SMART INVESTING NEWSLETTER
SEC Changes, CEO of MicroStrategy, Housing Market, S&P 500, Bitcoin, luxury brands, Target stock, Nvidia (NVDIA) earnings, Home Sales in the US, & IRA Income Limits
Brent Wilsey • November 23, 2024
Changes in the SEC under Trump that you should know
There will be many changes under Trump, but for investors the SEC, which is also known as the Securities and Exchange Commission could be a big one. The current head of the SEC, Gary Gensler, is likely gone for sure. He has been tough on Wall Street and even tougher on cryptocurrencies. It is likely Trump will appoint a new SEC chairperson who will want to have less control over Wall Street. One name on that list is Hester Pierce. She was appointed by Trump in his first term and is one of two current Republican commissioners. She also voted against most of Gary Gensler’s initiatives and is much friendlier towards Wall Street. That doesn’t mean everything will run wild and in particular, she still would like to see regulation for the cryptocurrency business. It seems she disagrees with both Gensler and Trump-appointed predecessor, Jay Clayton, who sued crypto startups that didn’t register their products as securities. Instead, she would rather see new regulations for crypto’s technology. Her approach would be different than Gensler, but it seems that she still wants to protect the investor by using stronger regulations. One rule in the works that may not make it into the books that had much controversy was forcing companies to disclose climate related risks. The SEC voluntarily put the rule on hold while it is litigated. Another one in litigation is for rules that hedge funds and brokers must report on short positions and stocks lent for short selling. Unless these two can pass before the new administration takes over in January, I don’t believe they will have any chance of surviving. There are also other rules in litigation that are in limbo that will probably be dropped next year. Be sure to stay tuned to the Smart Investing Show for updates and changes in regulations by the SEC, as I’m quite confident it will look very different next year!
Is Michael Saylor, CEO of MicroStrategy, a genius or a crazy man?
If you’re not familiar with MicroStrategy, their symbol is MSTR. Their CEO is famous for not just buying bitcoin, but leveraging everything he can to invest all the assets into bitcoin. I listened to a podcast that Mr. Saylor did recently and I was shocked at many things he said. If you follow us on a regular basis, you know we’re not advocates of investing in cryptocurrencies or bitcoin, but this CEO takes it to the extremes on the other side. The company’s financial statements look like a disaster, I’m surprised they are still in business. Mr. Saylor stated they just borrowed billions of dollars to purchase $4.6 billion in bitcoin, which brings their bitcoin holdings up to about $40 billion. The company only has $60 million in cash. If you do the math, MicroStrategy currently owns about 1.6% of the market value of all the bitcoin. With all the rumors floating around about the US government being an advocate of bitcoin and perhaps even setting up a bitcoin reserve, the price of bitcoin is now around $100,000. Mr. Saylor was laughing as he spoke about the current value of bitcoin at $1.8 trillion and said he sees it going to $180 trillion in 20 years, at that level the price of one bitcoin would be $13 million. The host of the podcast did a quick analysis and said based on that projection, the market cap of your stock, which is currently $89 billion would be worth roughly $10.5 trillion in 20 years. The response was, yes that’s what the math says. The only reason I could come up with why Mr. Saylor is so optimistic is he feels in 20 years 7% of all the world’s money will be in bitcoin. I have read from many professors and experts on the global economy that have said this will never happen because governments will not be able to control their own economy. He also stated that bitcoin should be the world currency and in 20 years there should be $500 trillion in digital assets. I’ve been in the investment world now for over 40 years and none of this makes any sense to me. I do believe there will be a major storm someday in the future. As far as investing in the stock MSTR, the company has no earnings, no cash flow and nearly a 16% short holding betting on a stock decline. The stock has a 52 week low of about $44 a share vs a high of $505 a share and currently trades around $440 a share. I have to say this is not a company, but more of a management company of a non-diversified asset or a leveraged bet all in bitcoin.
The housing market has changed
It used to be couples would get married and buy a house in their late 20s, but now because of a different lifestyle and higher prices for homes, first time buyers are now nearly 40 years old. I also found it interesting that there are now more single people buying homes. Single women are generally about six years older than single men when buying homes. However, roughly 20% of single women are first time home buyers, which is more than double their male counterparts. People in their early 60s have become the most active in the current housing market. This is the generation that scratched and saved and sacrificed to buy a home back in the 1980s. Even then houses were not that affordable, not to mention interest rates looked a whole lot different! But now those buyers, some of which have accumulated close to 40 years of equity have benefited handsomely and account for a big portion of the $35 trillion in home equity across the US. For those looking to buy, there are some signs of relief in home prices with some areas in Texas and Florida that were not too long ago very hot markets starting to see price declines. I feel it could take another couple years to get a more normal housing market, especially with about 25% of people having a mortgage on their home of 3% or less. With such a low rate, they would probably be more likely to remodel or do an addition rather than sell their house.
Beware of IRA Income Limits
Saving money is obviously a great thing, but it is important to be aware of the income limits when making both Traditional IRA and Roth IRA contributions. Contributions to IRAs can be made at any age, but you need W-2 or self-employment income to contribute. However, if your total income from all sources is too large, this may prevent you from making contributions as well. With Traditional IRAs, you can make contributions at any income level, but your ability to deduct those contributions is phased out if your income is too high, assuming you have access to an employer retirement plan like a 401(k). Since getting a tax deduction is one of the main benefits of a traditional contribution, high-income earners would likely want to fund a different account instead. For a single filer this phase out begins at $77,000, and for married filers this begins at $123,000. If your spouse has access to a workplace retirement plan but you do not, your phase out for traditional IRA contributions begins at $230,000. Roth IRAs are subject to different limits. For single filers the ability to contribute begins to be phased out when income reaches $146,000 and for married filers at $230,000. So with traditional IRAs, your income determines if the contribution is deductible, with Roth IRAs your income determines if you can make the contribution at all. Unfortunately, I see people making Roth IRA contributions when they aren’t eligible to all the time. This can happen if you are used to making a Roth contribution every year and eventually through raises or bonuses or whatever your income exceeds the limit without you knowing. Now with Roth IRAs, there is a workaround called a Backdoor Roth contribution that can be used to make Roth contributions when income is over the limit. To do this effectively, the contributor cannot have any Traditional IRA money. If they do, they would need to roll it into a workplace plan like a 401(k) before implementing the Backdoor Roth contribution. The Backdoor Roth involves making a non-deductible contribution to a Traditional IRA, which again can be done at any income level, followed by a conversion into a Roth IRA. Conversions do not have income limits and because the initial contribution to the Traditional IRA was not deductible, it is not taxable when converted to the Roth IRA.
The dividend yield on the S&P 500 is the lowest in over 20 years
With the recent highs, the yield on the S&P 500 has dropped to around 1.27% and is very close to its lowest level since February 2001 when it hit 1.2%. If you remember at that point in time, it was during the dotcom bust and the index fell dramatically for the rest of 2001 and 2002. The highest yield on the S&P 500 in recent times was in 2009 when it was 4.1%. What has caused this low current yield? It is because the index is now heavily weighted in tech stocks, which have very low yields. This includes Nvidia at 0.03%, Apple at 0.44%, Microsoft at 0.80%, and others that have very low yields or no yield at all. Most of the dividend yield comes from other industries like financials, which currently has a weight that is less than half the technology companies. The current weighting for tech stocks in the S&P 500 is 32% compared to financials, which is the second largest group at 14%. This then means that although these companies have strong yields, since they have a smaller weight, their dividends have less of an impact on the index. Going back in history almost 100 years, dividends have accounted for 32% of the total return of the S&P 500. Also, if you’re an income investor, the S&P 500 is definitely not the place for your money. This low yield on dividends also highlights another concern that perhaps the S&P 500 is too high and could struggle going forward.
Congratulations, bitcoin is up! Now what?
Depending on the day, bitcoin’s value is getting close where it would be worth as much as one of the top five public companies in the United States. Why all the excitement? We know it’s not about the fundamentals, or income like dividends because there are none. It can’t even really be about the economy either. It is strictly based on supply and demand. If people get excited about gambling on it and buy it because they think it will go higher, that then causes the price to climb. That almost sounds like some type of a Ponzi scheme to me. But there are some other crazy thoughts out there causing bitcoin advocates to jump on the bandwagon. There is now an idea out there that a bitcoin reserve could back the US dollar. Would that make you feel secure at night? The US dollar is currently backed by the full faith and credit of the United States government. Which do you feel more comfortable with? There’s also talk that the new administration would stop selling the bitcoin it accumulates from seizures of illegal activities, and on top of that begin to stock pile it as a reserve. Would President Trump really want to add to the US debt to buy bitcoin while he is cutting taxes? I doubt it. A third reason I have heard is bitcoin is a good hedge against inflation. Looking back in time this has never really been the case. Recently gold has been declining as an inflation hedge because inflation seems to be calmer, but yet bitcoin continues to rise. Have you ever seen a bitcoin? Of course not, there’s just something about being able to hold a US dollar in your hand versus something that is only done with technology. If you look at a US dollar, on the back you will see it says “IN GOD WE TRUST”. I guess with bitcoin we have to say “in technology we trust”?
Why do people spend so much money on expensive luxury brands?
I’ve asked myself these questions many times when it comes to fashion. I don’t understand why someone would spend so much money on a purse that costs them thousands of dollars or a blouse or pants that cost $800 or more? Based on psychologists who study consumer behavior, they say it’s a way to separate themselves from the crowd and show that they are high on the social ladder in life. By wearing luxury brands, people think and perhaps rightly so it can make them appear that they are wealthy and successful to others. It was also amazing that in the study the ultra-rich don’t like to get luxury brands with the bigger labels. However, a lot of demand comes from others who are trying to show they can afford these products. If you’re wondering what is considered ultra-rich, it is estimated to be a net worth of around $30 million in the US. It was also discovered the bigger the brand label, the more likely it was for some people to pay a higher price. It was interesting to note that one study shows that for every $5000 increase in the price of luxury goods, the brand’s logo decreased by a centimeter. Luxury brands know these marketing tricks and on average have operating margins over 30%, which is more than three times around 7% for your mass market retailers. One benefit luxury brands have is they produce what is known as Veblen goods, which defies the normal laws of economics. Normally, increases in price will hurt demand, but with these luxury brands by increasing the price to a certain level it may actually increase demand. This is because it may be more sought after because the higher price is a sign that it is worth more and it could be perceived that what they are buying is valuable and scarce. I know it sounds crazy, but this all comes down to the marketing for luxury brands. This trend seems to be coming to an end as there are companies tracking social media posts showing the main emotion on comments of luxury brands. 60% of the emotion was anger, disgust or sadness. So maybe next time you pass by one of those luxury stores in the mall and you get that inclination to maybe do something special for yourself and spend a lot of money on some luxury brand, remember for every thousand dollars you spend they are making $300 off your purchase!
Target stock craters after terrible quarter, should you buy the stock?
Target’s quarterly earnings per share of $1.85 was a major miss compared to the estimate of $2.30 and sent the stock down by more than 20% during the day. This also led to a change in guidance as the company now expects full-year adjusted EPS to come in between $8.30 and $8.90. This is lower than the previous guidance of between $9 and $9.70 per share that was issued in August and below analyst expectations of $9.55. The disappointing report comes shortly after Walmart’s strong quarter that sent its stock to all-time highs. One area Walmart has focused on is groceries as it now accounts for about 60% of the business compared to about 23% for Target’s business. Walmart also mentioned they have seen more business coming from consumers making more than $100k per year, which I generally thought of as a Target consumer and that could mean Target is continuing to lose market share to Walmart. I do know based on personal conversations there are still people that are “Team Target” and would never shop at Walmart. Personally, my family prefers Target over Walmart given the children’s clothing options and some of the home brands like Magnolia and Studio McGee. With that said there is something Walmart is doing right to attract customers, perhaps it is using groceries to attract shoppers or it could be the low-price reputation. To combat this, Target has said it will have lowered prices on more than 10,000 items this year by the end of this holiday season. The big questions are will this be enough to attract customers and how big of a hit to margins will this cause? To help attract customers, Target also announced two exclusive Taylor Swift releases available starting Black Friday. They will be selling the official “Taylor Swift l The Eras Tour Book” and “The Tortured Poets Department: The Anthology” album on Vinyl and CD. Target did also point to overstocking in preparation for the recent port strike. This should not be a problem in future quarters, unless there is another port strike come mid-January. At least that would occur outside of preparation for the holiday season. I do think there is potential with this stock given it now trades at 11.7x January 2026 EPS and pays a dividend close to 3%. With that said I do believe patience is important here as those EPS estimates may drift lower and downgrades on the stock could pressure the stock over the next few weeks.
Nvidia (NVDIA) earnings are out, time to buy the stock?
It was no surprise to see Nvidia reported another strong quarter with EPS of 81 cents topping the expectation of 75 cents. The growth has been absolutely staggering for the business considering sales rose 94% on an annual basis. While impressive, the growth is decelerating considering the previous three quarters saw sales rise 122%, 262%, and 265% respectively. The company’s Q4 forecast calls for further deceleration as it is looking for year-to-year growth of about 70%. Given the fact that these numbers have gotten larger and larger, next year should see even further deceleration in growth. It is remarkable what Nvidia has been able to achieve, but I still don’t see much upside for the stock considering all the positivity that is currently reflected. The stock is up close to 200% this year alone and catapulted itself to become the largest company by market cap as it passed Apple. The business is strong in many ways, but for me this really comes down to what is a fair valuation. Currently the stock trades at over 30x estimated EPS for January 2026, which definitely does not make it a value. Big concerns I would have if I owned this stock outside of valuation would include: The company owns this AI market, what could future competition look like? Nvidia had a gross margin of 74.56% and an operating margin of 64.7%, there is not much likelihood for expanding margins and in fact I believe it is much more likely they contract. The large customers like Microsoft and Amazon need to see returns on these massive investments. If they don’t show progress next year, could that slow the investment cycle? Lastly, what happens when this investment cycle ends? People have speculated we are still early in the AI build out, but let’s say it lasts another three years, what happens after that? Does Nvidia’s earnings have staying power, or will they see a massive decline as the buildout slows? Congratulations if you have held this stock, but as a value investor I’d have to recommend staying away.
What is going on with existing home sales in the US?
In the month of October, we saw existing home inventory jump by 19.1% year over year to 1.37 million homes. This now means there’s a 4.2-month supply of homes, which is still short of the 6-month level that is generally associated with a balanced market. Even with the increase, there would still need to be another 30% in inventory to get us back to pre-Covid levels. Outside of limited inventory, there are two major headwinds for sales. The 30-year mortgage is now hovering again around 7%. Along with that, the median price of a home is now $407,200 in the United States. This is not the highest on record, but it is the highest ever for the month of October. Even though mortgage rates have recently climbed, all cash sales were only 27% versus 30% in the month of September. That means either people have less cash to pay for a home or they just don’t believe it is worth spending all their cash for a house. I agree with that because part of the benefits of real estate is to have some leverage on that asset. The median price of $407,200 continues to hurt first time buyers who only represented 27% of homes sold in October, which is very low compared to the historical average of 40%. I do believe if you buy a house today, you should be buying it because you want to own a home. I would caution you to not expect great returns on that real estate over the next 10 years. My estimate is over the next 10 years if your house appreciates by 50 or 60 percent, that would be a good result!
Jobs market remains in a good spot Headline nonfarm payrolls increased 139k in the month of May, which was above the estimate of 125k, but below April’s reading of 147k. A big negative in the report was the fact that March and April saw negative revisions that caused payrolls in those month to decline by a combined 95k versus what was previously reported. Even with that, if you zoom out and look at the big picture the economy is still adding jobs at a healthy rate given the fact that the unemployment rate has remained at 4.2%. I would also say it was a big positive that the private sector saw good growth since federal government payrolls declined by 22k in the month of May and are now down by 59k since January. I still expect losses to accelerate in the coming months for government payrolls since employees on paid leave or receiving ongoing severance pay are still counted as employed. Areas that saw major growth in the month included health care, which added 62k jobs and leisure and hospitality, which added 48k jobs in the month. Many of the other major industries saw little change. Wages were also positive in the month for workers as average hourly earnings grew 3.9% compared to last year. This was above the forecast of 3.7% and last month’s reading of 3.8%. I believe this is a good level for wage growth as it is healthy for workers, but not overly concerning on the inflation front. I would say this jobs report did little to change the narrative on the economy as it showed it remains healthy, but it definitely appears to be slowing. Facebook scams are out of control There’s no way of tracking the exact number of scams or the dollar amount lost from scams on Facebook and Instagram, but JP Morgan Chase said between the summers of 2023 and 2024 they accounted for nearly half of all reported scams on Zelle. An internal analysis from 2022 found that 70% of newly active advertisers on the platform are some forms of scam or low-quality products. Meta, the owner of Facebook and Instagram, does over $160 billion in advertising and is hesitant to put any restrictions that could prevent growth in their ad business. In 2024, the Wall Street Journal discovered documents that advertisers can be hit with anywhere between eight and 32 automated strikes for financial fraud before their accounts are banned. On top of that, Facebook Marketplace, which is its online secondhand market, has now passed Craigslist as the most heavily used platform for free classified ads and it has become a great place for scams. The scam that most people fall for is the sale of pets. This comes even though Meta bans the peer-to-peer sale of live animals. Meta has as argued in court it is not their legal responsibility to deal with the issue. Section 230 in the US telecommunications law relieves platforms like Facebook and Instagram from liability of users who create their own content. This is currently being tested by an Australian mining billionaire because Facebook failed to remove fraudulent investment advertisements that used his image and AI cloned voice. Hopefully he wins the case. In the meantime, I would have to recommend that people stay away from using Facebook or Instagram for buying from advertisers on their platforms because you could be dealing with someone from China, Vietnam, or the Philippines, who have stolen pictures of a familiar company that you think you know, even including its address. And once you give them your credit card information or any other financial information, they have you and your problems will begin. Sell gold and buy platinum I thought you might be thinking you’ve done so well buying gold and you may think it’s still going higher so just stay the course, but platinum has been left behind for the last 11 years. Back in 2014, platinum was at $1500 an ounce compared with gold at $1300 per ounce. Fast forward to today and gold is around $3300 per ounce and platinum has gone down in value to about $1000. Platinum actually has real demand as about 40% of the demand comes from catalytic converters which are a hot commodity, we just recently wrote about how April car sales were up 10%. Platinum supply is about 7 million ounces on an annual basis, but it is predicted by the world platinum investment council that in 2025 it may only be 5.4 million ounces. Compare that with gold which will have about 100 million ounces mined this year. Perhaps platinum could be the next shiny metal that performs well. There is even talk that Chinese buyers who are priced out of gold are now starting to invest in platinum. If you like precious metals, you may want to do some research on platinum. It could be on sale for now. To be clear I don’t buy these precious metals, but given the choice between gold and platinum, platinum definitely seems more interesting at these levels. Job openings report shows there is still plenty of work out there The Job Openings and Labor Turnover Survey, also known as the JOLTs report, showed job openings remained strong as they increased 191,000 from the month of March and totaled 7.4 million. This also beat the expectation of 7.1 million and provides further evidence that the labor market remains healthy. Job openings did decline by 228,000 or about 3% compared to last year, but there are still 1.03 available jobs for every unemployed worker. As we have discussed, we are looking for the labor market and economy to continue to soften, but that does not mean it is weak, it just means we could be progressing at a slower rate. As with other hard economic data, the next few months will be more telling about how the tariffs are impacting business decisions. This JOLTs report was from the month of April, when tariffs were just beginning. I still believe the data will hold up alright in the coming months even in the face of these trade negotiations that are occurring across the world. Office space may be harder to find in the coming years For the first time in at least 25 years, office conversions and demolitions will exceed new construction, which means there will be less space available. CBRE Group found that across the largest 58 U.S. markets, 23.3 million square feet of space will be demolished or converted to other uses by the end of this year while just 12.7 million square feet of space is expected to be completed by developers in those markets. We do have an office REIT in our portfolio and they recently talked about how leasing has continued to exceed expectations. I continue to believe the office has a valuable place in business and we have continued to see more and more companies implement return to office mandates. With less supply out there and demand remaining strong, we should see owners of office space benefit from stabilizing rents and increasing prices in the coming years. On the other side of coin, I have continued to express concern about the long term dynamics for multifamily housing due to the construction boom in the space and potential oversupply. It’s not just the new construction though as developers have another 85 million square feet of office space being readied for conversion in the next few years. This comes after office conversations to multifamily residences that have generated roughly 33,000 apartments and condominiums since 2016. It is estimated by CBRE that each conversion on average produces around 170 units. As a contrarian investor I many times like to go against the grain. With that being said I am definitely much more interested in the office space over the residential space at this point in time. Computers in our brain may not be that far away It’s a scary thought, but there are already people with brain computers and interfaces that have been installed. It is currently less than 100 people to date and it is estimated that will double within the next year. Businesses in this field are called neurotech companies. It is projected in the next 15 years or so this will be a $1 billion a year market. Some of the designs are an implant of a tubular mesh of electrons that will run through a major blood vessel in the brain like a stent. There are different designs by different companies and some have over 1000 electrodes spread across 1.5 centimeters. The benefits of having these installed in your brain will be figuring out which medication works best for that particular brain chemistry. Going beyond that are thoughts to control vehicles, limbs, and exoskeletons along with generating speech directly from thought. There are about 12 small companies now working on this and I believe most will go probably go broke before they make it big. I’m sure some will be acquired by big medical technology companies or device makers that will take it to the next level. Don’t let the future scare you as it’s going to come anyways, but I do wonder with all the positives of this technology what negatives will there be as well? Will cybercriminals be able to hack into your brain? Or on the bright side will your spouse really know what you’re thinking. I think that’s a good thing, right? The growth in gambling might become a problem Gambling has been around forever, but you always had to go to a casino or have your own bookie to take your bets. This mostly occurred in person. Now with companies like DraftKings and FanDuel it is far too easy for people to get addicted to gambling on their phone. In 2024 the revenue from gambling was $71.9 billion. Now with the ease of cell phones, 48% of American men under 50 have an online gambling account and wager about $150 billion a year on sports alone. It’s now been seven years since the Supreme Court ruled that nationwide sports betting is legal. It’s no surprise the problem of gambling addiction is starting to appear and the journal of behavioral addictions says smartphone apps carry higher addiction risk than traditional gambling at casinos and horse tracks. That’s no surprise to me because of the ease of holding in your hand this gambling tool. For someone that has a gambling problem, it takes about seven years for them to start to realize they have a problem. The numbers now show this explosive growth as companies like FanDuel saw its revenue jump from $2.8 billion in 2019 to nearly $17 billion today. DraftKings is also seeing huge growth as revenue was $432 million in 2019 and now it is at $6.3 billion. I had a feeling the stocks would do well but would not invest in them because of the nature of their business and also, they had no earnings at the time. For those that did gamble with the stocks, DraftKings shares are up 156% over the last three years because of the massive growth in this industry. Unfortunately, in the next few years, problems could start showing up in the healthcare industry. This belief is based on an 11-year study that ended in 2016 from the National Council on Problem Gambling that showed 20% of gamblers with this disorder attempted suicide. According to the Journal of Gambling Business and Economics just under 6% of those who gamble on US sports generate 80% of the betting revenue. As the growth of gamblers grows, more people will be betting and that 6% number will likely rise. Financial Planning: Retirement Savings Rate Hits Record High; How Do You Compare? The average 401(k) savings rate, including employee contributions and employer matches, has reached a record high of 14.3%, nearing the widely recommended target of 15% for a secure retirement. This milestone reflects growing awareness of the importance of long-term financial planning, especially as traditional pensions continue to disappear. However, the ideal savings rate isn’t one-size-fits-all. Individuals who begin saving in their early 20s may be able to retire comfortably with a lower contribution rate, while those who delay investing until their 30s or 40s often need to save well above 15% to catch up. Starting early allows compound interest to do more of the heavy lifting, highlighting the value of consistent, proactive saving from a young age. For example, someone who starts at the beginning of their career might be okay saving as little as 7% of their income and still retire on time. This means if they save the minimum necessary to receive the full company match (5% contribution + 4% match = 9%) they likely will be fine. However, waiting until their 40’s may require a savings rate of 25% or more to produce the same retirement income.
First Time Homebuyers Hit a Record Low With the high cost of housing and higher interest rates, people trying to get their first home dropped to a record low around 23% in 2024. The average age of the first-time homebuyer has increased 10 years over the historical average to 38 years old. The median income is now $97,000 and the first-time home buyers are coming up with an average down payment of 9% of the value of the home. Many of these young buyers are using FHA loans, which require a very small down payment and according to research roughly 30% of all FHA mortgages have a debt service ratio of over 50%. This means more than half of these buyers’ incomes is going toward servicing debt. This could be a hard pill to swallow for young buyers with not much money left over for luxuries like vacations and new cars. However, if when they buy the home, they understand that if they really tighten their belts for the next three to four years, they will probably be fine. New home builders are doing what they can to try and get rid of the largest inventory of unsold homes on their lots since 2009. The median price of a new home is currently less than one percent higher than the median price of existing properties, which historically has seen a 17% premium. The home builders are using profits from their homes to buy down mortgages. Even though the 30-year mortgage was recently around 6.8%, home builders can buy these mortgages down which led buyers of new homes to a rate around 5%. Buying down these rates has cost home builders about 8% of the purchase price of the home. This reduces their profits but better than the alternative of sitting on unsold homes with a carrying cost for the builder. I don’t see this situation getting better anytime soon because I’m not looking for a large decrease in mortgage rates and incomes over the next year will probably increase somewhere around 3 to 4%. We continue to believe the rapid increase in the price of homes over the last few years will not last and it will now take some time to get back to normal market. Maybe we will see a better real estate market in 2027 or 2028. Is Bitcoin coming to your 401k? I have been concerned with bitcoin and crypto as a whole for several years for many reasons including fraud, illicit activity, and the fact that there is really no way to derive an intrinsic value for it since there is no earnings, cash flow, or anything really backing the asset class. I was disappointed to see the current Labor Department removed language that cautioned employers to exercise “extreme care” before making crypto and related investments available to their workers. They cited “serious concerns” about the prudence of exposing investors’ retirement savings to crypto given “significant risks of fraud, theft, and loss.” While this isn’t necessarily a full-on endorsement for placing crypto in 401k plans, it definitely seems like the administration is continuing on its path to try and normalize crypto as an established asset class. Even with this change in language I would be surprised to see a huge surge in cryptocurrencies within 401k plans. Ultimately, ERISA bestows a fiduciary duty on employers and company officials overseeing 401k investments and that means legally employers must put the best interests of 401(k) investors first and act prudently when choosing which investments to offer (or not offer). Given the extreme volatility within crypto I believe it would be a huge risk for these companies to offer it as it could open them up to lawsuits if there are major declines. We’ll have to see what other changes are made as time progresses, but I don’t believe crypto has any place within a 401k plan at this time. Inflation report shows continued progress The personal consumption expenditures price index, which is also known as PCE and is the Federal Reserve’s key inflation measure, showed an annual increase of just 2.1%. Core PCE, which excludes food and energy, showed a gain of 2.5%. Both results were 0.1% below their respective estimates. Overall, inflation has continued to cool and is now quite close to the Fed’s 2% target. The question that remains is how will tariffs ultimately impact inflation? An economist from Pantheon Macroeconomics said that he believed core PCE would peak later this year between 3.0% and 3.5%, if the current mix of tariffs remained in place. I would say it is difficult to forecast the tariff impact since we don’t know what will ultimately be passed on to the end consumer. It will definitely be interesting to see what numbers look like in the coming months, but ultimately, I believe most of the concerns around inflation are overblown and even if the rate for PCE is around 3%, I don’t see that as being problematic for the economy. Financial Planning: What it Means to be an Accredited Investor An accredited investor is someone who meets specific income or net worth thresholds—such as earning over $200,000 annually ($300,000 with a spouse) or having over $1 million in net worth excluding their home—and is allowed to invest in private securities offerings not registered with the SEC. These investments, which include private REITS, private equity, hedge funds, and startups, often promise high returns but carry significant risks such as illiquidity, limited transparency, and the potential for total loss. While many of these offerings are only available through fiduciary advisors—who are legally obligated to act in their clients’ best interest—investors must still exercise caution. Fiduciary duty applies only in certain contexts (such as investment advice) and may not extend to related areas like insurance or commission-based products. Additionally, what qualifies as “acting in your best interest” is often subjective and open to interpretation. Working with a fiduciary does not guarantee protection, and investors should remain vigilant, ask questions, and independently evaluate any recommendation. Also, private investments aren’t necessary better than public investments, so just because you qualify as an accredited investor doesn’t mean you should be investing in private securities. Is a buyer’s market coming to the housing market? Interest rates on mortgages have stayed pretty much above 6% since September 2022 and it doesn’t look like they’ll be falling anywhere close to 6% anytime soon. But for those looking to buy a new home, we could be looking at a homebuyer’s market soon. It’s not here yet, but there are signs that the number of homes listed for sale this spring has increased, while sales have actually decreased. Nationally, existing home sales are down 2.4% through April while the number of properties for sale has increased by 5.1%. Unfortunately for buyers, prices for homes are still high and mortgage rates have increased which has led to affordability still being a major problem. On a national level about 20% of home sellers cut prices on their homes in April, which was the largest amount of price cuts since April 2017. Zillow expects a national drop on average of 1.4%, but areas where there is higher priced homes and rising listings, the drops could be larger. Areas where there are second home owners could also see declines as many of them are sitting on a lot of equity in that house and they may not be using it as much as they thought they would. This could lead them to take advantage of that equity and sell at a reasonable price. Unfortunately, for the entry-level homebuyer competition is still fairly high and supply remains quite low, but that could change in the future as well. If you’re a buyer waiting to buy a home, I would be patient and keep your down payment in a high-yield money market, which should pay you around 4% while you wait to get that home that you want. Patience pays off in investing and home buying. The U.S. is far ahead of Europe in Business People love to travel to Europe to see history and maybe drink the French or the Italian wine, but when it comes to growing the economy Europe is far behind the US. Going back 50 years the US has created 241 new companies worth more than $10 billion, Europe pales in comparison creating only 14 new companies of that size over the last 50 years. Europe continues to fall behind the U.S. in productivity, 35 years ago the average EU worker produced 95% of what Americans did. Fast-forward to 2025 and Europeans now produce less than 80% of an American worker. It’s surprising that even though Europe has 449 million people, which is over 100 million more than the US, their economy is now 1/3 smaller than the US economy. Investors and entrepreneurs in Europe say the obstacles that prevent growth are a timid and risk adverse business culture, strict labor laws, regulations that stifle any type of growth and a smaller pool of venture capital. It is estimated that European businesses spend 40% of their IT budgets on complying with regulations. Also, many of these companies are confused as 2/3 of European businesses don’t understand their obligation under the EU AI act. I suggest to take this as an important history lesson for younger people who may think that more government is good. More government does not produce a growing economy and if you and your children want a higher standard living going forward, it takes hard work and competition, not government regulation and control. Crypto Exchange Kraken is going to offer digital tokens backed by stocks I can’t believe that this is happening, but it is and crypto exchange company Kraken said it would occur within the next few weeks. The company will be rolling out digital tokens that are supposed to be back by stocks such as Apple, Tesla, Nvidia and other popular companies. This also includes ETFs, like the SPDR S&P500 and the SPDR gold fund. These will not be available to US investors, but it is instead for other countries around the world to invest in US stocks. This is supposed to be easier than the current way of investing in US stocks through local brokerages. These digital tokens will be referred to as Xstocks And will be on the Solana Block chain platform. It is expected that Kraken’s partner, Backed Finance, will acquire new shares of stock as these tokens are sold to back up the value of the digital tokens. Trading of these digital tokens will be allowed 24 hours a day seven days a week. I’m concerned this could cause extreme volatility for some of these stocks as they may need to be purchased in large quantities each week day morning based on the activity that occurred while the market was closed. I think some crazy things could happen. I see huge concerns here and lots of room for fraud as it could be discovered the digital tokens are not backed by the correct number of shares. Maybe my thinking is old-fashioned but just seems to me if I’m going to invest in a company, I want to actually hold shares in that company not have someone acting as a middleman. I think unfortunately people trading these digital tokens don’t care about true investing and it’s just going to be more speculation. I do hope they fail like the crypto company Binance did when they tried the same thing back in 2021. The regulators around the world felt like Binance did not have the correct licenses to do this. But don’t worry, Kraken is regulated by the Wyoming division of banking and has a special purpose depository banking license. Well, that should make investors feel a whole lot better, right? The History of FICO Most people have heard of a FICO score, however I’m sure most have no idea how it was established and also that it is a public company that has performed very, very well over its history. The company was started back in 1956 by an engineer named Bill Fair and a mathematician named Earl Isaac. Each put in $400 of startup capital and it took two years to sell their first credit score. The name of the company is Fair Isaac company, which is where they came up with the FICO score. 31 years later on July 1987, it went public and sold 1.4 million shares at $9.50 per share. The stock now trades around $1650 for a total return of about 17,200%. There are very few investments that could come even close to that type of return. The company does not collect money directly from the customers who receive their credit score, it generally comes through application fees and is paid by the lenders. The company has what is known as inelastic demand, which unlike many other companies they can raise prices and the customers will still pay for their service. Sounds like a little bit of a monopoly to me. They are used by 90% of US lenders and do over 10 billion credit decisions a year. They do over $30 billion a year in sales with only 3700 employees. The free cash flow of the company increased by 30% to $607 million last year and it bought back $822 million of stock. The company sounds very attractive; however, it trades it around 40 times forward earnings, which is rather pricey and the slowdown in the real estate market could hurt the company going forward.
The US just received a downgrade to its credit rating, should you worry? Last week, Moody’s announced it downgraded the United States sovereign credit rating from AAA to Aa1. While a downgrade is important to understand and can have negative consequences for interest rates, this downgrade did not seem too problematic. I mainly say that because Moody’s was the last major credit rating agency to have the U.S. at the highest possible rating. The first downgrade carried the most weight in my opinion as it had the highest shock value. Standard & Poor’s was the first to move in August 2011 and the stock market fell 6.66% the session after the announcement. Fitch then lowered its rating on U.S. debt in August 2023 and the stock market lost 1.38%. After this Moody’s downgrade the stock market seemed to have little reaction as it actually had a small increase following the news. While this downgrade may sound scary, I don’t believe it will have long term consequences considering the fact that US debt is still viewed as a very safe asset. With that said, the US does need to address the growing deficit problem as further downgrades from these credit agencies could cause problems. Demand for electric vehicles is falling dramatically Electric vehicle sales in the month of April declined 5% while the overall car market grew by 10%. This is only the third monthly decline in four years for electric vehicles. The reason for the decline is consumers are watching their spending more than they have in a while and many of the deals and promotions for electric vehicles have disappeared. It was not just Tesla who had difficulty because of Elon Musk’s political association, but even Kia, Hyundai and Ford experienced drops. Rivian was hit hardest on their R1T pickup truck as it saw a 50% decline in sales for April. With some of the crazy electric vehicle lease deals gone, consumers are also asking the question about charging related concerns. There are some car buyers who were considering buying an electric vehicle but they said it’s not worth the stress of charging your vehicle all the time. It’s just much easier to pull into a gas station that is always easy to find. This is only one month of electric vehicle sales and not a trend that has been going on for a while, but with the increased production of oil from OPEC and a large potential supply of oil in the future, gas prices should decline which takes away the incentive of paying more for an electric vehicle. High risk, private market investments are showing up in more 401(k) plans Another big 401K provider called Empower who oversees $1.8 trillion in 401(k) assets for about 19 million people has decided it will start allowing private credit, equity and real estate in some of the accounts they administer later this year. I think this is a terrible idea for investors. I have seen the back end of these private deals and many times investors have made no money from them and can only get out a little bit of their money at a time, while they are suffering from low returns and high fees. No surprise Wall Street loves these private market investments because of high fees, which range anywhere from 1% to 2% of the portfolio balance on an annual basis. One way they are trying to sneak in the private market funds is with a 10% allocation in the popular target date funds. This is pretty sneaky because you may be thinking you’re getting a pretty conservative stock and bond fund that becomes more conservative as you get older, but with a 10% allocation in these private assets I believe it will increase the funds risk and lower the returns going forward. As always, the bankers on Wall Street only care about generating more fees, and don’t care if investors lose money as long as they bring in their billions of dollars in profits. If you see these in your 401(k) options, cross them off the list and stick to the traditional long-term investments that have worked for so many years now. Financial Planning: Who Benefits from the new SALT proposal? The current SALT deduction allows taxpayers who itemize to deduct up to $10,000 of certain state and local taxes, most importantly their state income taxes and property taxes, from their federal taxable income. The new proposal in the House bill would raise this cap to $40,000 for households earning under $500,000, with a phaseout that fully eliminates the expanded deduction at $600,000. Married and single tax filers alike with incomes over $600,000 would be subject to the $10,000 SALT limit. This change is intended to benefit middle- and upper-middle-income taxpayers in high-tax states, while limiting the benefit for higher earners. The proposal also includes annual 1% inflation adjustments beginning in 2026. If the bill is signed into law in its current form, the larger deduction would apply beginning in tax year 2025. If passed, tax payers who make less than $600k in high tax states who own a home with a mortgage will see the biggest tax benefit and they may want to adjust their tax withholdings or estimated tax payments to account for it. However, the bill has not passed the Senate, and the final terms are likely to change. US air traffic control systems need to be updated and repaired When it comes to flying, we always think about the safety of the airplane and the pilot flying the plane. I know I always feel pretty safe when I get on a new plane. I think that’s just human nature now and with the amount people travel, we think it’s less likely to fail. But sometimes it’s the things that are not in front of us or obvious that can harm us. There are 138 US air traffic control systems in the US and a recent study showed that 76% of these control systems are either obsolete or potentially too difficult to maintain. There is no need to panic or cancel that flight next month, but it is good that this was brought to light because we now know the US air traffic control system has not kept up with technology and needs to be updated. The Federal Aviation Administration known as the FAA is aware of this and is taking action to update the system. The recent incident at Newark Liberty airport brought this situation to light and there have been other less known incidents of communication problems within the traffic control system. They are still fighting a shortage of air traffic controllers, and with the obsolete technology the FAA needs to come up with a plan soon. Coinbase to pay out up to $400 million Coinbase Global, which will be going into the S&P 500, got hit with a $20 million ransom from cyber criminals who stole information on Coinbase accounts including details like names, addresses, phone numbers and email addresses. It looks like they even got access to Social Security and bank account numbers along with government ID images from driver’s licenses and passports. If you follow us on a regular basis, you know we’re not advocates of cryptocurrencies, but this scam happened because they attained information by bribing multiple contractors and employees working in support roles outside the United States. The ransom was for $20 million, which Coinbase refused to pay and they are instead offering a $20 million reward to find the cyber criminals. According to a regulatory filing, it is estimated that it could cost Coinbase to reimburse their customers and fix the problem between $200-$400 million. 97,000 customers were affected by this hack and as I said while we do not back cryptocurrencies, I was pleased to see that they were not paying the ransom of $20 million because it just keeps these cyber criminals going. Who should be responsible for recycling, the company producing the product or the consumer? Beverage companies like Coca-Cola and Pepsi are being pushed to stop producing plastic bottles and containers and use an alternative source like glass bottles that can be returned. This would be an added cost that more than likely would be passed along to the consumer. Being a businessman, I’m going to push back a little bit and say it should not be the responsibility of the company, but the consumer should be the one that recycles the plastic products as the end user. I have been a big recycler for as long as I can remember as it just made sense to me and it didn’t seem that hard to do. I was disappointed to see in the 1960’s, the United States recycled 7% of recyclable products but by 2025 that only increased to 32%. I thought it would be much higher in the United States. I was also surprised that the state with the highest recycling is not California as Maine takes the crown recycling 74% of their products. Around the globe, Sweden wins hand down recycling 99% of their local made products. The country Chile is definitely way behind as it only recycles one percent. I do agree something needs to be done considering the fact that since the 1950s, 9.2 billion tons of plastic has been produced of which about 75% is in our landfills, dumps and the ocean and unfortunately, they’ll be there for quite a while. A plastic bottle takes anywhere from 450 years to as long as 1000 years to decompose. The global concern is that in 35 years plastic waste could triple. I know I’m going to ruffle some feathers, but again I blame the consumer for not recycling. I found it interesting if you do recycle, crushing the plastic bottles slows down the process because the advanced machines don’t recognize it as a bottle and may think it is another product rather than plastic. War weapons have changed dramatically over the years If you go back in time, we had weapons like wooden arrows, swords and cannons. We then saw the addition of bullets, missiles, and jets. Now weapons are evolving where they no longer need men to fight the battles in the field and instead, they’ll be fought by the machines. The cost per weapon will also be much lower and much quicker to build compared to the eight-year construction of aircraft carriers like the USS Gerald R Ford at a cost of $13 billion. The weapons of today are becoming very smart with the assistance of AI and far cheaper to build than in the past. In my opinion defense is not something that the United States wants to go cheap on and I’m glad to see we do spend about $1.1 billion yearly on defense to protect our country. We will still need pilots, but instead of one pilot per plane there are now unmanned collaborative combat aircrafts known as CCA’s where one pilot can command 10 pilotless planes. It appears the industry is changing quickly and I’m happy to report that the United States is in the lead with developing smart weapons. For investors looking at the defense contractors in the United States, there are some big names like Lockheed Martin and Northrop Grumman whose stocks are not too expensive but I also wouldn’t say they are on sale. There are also smaller companies like AeroVironment and San Diego based Kratos Defense and Security Solutions that should continue to grow as the war game changes, but would definitely be riskier investments. Overall, as defense changes, the area of defense contractors should continue to grow. What makes In-N-Out Burger so successful? Many small businesses and probably large businesses as well could learn so much by just going to eat at an In-N-Out Burger. It is probably one of my favorite restaurants and places to go because I always know what I’m going to get and it’s always of high-quality. My wife and I went on a Sunday afternoon around 1 o’clock and there were probably at least 25 cars in the drive-through and inside there were barely any open tables. We were lucky enough to get a table back in the corner, which gave me a full view of some of the things that makes this restaurant company so successful. First, let me give you a little background. The company had sales of $2.1 billion, which was derived from 418 restaurants, of which 280 are in California. The company was founded in 1948 by Harry and Esther Snyder and is currently owned by the Snyder family and run by the granddaughter, Lynsi Snyder who is owner and president. She is worth about $7 billion. As we sat at that corner table for probably 15 to 20 minutes to eat our lunch, I noticed four times an employee coming by to pick up a piece of paper or any trash on the floor, which was not there for longer than two minutes. I also noticed as soon as someone got up when they were finished eating, within a minute another employee would come by to clean up the table for the next person. You just don’t see that in businesses today. I believe some businesses are too concerned trying to control their labor costs, which comes at the expense of customer service and it seems you won’t find that at In-N-Out Burger. The restaurants are extremely clean and appears to be from what I could see at least 20 to 25 people working there. I have to add I don’t know what the interview process is but all of their employees seem to be very friendly, upbeat and appear to enjoy their job. Since they are a private company, it is only possible to get estimates of the sales of $2.1 billion per year, which comes from producing 61 million hamburgers. They have maintained pretty much the same menu for the last 75 years, which has likely enabled them to focus on quality control to produce great hamburgers and French fries for every order. Ultimately, their service is great, the food is great and I love that they keep it simple, which works very well for many businesses. Their business model is so unique that in 2003 they even became a case study for the Harvard school of business. UK luxury cars are hurting and it likely won’t get any better If you love the British high-end luxury vehicles like Aston Martin, Bentley, Rolls-Royce, Jaguar and Land Rover you may be disappointed that the prices of these vehicles will likely be going even higher. British cars will now have a 10% tariff on them when coming to the US, which is well below the 27.5% rate before the tariffs were implemented, but it is still way higher than before the tariffs began on April 3rd. In 2024 Britain shipped 96,000 cars to the US, which is just under the limit for the 10% tariff of 100,000 vehicles a year. Anything above that the 100,000 limit will see tariffs jump to 25%. Last year Britain made approximately 780,000 cars, which was about the same as 2022, but for 2025 the production is expected to slip by 8 to 10%. I was surprised to learn that of the top 20 car manufacturers in the world, the United Kingdom was 19th. This was below Russia and only beat out Malaysia. I didn’t even know that Malaysia produced cars. Today China is the top producer of cars around the world producing over 30 million cars a year with the United States coming in at just over 10 million and Japan checking in at around 8 million cars produced. The United States is the single biggest market for British luxury cars like Bentley, Range Rover and Aston Martin, but the demand for these British luxury cars is in a state of decline. I guess we need another James Bond movie for people to get excited about driving an Aston Martin.
U.S. Tariffs are hurting China Exports from China have dropped dramatically which has weighed on China’s economy. This has caused protests due to lost jobs and wages in their economy. Exports from China to the United States dropped 20% in April, but China did pick up exports from other countries like Indonesia, Thailand and Africa. While this may help a little, the export dollars for China to these other countries pales in comparison to the mighty consumption of the US consumer. China’s economy depends on exports considering the fact that in 2024 1/3 of GDP growth came from exports. The Chinese government is panicking a little bit with the central bank in China saying it would cut interest rates and inject more liquidity into the financial system. Some factories in China are pausing their production and laying off workers until things pick up again. Goldman Sachs estimates that roughly 16,000,000 jobs in China come from exports to the United States. With the news that tariffs are being lowered for 90 days it will be interesting to see how companies and these countries react. The US will still have a 30% tariff on many Chinese products, but that is much more manageable than the 145% that was in effect. It is important to remember this is a pause and that rhetoric could pick back up as negotiations continue. I do believe a reescalation in the trade war would really hurt the Chinese economy more than ours and I’m optimistic we will see a trade deal reached, but it will likely take time. I believe it is worth waiting for as a better trade agreement will benefit us for decades down the road. Inflation continues to cool The headline Consumer Price Index (CPI) for the month of April came in at a 12-month rate of 2.3%, which was below the estimate of 2.4% and marked the lowest reading since February 2021. Core CPI, which excludes food and energy, came in at 2.8% which matched expectations and was in line with March’s reading. Energy was a major help to the headline number as it fell 3.7% compared to last year with gasoline in particular down 11.8% over that timeframe. While this is all great many economists are worried about what the next few months will look like on the inflation front due to tariffs. Joseph Gagnon from the Peterson Institute for International Economics said he believes a 10% average tariff rate would add as much as 1 percentage point to the CPI after about six to nine months. While I would agree with the idea that inflation will likely increase in the months ahead, I still don’t believe it will be to a problematic level for two reasons. First, we should remember there are several players that can absorb the costs from these tariffs. You have to consider the companies importing products can reduce their margin, there would be shipping/transportation companies that can reduce their costs, the companies manufacturing products can lower their prices, and then yes, the consumer is the last piece of the puzzle that could now have higher prices. With all that said I don’t believe a 10% tariff would result in a 10% increase in prices due to all the places in the supply chain that can absorb some of the cost. The second reason I wouldn’t be overly concerned is I wouldn’t see the tariff as embedded inflation and it could likely be viewed as a one-time lift to prices that would then be lapped next year. Nonetheless this story will be interesting to monitor in the coming months to see what the actual impact is, but I do remain optimistic about our economy and the inflation outlook. Could artificial intelligence create more jobs? Many people think that artificial intelligence, also known as AI, is going to reduce jobs for people. The CEO of IBM, who admits that AI has replaced hundreds of workers, said it has created more jobs than it has eliminated. He went on to say it frees up investment that the employer can put to other areas that include such jobs as software engineering, sales, & marketing. Normal things like creating spreadsheets and other routine tasks can be done with artificial intelligence, but it still takes a human to do the critical thinking on how to use that data to enhance business for the company. If you’re working for a company and you don’t have much contact with other workers that relate to your job, your job could be at risk of being replaced by AI. Make sure your job involves using data to work with other people, which should give you job security in the growing world of AI. Oil at $50 a barrel? There is talk that we could see oil drop from around $60 a barrel down to $50 a barrel, which would be a big benefit for consumers at the pump. The reason for this is that OPEC and its allies are increasing production of oil faster than anyone expected. By June they could be producing nearly 1,000,000 more barrels of oil per day compared to current levels. The United States is currently the number one producer of oil in the world with production of nearly 15,000,000 barrels per day. If you’re wondering does that meet our consumption? It does not as that stands at 19.6 million barrels per day. OPEC is not taking this sitting down and they want to regain market share. To do it appears they’re willing to see lower oil prices. The reason why oil prices are expected to drop is that the demand is about the same as it was just one year ago, so the increase in production means we’ll probably have an oil glut for a while. At $50 a barrel most oil companies can still make money off of producing oil, but US oil companies might stop doing stock buybacks and could no longer build new wells. What this would do is hurt supply in the future and oil would turn around and increase once again. If you invest in oil companies, you have to realize that supply/demand of oil will rule the price of the stock. But fortunately, most of the big oil companies pay a good dividend, which makes it a little bit easier to hold on when the stocks have a temporary decline. For consumers, this means the average cost per gallon of gasoline across the country, which is now around $3.20 per gallon, could drop to levels around $2.50 per gallon. Consumers in California may not see declines in the prices at the pump as California continues to drive refiners out of the state and reject refined gasoline from other states that do not meet a ridiculously high standard. If you want to blame someone for higher gas prices in California you can blame the governor and Sacramento for ridiculous policies on gasoline. Financial Planning: Trusts and Retirement Accounts Do Not Mix Naming a living trust as the beneficiary of a retirement account—such as an IRA or 401(k)—is generally not a good idea due to potential tax inefficiencies and administrative complexity. Under the SECURE Act, the "stretch IRA" option has been largely eliminated for most non-spouse beneficiaries, and replaced with a 10-year rule requiring the entire account to be withdrawn within a decade of the original owner's death. If a trust is named as the beneficiary and it isn’t specifically drafted to be the beneficiary of a retirement account, it may not qualify for this 10-year treatment and could face even faster distribution requirements, such as a 5-year distribution period, accelerating taxes significantly. Instead, it’s typically better to name individual beneficiaries directly on retirement accounts to preserve flexibility and minimize tax impact. For those needing control over distributions—for example, to protect minor children or spendthrift heirs—a carefully drafted trust designed to meet IRS requirements should be used with the help of a qualified estate planning attorney. For most other cases, listing actual people or charities as beneficiaries is a much simpler and more efficient strategy. Should you use the new money market ETFs? Over the last 10 years money market mutual funds have grown by 150% to $6.9 trillion from $2.75 trillion just 10 years ago. That far outpaces the growth of the average US stock fund, which only increased by 70% over the 10-year period from $9.5 trillion to $16 trillion. A positive for investors is fees on US stock mutual funds have fallen by almost 40% to 0.33% annually from 0.54% according to MorningStar. Money market funds even though they have increased their assets by 150% actually saw their expenses rise to 0.21% from 0.19%. To catch people off guard, they have now come out with money market ETFs, but don’t fall for it. These new types of funds have not been tested yet and I fear investors will not understand how they work. Remember a true money market fund cannot break the dollar share price, but to the unknown investor who thinks it’s better to be in a money market ETF they are at risk of price fluctuations. You may not like that the money market mutual funds have raised their fees a little bit but keep in mind for 10 years many of these companies waved all their fees because the yield was so low. They can now make a little bit of money off of these money market funds while still offering a yield that is more attractive than your checking/savings account in most cases. The Vatican has a financial mess on their hands I was disappointed to learn that the Vatican is in a financial mess that I don’t see how they can get out of. Wall Street Journal reporters met with officials from the Vatican‘s bank, pension fund and regulatory institutions and things that were discovered were appalling in my opinion. It was discovered that nuns kept ledger’s that were written in pencil on paper. That’s shocking considering where technology is in today’s world! I remember from my accounting days, even back then it was a huge no no to use a pencil. It appears auditors and people in charge have come and gone, scratching their heads by finding such things as huge amounts of money missing and there was even cash found in shopping bags. In the 19th century, they used to tax rich farmland owners that is now central and northern Italy. In 1870 it was taken away from the Vatican and it was only left with a 0.2 mi.² estate that is now called Vatican City. They do have investments including real estate, but no one seems to know the true value of those investments. They have priceless masterpieces from Michelangelo, Caravaggio and Leonardo and over one million rare books, but they are carried on the balance sheet at only one euro because the Vatican has no intention of ever selling these assets. Unfortunately, they pay large insurance premiums on them, which is very costly. The pension plan had a 2 billion Euro liability, which at this time there’s no way for them to fund the full pension. It’s a shame to see such a great religious organization in such financial ruin from fraud and deceit of those who were entrusted. Instead of trying to fix the problem, the only thing they have come up with was to ask the faithful to donate more money. The Vatican was actually built in the fourth century, but in its current state it has only been around for about 90 years. Hopefully they will get their situation figured out and get their books in order. They need to have a regular audit by outside auditors on a yearly basis to protect the future of the Vatican, but how do you audit and question the Pope? Gig workers may be better entrepreneurs A gig worker is someone who is an independent contractor and takes on short term contracts for multiple companies. In a study from US tax records from 2012 to 2021, 2 1/2% of gig workers created their own company compared with only 0.7% of the working age population. Reasons that were submitted for this was they have the flexibility to start a business compared to someone working at a company for 40 hours a week. The flexibility gives them the opportunity to set up their business on their schedule instead of working 9 to 5 for an employer. It was also discovered that the average age of gig workers that started their own company was 38, which compared to non-gig workers at 41 years old. Gig workers being more entrepreneurial makes sense to me since they work on their own and are not told what to do. In the beginning the gig entrepreneurs had higher gross profits than others who started businesses. Profits were 39% higher for gig workers after one year and after three years it rose to 42%. Unfortunately, companies founded by gig workers don’t survive as well, it appears they’ll take on a higher risk than the average person. The likelihood of surviving the business for a gig worker was 69.4% after one year, which was below the 72% chance of survival for working age people. By year three, the chance of that gig worker’s business surviving was 45.2% versus 48.4% for the working age population. It takes a special person to become an entrepreneur and run their own business. I never forget the old saying about owning you own business: the best thing is you can set your own hours, between seven in the morning and seven at night and even that might be generous. If you want a good successful business, the best advice I have found is to work extremely hard and put in a lot of hours. The US consumer still looks strong April retail sales were quite impressive when you look at the results compared to 2024. Listening to the news I thought it might be problematic as they pointed out the month over month growth of just 0.1%, but compared to last year they grew 5.2%. It’s even more impressive if you exclude gas stations as retail sales would have grown 6.2%. This is due to the fact that lower gas prices caused sales at gas stations to be down 6.8% compared to last year. There is no doubt about it that tariffs caused some pull forward in demand with areas like motor vehicle and parts dealers seeing sales climb 9.4%. Furniture and home furnishing stores, which would also likely be impacted by tariffs saw sales climb 7.8% compared to last year. The one area that I really find interesting though is food services and drinking places, which saw sales climb 7.8% compared to last year. This tells me the consumer is still feeling confident as this area is quite discretionary and if people are worried about the economy they generally cut back on spending at restaurants. Also, there would be no pull forward in demand from the tariffs in this space. Did Cisco finally reach its high set back in 2000? When I was watching the business news on Thursday morning, I noticed that Cisco, symbol CSCO, had passed $65 a share. I thought this was a big accomplishment because I remembered back during the tech boom Cisco was like Nvidia and some other high flyers of today and the stock went to exorbitant levels of which I remembered at $65 a share. However, when I looked back to see the high for the stock that occurred on March 20th, 2000, I noticed it hit $79.38 a share. So, investors who were sucked into the hype and bought the stock at that level still have not broken even. The company does now pay $1.64 in yearly dividends so perhaps when you add that back in, you get to break even or perhaps even a little return on the stock. The first dividend was paid by the company on April 20th, 2011, but I know it was a much lower rate than $1.64 of today. With estimated earnings for July 2026 from the mean of 23 analysts at $3.99 the forward PE is about 16.3, which is reasonable, but I wouldn’t say it’s on sale and worth buying at this level. I wrote this piece not to recommend a buy or sell on Cisco stock, which I do think is a good company, but to bring back history because if you don’t remember history, then you’re probably doomed to repeat the same mistakes.