to find counterfeiters online because of misspellings and bad grammar, but generative AI has helped counterfeiters remove these glitches. In the last four years, counterfeit goods that have been seized has climbed to over $5 billion from just a little over $1 billion. The consumer is generally the one holding the bag and their losses cannot be corrected. Social media sites have really benefited from increasing traffic as it allows them to charge more for advertising and they are currently not responsible for what is on their site because they are not the owner of the merchandise just a conduit. The risk here on the counterfeit goods is not just the money that is lost, but there are also safety issues on things like toys, apparel, and accessories that failed to comply with the US product safety standards. People have even purchased fake parts for their cars, which has caused fatal car crashes. Customs and border patrol saw an increase in 2024 of counterfeit airbags, which may not deploy and ends up killing the driver or the passenger. There is potentially some help on the way as a new law called the Stopping Harmful Offers on Platforms by Screening Against Fakes in E-commerce Act, also known as the SHOP SAFE Act, is in Congress, but it has not been passed yet and it seems to be stuck in the mud. There’s also a lawsuit in the courts further scrutinizing these social media apps, Anderson versus TikTok, in which a 10-year-old died after she was shown a blackout challenge. These sites are using algorithms to push out content that people aren’t searching for and can be dangerous. This is then causing people to buy products that they may have never thought about buying. My advice here, until there is more clarity, I wouldn’t buy anything on these social media sites. Sorry to tell you, but the price of chocolate will be increasing This has a larger effect on Americans than most probably think considering 89% of people in the US eat chocolate once a week and 40% of people in the US eat chocolate on a daily basis. Looking back just four years ago, cocoa prices were under $4000 per ton. By the end of December 2024, they hit $12,000 and now in July 2025 they have pulled back to $8500, still more than double where they were just five years ago. The reason for the surge in price is the poor weather in West Africa where roughly 70% of the world cocoa supply comes from. Unfortunately, there’s also been a cocoa plant disease in West Africa which has hurt prices even more. This has led to a shrinking supply of cocoa and it is not expected to turn around anytime soon. So if you like Hershey’s chocolate or Oreo cookies, you’ll likely see prices continue to increase. As profit margins get squeezed for companies like Hershey’s, where chocolate accounts for 67% of total sales, their stocks could struggle in the months ahead. If you’re a chocolate lover, you may have to cutback your daily intake of chocolate or be prepared to increase your chocolate budget! The U.S. Housing Market is still in the Doldrums The spring home selling season has been a disappointment and it doesn’t look like there will be much improvement going forward. This is the third year in a row of slow housing sales and both realtors and homeowners are becoming impatient. There is good news for homeowners on the national level as the median price of a home increased to $435,300 in June, a record that goes back over 25 years. This is an increase of 2% from 2024 and it is important to point out that this is the median price so while there are areas that saw growth, there are also other areas that saw declines. Areas in Texas and Florida comes to my mind first when thinking about some areas that have struggled. On the negative side of the coin, US existing home sales was down 2.7% in June from May, which was not a good sign for demand. Another concerning data point came from real estate company Zillow, as it said 25% of listings in June saw a price cut, this was the highest proportion of price cuts for any June in the last seven years. The National Association of Realtors also pointed out that the typical home in June was on the market for 27 days, which was a five day increase from June 2024 when a house was on the market for only 22 days. Don’t listen to anyone blaming the Federal Reserve for the housing slowdown because they are not cutting interest rates. Mortgage rates are not tied directly to what the Federal Reserve does on short term interest rates. Generally, mortgage rates move more in tandem with longer-term government bond yields. I hate to say it, but I do not see much of a chance for a big decline in long-term interest rates because of the high supply of US government debt that continues to hit the market. I think we will continue to see a slow housing market in 2025 and perhaps even start off 2026 at a slow pace as well.

Big bank earnings give a cautious green light on the economy Every quarter we get excited about listening to and reading about how things went for the big banks in the most recent quarter as they release their earnings. I’m primarily talking about JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo. We have held a couple large banks in our portfolio for years and they have provided very useful information along with great returns as well. Overall, the big banks were happy with the low rates of consumer delinquencies and writing off debt that was unrecoverable stayed around the same rate as last year. One banker made a comment that with a 4.1% unemployment rate it’s not likely to see a lot of weakness in their portfolio. This is something we have said for quite a while now, but we believe as long as the employment picture stays strong, the economy should do well. Deal making for the banks looked pretty good across the board and all of them had profit increases compared to one year ago. The overall tone from the bankers was largely upbeat, but a couple banks did call out some concern around commercial real estate and office buildings. There are certain cities with economies that are doing well, but there are other areas that are more problematic and the banks generally have commercial real estate in many markets across the country. To summarize, it appears the bankers feel pretty good, but they still remain somewhat cautious as bankers always should. Understanding new legislation on cryptocurrencies Last week new legislation on cryptocurrencies was announced as the Genius Act, which stands for Guiding and Establishing National Innovation for US stable coins, made its way through Congress and to the President’s desk. The legislation is supposed to provide licensing and oversight for stable coins as issuers must obtain licenses through either a national trust bank charter with the OCC, which stands for the Office of the Comptroller of the Currency, or a state level money transmission license. The Genius Act is supposed to provide consumer protection in the case of the issuer of a stable coin becoming insolvent. The solution in the Genius Act is to prioritize stable coin holder claims so the holders of those coins should be able to get their money back. This is nowhere near the safety one has in a bank where your deposits are insured by the FDIC should that bank fold. I feel this law will give people a false sense of security and I don’t believe it will prevent a major collapse of stable coins. There’s also a conflict of interest from President Trump‘s promotion of digital currencies since he himself has a coin and his sons Donald Trump Junior and Eric Trump run a bitcoin mining firm called American Bitcoin and are heavily involved in the crypto space. I believe the whole thing is just adding to the bubble of cryptocurrencies. Keep in mind that a bubble can last 10 to 12 years, if not longer, but the bigger it gets the bigger the financial disaster it causes. What is better for investors stock dividends or stock buybacks? Unfortunately, there’s no hard and fast rule based on performance figures in terms of what is better for stock investors, but I would have to lean towards stock dividends. If you look at the right companies paying dividends over a 10-year period you can find that perhaps the company you invested in is now giving you a yield of maybe 7-8% based on your initial investment. Those dividends can be a really great tool for long-term investing and while companies could always stop the dividend, most companies that have paid a dividend for the long-term do not like to stop or even reduce paying that dividend. This can help stabilize returns during downturns and may help investors be less emotional. A problem with stock buybacks is they can be announced and the stock may see a little bounce, but then it’s possible that management does not fulfill the commitment to buy back all the shares they had planned to. Also, if the company or the markets were to hit a rough patch many times the first thing to go is stock buybacks. It is also possible that the company could do a stock buyback, but within a year or two the stock might drop below the price where the repurchases occurred, which would make those investments a questionable use of capital. Benefits to stock buybacks include the fact that there’s no taxes for shareholders when they occur and they do increase your ownership of that business. While dividends are generally taxed, they are tax favored and depending on one’s tax bracket you may pay very little or no tax at all. And don’t forget about the compounding effect of reinvesting those dividends back into another investment. Unfortunately, it has become harder to find good quality companies paying dividends for a reasonable price. Looking at the S&P 500 index, the yield is now only 1.2%, which is near the all-time low that was hit during the dot-com bubble. Over the long-term history of the S&P 500, it’s yield is generally around the 10-year Treasury and I was surprised to learn that up until the 1960’s, the S&P 500 actually generally yielded more than the 10-year Treasury. Even looking just 10 years ago they were both yielding around 2%, but currently the spread between the two is about 3%. This comes as the S&P 500 has seen its forward P/E based on the next 12 months of earnings expand from 17 to around 22 during that time frame. Could this be another warning sign that the S&P 500 index is overvalued? Financial Planning: New Tax Rules for Tips and Overtime Starting in tax year 2025 and through 2028, the One Big Beautiful Bill Act exempts up to $25,000 in tip income and up to $12,500 in qualifying overtime pay per individual from federal income tax—doubling to $50,000 and $25,000 respectively for married couples filing jointly. The tip exemption applies only to workers in occupations where tips are customary and must be properly reported through W-2s. The overtime deduction applies only to the premium portion of overtime wages—i.e., the extra pay above an employee’s standard hourly rate—and must be paid in accordance with Section 7 of the Fair Labor Standards Act (FLSA), meaning it only covers overtime worked in excess of 40 hours per week under federal rules. Overtime paid under state laws or union contracts does not qualify unless it also meets the FLSA criteria. The full exemption is available to taxpayers with modified adjusted gross incomes up to $150,000 (single) or $300,000 (married filing jointly) and begins to phase out above those levels. To claim the exemption, workers must file a new IRS Form 10324-T with their annual tax return. Keep in mind Social Security, Medicare, and state taxes still apply to the tip and overtime pay. The policy begins with wages and tips earned on or after January 1, 2025, with claims first filed on 2025 tax returns in 2026. Solar panel loans appear to be in trouble You may think this doesn’t concern you because you don’t have any loans on solar panels, but guess again as you might own them through bundled investments known as ABS or asset back securities. They may also be mixed in with private credit that was sold to you with other loans. The problem in the solar loan industry is the overcapacity and the loose lending of creditors. The industry saw substantial growth in 2024 as 4492 megawatts of panels were installed. Compare that to 2019 when only 2864 megawatts were installed. Companies you may recognize in this would be Sunnova Energy International along with Goodleap who packaged loans as a middleman, took a commission and then sold the loans. The companies became very aggressive selling solar panels and gave loans to people who had very low credit and thought the savings on the electricity would be far higher and would cover the cost of the loan. Unfortunately, that was not the case and with the expected slowdown in solar sales there is nothing to continue to feed these loans. It is so important for investors to understand where they’re investing their money. Even though one may think bonds are pretty safe and the broker that sold them to you told you there’d been no market fluctuation, bad bonds have far greater investment risk than many realize because if the bonds aren’t repaid it can result in major losses for those investors. One of world‘s top bankers warns on private credit Jamie Dimon, CEO of JPMorgan Chase, is considered one of the world’s top bankers, if not the top banker and he recently warned that private credit is a recipe for a financial crisis. I have been warning our readers, listeners and viewers of what I see as the building of the private debt bubble, so it was nice to see some of Dimon’s comments validating my concerns. Unfortunately, some people will ignore his warning because he says he will be competing in the space as well. But people should understand that while the bank has earmarked about $50 billion for private debt, I believe Dimon will be the one that comes in and takes advantage of all the wreckage in poor loans. He is in no rush to go out there and simply loan money at rates 2 to 3% higher to higher risk borrowers. With that said, he understands that more corporations are turning to private debt due to its flexibility. Make no mistake private credit is far riskier than what banks will lend, which is why there is private credit. But the explosion of private debt over the last eight years has been crazy, considering it has increased by around 100 times to nearly $700 billion. Jamie Dimon also points out he doesn’t like how some private credit firms are taking the savings from small investors to grow their rapid expansion. These private credit firms are very tricky and some are getting access to small investors by working with insurance companies and using annuities to grow their business. Shame on the insurance companies for doing this as I worry this will be another pot that will over boil in the future. Unfortunately, when the credit boom collapses, I believe there will be many small investors who lose more than they can afford and they will be too close to retirement to recover. The story likely won’t end well, and if investors won’t listen to me, take the advice from a very well-respected banker, Jamie Dimon. Private equity should not be allowed in 401(k)s Most of the time I disagree with attorneys, but this time, I’m glad to see that the attorneys will be going after companies that allow private equity in their 401(k)s for their employees. There is currently over $12 trillion in defined contribution plans like 401(k)s and Wall Street has been pushing hard to get private equity into this fee gold mine that could produce billions of dollars in fees for Wall Street. The attorneys say private equity is not a good investment for 401(k)s because of the high fees and the lack of the liquidity, which makes it hard for people to get out of them. I agree 100% with the attorneys on this statement. Unfortunately, the Trump administration is expected to issue an executive order to make it easier for the private markets to be offered in 401(k)s. Attorneys responded to this by stating an executive order will not overrule the current fiduciary requirements of the Employee Retirement Income Security Act, also known as ERSIA, which governs retirement plans. I’m siding with the attorneys on this because I believe this will destroy many peoples long-term retirement plans. I’m hopeful as the attorneys begin their lawsuits and go after companies suing them for the lack of fiduciary requirements, that employers back off from allowing private investments in 401(k) plans. That international trip is going to cost you more than you expected According to a recent survey compiled by Deloitte, 25% of US consumers said they were traveling internationally over the summer. They’re going to be in for a big surprise when they are dining out, traveling around, and buying souvenirs. The ICE US dollar index symbol, USDX is widely used for the value of the US dollar against foreign currencies. From January through June, it posted its biggest decline in more than 50 years. Thinking of going to Europe? The dollar against the euro was off 13% and even against the Japanese yen the dollar was down 6%. This will definitely wreak havoc on your travel budget and I don’t see it improving in the near future. While this may sound negative for the US, there actually positives that come with it. The increased costs could lead to less people vacationing internationally and instead choosing to stay here in the US. With travelers spending their vacation dollars here it would help stimulate the economy. Also, people from around the world can now travel to the United States for less and also spend their vacation dollars here. As I talked about six months ago, while the pride of having a strong dollar sounds good, having a weaker dollar can help our economy with continued growth. Mined diamonds versus man-made diamonds, which should you buy? Based on my research, they look the same and can only be told apart by expensive equipment. Man-made diamonds are real diamonds that are created in a lab that can duplicate the extreme pressure and temperature in the Earth that took over 1 billion years to create naturally. Manufactured diamonds are 100% carbon with the same hardness and sparkle of a natural diamond. Walmart is the country’s second largest fine jewelry seller behind Signet and sold its first man-made diamond in 2022. As of today, roughly 50% of the diamond sales at Walmart are man-made diamonds. Signet, which owns Kay Jewelers, Zales and Jared, says it has been adding more lab grown diamonds to its fashion jewelry and this has helped increase sales for the company. Lab grown diamonds when they first came out were close in price to a natural diamond, but since 2016 the price has dropped around 86%. The price of a natural diamond now is about $3900 per carat vs $750 per carat for a lab grown diamond. Due to the increasing popularity, it appears that most consumers don’t seem to care whether it’s a natural or a man-made diamond. Would you be willing to save thousands of dollars to buy a lab grown diamond versus a natural diamond? Who has more viewers, Netflix or YouTube? Netflix just recently reported their earnings per share jumped 47% and their share of US viewers held steady at 8.3%. If you guessed Netflix has more people from the US watching them than YouTube you would be incorrect. YouTube share of US viewers came in at 12.8%, which was nearly a 33% increase from 9.9% last year. YouTube also has substantially higher revenue of $58 billion compared to the recent $39 billion in revenue at Netflix. People are excited about the revenue growth at Netflix as it is projected to climb 15% to $45 billion in 2025, but that pales in comparison to YouTube’s expected revenue jump of nearly 21% to $70 billion. Netflix also has a higher cost for content expenses, as 52% of total expenses were for content in the second quarter. YouTube has much lower expenses because most of the creation expense is carried by the creators of the content. While this has been a positive for YouTube in the past, it could cause some problems in the future as their content creators could be stolen from them by others, including Netflix. As an example, Miss Rachel, who is a children’s entertainer with a very popular YouTube channel, now has a Netflix show that saw 53 million hours of viewing in the first half of 2025. With Netflix owning their content, it cannot be taken away from them. A wild card that is still out there for controlling US viewers time is TikTok, which is currently in limbo, but could be a major disruptor in the entertainment space since younger audiences seem to enjoy the short videos versus longer TV shows and even movies to some degree. Apparently, younger viewers have a very short attention time span and TikTok is capitalizing on that opportunity and maybe even making that problem worse.