Stock Market, Consumer Credit Card Debt, Real Estate, Refinancing, Elon’s Pay Package, Crypto in Small Companies, Company Reporting Consumers, Fast-Food Wages & Luxury brands

Apple CEO Tim Cook pulled three rabbits out of a hat Pulling a rabbit out of a hat is a pretty good trick, but pulling three out of a hat is nothing short of a miracle. In the spring of this year, Apple stock fell below $170 a share as it was faced with enormous tariffs on iPhones, the potential loss of a $20 billion per year payment from Google, and sales for iPhones seemed to be stuck in the mud. To handle the tariff situation, Tim Cook promised US investments of $600 billion over four years. This was not bringing iPhone production back to the US, but it was an investment of making AI servers in Texas and offering manufacturing training for US businesses in Detroit. Apple also announced a $2.5 billion commitment to make iPhone cover glass in Kentucky with Corning and a $500 million partnership to produce rare earth magnets in the United States. After this investment pledge, the President said Apple would be exempt from tariffs on imported electronics. To save the $20 billion yearly payment from Google, Mr. Cook sent Apple’s senior vice president in charge of services Eddie Cue to testify. He convinced the judge that technology shifts are so powerful that they can take down even the most massive companies. In other words, the judge didn’t need to impose harsh penalties, and the market would essentially take care of itself. And somehow consumers have been convinced that the new thinner smart phone called the iPhone Air is a must for any consumer. The marketing on this must be phenomenal because the iPhone Air has a weaker camera, a single speaker, a smaller battery with a shorter life and a higher price tag. Apple also convinced consumers that the rest of the iPhone 17 lineup was worth an upgrade. Apple is predicting up to12% revenue growth in the holiday quarter, twice what Wall Street estimated. So, in roughly 6 months the stock, after dropping to a low around $169 a share, it is up roughly $100 and somehow supports a price earnings ratio of 36. Congratulations to Tim Cook and shareholders of Apple stock. If anyone said they knew Apple would be fine either they have a crystal that really works, or they didn’t understand the problems Apple was facing. Going forward the road is still bumpy with operating expenses coming in slightly over $18 billion for the December quarter, a 19% increase year over a year and well above the 10 to 12% revenue increase that Apple's projecting. We don’t see any big drops in the stock coming up, but I still can’t justify the share price or see any reason why the stock will continue to climb going forward. In 2026 you could be buying stocks on the Texas Stock Exchange Businesses and CEOs are getting tired of the high taxes in New York City and the regulations that are costing them billions of dollars. Texas, which is known as a pro business state will be opening in Dallas the Texas Stock Exchange (TXSE). This has already been approved by the Security Exchange Commission (SEC). It is expected to see operations open for trading in the first quarter of 2026. The Texas stock exchange has the backing of JPMorgan Chase, who just invested $90 million into the new exchange. Large companies like BlackRock and Charles Schwab are also on board. It is backed by many businesspeople including billionaire Kelcy Warren, cofounder of Energy Transfer Partners, and billionaire Paul Foster, who founded the investment firm Franklin Mountain Investments. This could be a heavy blow to New York and New York City, who have been unfriendly to business because they felt like they have the only place in the country to trade. Now that New York City has elected Zohran Mamdani for mayor, it will be interesting to see how businesses respond since he says he will go after business and the wealthy to pay more taxes. The state of Texas has no income tax, but if you live in New York City you could pay a state tax of 10.9% plus a city tax of 3.9% and it doesn’t take long to get to those levels based on your income. Public companies that bought Bitcoin are getting worried The craziness of public companies riding the Bitcoin wave as it increased in value caused many of their stocks to jump even more than the increase in Bitcoin or other cryptocurrencies. But now that Bitcoin has pulled back from its all-time high slightly over $126,000 and has dropped about 20%, those public companies that bought Bitcoin are seeing their stocks drop far greater than the decline in Bitcoin. Roughly 25% of the public companies that bought Bitcoin as a treasury strategy now have a market cap valuation below the total value of their Bitcoin value. What companies were doing was they would invest in Bitcoin then sell their shares at a premium as their stock increased in value and then used those proceeds to turn around and buy more Bitcoin. Now that Bitcoin has declined, there’s no reason for crypto buyers or traders to buy those stocks and instead it looks like they have been selling them. As an example, CleanCore Solutions is now down over 80% since investing in Dogecoin and even a larger player like Japan’s Metaplanet, which is a top five publicly listed Bitcoin holder, has seen its stock decline around 60% over the last 3 months. If Bitcoin were to continue its decline, the company could be forced to sell assets, which could cause Bitcoin to fall even further. So far, this has not affected the company who started this craziness of buying Bitcoin in their treasury. I'm referring to MicroStrategy, which has changed its name just to Strategy and still trades under the symbol MSTR. Really all this company does is buy Bitcoin. Strategy owns roughly 640,000 Bitcoin and at today’s price it is worth roughly $70 billion. It is estimated that Strategy's average purchase price for Bitcoin is $74,000, so they seem to be safe for a while. However, stock investors in Strategy are probably crying the blues since in July the stock was around $450 and as of today it trades around $240, close to a 50% decline. As we have said for years, no one really knows what direction Bitcoin is going, it could be up or it could be down. But one thing is for certain, if those companies that bought Bitcoin and pushed the price higher, now need to sell it that will probably cause Bitcoin to fall further. Financial Planning: The Conflict of Interest around Universal Life Insurance Universal life insurance is often presented as a hybrid policy that combines features of term life and whole life, marketed for its perceived benefits of tax-deferred cash value growth and the potential for tax-free income through policy loans in addition to a permanent death benefit. However, realizing these benefits typically requires significant overfunding, meaning the policyholder must pay premiums well above the minimum needed to keep the policy in force. Universal life offers flexible premiums, but there are ongoing fees and costs of insurance, which increase with age, required to maintain coverage. Only premiums paid beyond those costs build cash value that can be invested. The problem is that agent commissions are usually based on the “target premium”—the minimum amount needed to keep the policy active, not the funding level required for it to perform as illustrated. This creates a conflict of interest, where many agents are incentivized to sell the policy but not to ensure it’s structured or funded properly. As a result, many universal life policies become underfunded, fail to accumulate meaningful cash value, and ultimately function as expensive term insurance. While some advisors structure these policies correctly, they are the exception rather than the rule. Because the life insurance industry is easy to enter and highly lucrative, it attracts many underqualified or self-interested salespeople. For most people, term life insurance combined with disciplined investing remains a more transparent and cost-effective approach that will outperform even the most efficiently structured life insurance, especially since the need for a death benefit typically declines by retirement. It’s important to regularly review existing life insurance policies to ensure they’re performing as intended and not quietly eroding in value over time. Sales of electric vehicles killed Porsche‘s profits Like other car makers, Porsche thought it was a good idea to come out with electric vehicles for their consumers to buy. Unfortunately, the Porsche buyer rejected electric vehicles, and this has destroyed the profits at Porsche, which had been known for financial stability and for over 10 years generally had double digit operating margins. The most recent quarter they reported a loss, which was the first quarterly loss in years. The numbers got worse from there. For the first nine months of the year, the profit was only €40 million. The company also reported €2.7 billion in one-time costs and write downs. Unfortunately, they believe by the end of the year that write-off could rise to €3.1 billion. The company is also dealing with a difficult Chinese market and tariffs from the United States. In my opinion, some cars should not be electric, which includes Porsche and the recent announcement by Ferrari to do an electric vehicle. I think that could have the same results as what Porsche experienced. New estimate show in 2033 retirees will lose $18,000 a year in benefits There are many misconceptions about what happens when Social Security becomes insolvent. Benefits will still be paid, but since there’s no money left in the plan, it will only be able to pay out what it brings in. In a recent survey by Allianz, 55% of Americans admit they don’t know much about Social Security or how it will fit into their retirement plans and 66% worry that Social Security will not be there when they retire. The $18,000 loss per year would be for the average couple, not per individual. Another issue that is not discussed as much is it is predicted that the Medicare hospital insurance fund will also be empty in 2033 and when that happens Medicare payments will fall by 11%. So, people getting less benefits are going to find it hard to find a doctor or medical facility to accept less. Social Security is a big part of household income for adults over 62 years of age accounting for roughly half of all their income. To fix the problem, either benefits have to be reduced, or taxes need to go up, or perhaps both. It’s important to realize that Social Security came out in 1935 when the average life expectancy in the United States was 61.7 years old. With the retirement age at 65, not many people were collecting Social Security. Today people in the US are living 16.7 years longer with a life expectancy of 78.4 years. This has not been taken into account over the last 90 years with Social Security and that’s why we’re in the mess that we are in today. As life expectancy improved over the years, the retirement age should’ve also increased at a proportionate amount. The best way to fix the problem is to extend the retirement age by five years or so, but only for the rich. The reason for this is American men born in 1960 that are in the top quartile by income are expected to live 12.7 years longer than those in the bottom of quintile. This is because they have more money and are generally in better health with better access to a healthier lifestyle. Also, since rich Americans live longer than poor Americans, they collect more from Social Security so they should have to work a little bit longer, which would reduce the length of time that they would collect from Social Security and also add an additional five years putting into the fund. Being in the top quintile myself, I would not have a problem with this and believe it is the fairest way to solve the problem. I’m sure some will disagree with me and unfortunately, I don’t think the problem will be resolved until whoever gets in office in 2032 is forced to come up with a solution. No President or Congress would want to make such an unpopular decision until they absolutely need to. Job losses are increasing in white-collar jobs What do Amazon, UPS, Target, Rivian, Molson Coors, Booze Allen and General Motors have in common? They all have recently been laying off white-collar jobs to improve efficiency. AI is partly to blame for these job losses, but also executives are putting more pressure on mid-level managers and employees to produce more per employee. On the opposite side, there are many opportunities in front-line, blue-collar jobs for those who have specialized work abilities. That would include jobs in various trades, healthcare, hospitality and construction. It has been difficult for the graduating class of 2025, who according to the National Association of Colleges and Employers have submitted more job applications than the class of 2024, but are receiving less job. The sad part is I don’t see this changing going forward even though the economy is doing OK. Businesses will continue to look for ways to increase profits by using artificial intelligence and forcing employees to work harder and perhaps more hours. The jobs that pay more and require a bachelor's degree could be the ones that are more likely to be replaced by AI than other positions. If you’re in a white-collar job, you may want to do everything you can to increase your production to prevent being a white-collar employee who is easily replaceable by AI. If I wasn’t a value investor, I would consider putting Tesla stock in our portfolio As a value investor, when we invest in a company, it must have earnings, and we refuse to pay more than 10 to 12 times the future earnings for any business. This automatically kicks out a company like Tesla because it trades for over 250 times this year's estimated earnings. I always say if you don’t stick to your discipline and find an excuse to break it, then you have no discipline. However, on November 6th Tesla shareholders voted on stock bonuses for Elon Musk, which would nearly double his share in the company from 13% to 25% if he hits very high goals. The market cap of Tesla, which is currently around $1.5 trillion, would have to hit $8.5 trillion in the next 10 years, more than likely an impossibility of very high goals. I do believe Tesla could see a stock decline in the near future because of the big buying spree in September before the expiration of tax credits for electrical vehicles. I've seen predictions by experts that Tesla will see a 40% or more decline in electric vehicle sales going forward. This could cause a nice drop in the stock, giving investors a buying opportunity. The reason why I would be looking at investing in Tesla is three-fold. First, Elon Musk always seems to pull a rabbit out of the hat. I also believe they will have robotaxis and autonomous driving vehicles in the future. Another futuristic thing that is probably closer than we think is humanoid helpers in homes and businesses that will be a growing industry. Both of these innovations will be under the Tesla name, unlike some other innovations that Elon Musk has come up with that are under different companies. Investors investing money in Tesla have to be prepared for a wild ride over the next 5 to 10 years, sometimes experiencing a drop of perhaps 50% or more. But there is no doubt in my mind that Tesla will make some good profits off Robotaxis and these human-like robots. The big question is at the current levels has the valuation priced in these lofty expectations? Have some retirees become too comfortable with gains in the stock market? Over the last 10 years, the S&P 500 is up around 237%. Unfortunately, there are some retirees who don’t understand the risk they’re taking and believe this will go on forever. If you follow us at Wilsey Asset Management on a regular basis, you may know we have done well investing but also at the same time are very cautious based on many factors which I will not get into today. We do tell people that you can still be investing in stocks when in retirement, but you have to look behind the scenes and see what you’re investing in and understand that all stocks are not equal. Some retirees are probably spending more money than they should based on their past performance and are taking extra trips, flying first class and getting locked into lavish retirement homes that require a large down payment of hundreds of thousand dollars plus high monthly fees. What people don’t understand is that yes, the S&P 500 is up about 237%, but there could be a 20% pullback at some time that actually lasts more than a few months. That does not mean that the 237% gain will fall to just a 217% gain, no it will drop your gain over 10 years to only 169%. Also, the emotional distress that will happen when the markets fall will probably cause some people to sell their investments because they don’t understand what they have and then invest the money in something very conservative. Never getting back what they lost for perhaps as long as 20 years or more. It is great that retirees are enjoying their retirement, but they have to understand the risk they are taking, and this is why a good financial advisor with many years of experience that understands how to value investments is the best path for success in retirement. There are some signs that the job market is breaking down, but it’s not all bad We have been watching the job market for quite a while, and it still looks stable. There has been bad news from some companies like Amazon, General Motors, Paramount Skydance, and UPS that collectively laid off 65,000 people. But it’s not all bad news as there is some good news to balance out the bad. Small businesses revealed in the latest National Federation of Independent Business survey that they are planning to hire new employees. Also, people are still traveling and staying in hotels along with eating out and this has helped the hospitality sector, which posted the strongest rebound in hiring for October when monthly payroll growth was up 13.8%. Normally, October shows a decline in the month. With the government shutdown occupying so much of the negative news, there are other companies doing well like Homebase that provides employee management software to 150,000 small businesses which employ roughly 2,000,000 people collectively. It’s important to remember that small businesses in the United States accounts for nearly 50% of all the US private sector jobs. While small businesses do remain cautious, many are still optimistic going forward. Also on the positive front, ADP reported last Tuesday that the four-week moving average of 14,250 jobs for the week ending October 11 is higher than the previous four weeks with only 10,750 jobs. The government shutdown does make accessing data about the economy a little more difficult, but with everyone in the business world trying to find information to run their business there’s some interesting companies providing worthwhile data.

The big brokerage firms are fighting for your investment accounts Our investment advisory firm over the years has never been a favorite of the big brokerage firms because we generally only do three, maybe four trades on average per year. But the big brokerage firms are now acting like the casinos in Las Vegas and are doing everything they can to get you on their platform. They will give you all kinds of tools and seminars, so you’ll take higher risk and do more trading. In the meantime, they're downplaying the risk of trading. You see also like the casinos in Las Vegas, there are now stories of them giving away free rooms for the big players and they are giving you free software and free education on how to trade. Robinhood even invited 1000 people to Las Vegas and took them go kart racing and provided classes with their new trade platform. Schwab and Fidelity are doing similar types of events to get you to use more of their services. Once they get you in the door, they can show you how to use margin debt, which by the way hit a new record of $1.13 trillion in September, along with option trading and other exciting ways to make you think you can make a lot of money. Doesn't that sound like the casinos in Las Vegas that try and get you to hit the gambling tables? Unfortunately, it seems to be working somewhat because the percentage of investors who now have self-directed accounts is 33%, which is a big increase from 24% just five years ago. My problem with this, as you can tell, is I don’t believe they’re teaching people how to invest but more on how to gamble and how exciting it can be. Going back 100 years it's still the same with Wall Street, they will make some big profits, and the small investors will lose most if not all of their nest egg. Can Travis Kelce turn around Six Flags? If you’re not sure who Travis Kelce is, he is a tight end for the Kansas City Chiefs and engaged to the well-known singer Taylor Swift. Six Flags, which is a public company that trades under the symbol FUN, has received an investment of $200 million from the activist investment company JANA Partners. It was not disclosed how much investment Travis has of the $200 million, but he does like to invest in companies both public and private. He has investments in over 30 companies that include manufacturing, distribution, consumer goods, entertainment, and a beer company. He is pretty excited about his investment because as a kid he used to love the roller coasters, Dippin' Dots and him and his brother have great memories at Six Flags. He has suggested that they do a roller coaster with a 300 foot drop where riders feet dangle from beneath. Investing in Six Flags seems to be an uphill battle. Year to date the stock is down roughly 45%, the company is losing money and has a market capitalization of $2.6 billion. Travis does have a long-term perspective on all his investments likes we do. He is OK investing in a company losing money in hopes it could be turned around. Our philosophy at our firm is we will not invest in companies that do not have earnings. One benefit he does have is obviously his name and I’m sure if him and his fiancé, Taylor Swift, would start showing up at Six Flags, you can bet that they will be all over the news giving the company some nice free advertising. Markets actually declined after the Fed rate cut  On Wednesday, the Fed announced they would lower their benchmark overnight borrowing rate by 0.25% to a range of 3.75%-4%. This marked the second consecutive cut of 0.25% and there is still one meeting left this year where we could see another rate cut. The keyword here is could and the lack of conviction around another cut is likely what spooked the market. Powell said a December rate cut isn’t a “foregone conclusion” and while recently appointed Fed Governor Stephen Miran again dissented in favor of a 0.5% cut, there was also a hawkish dissent with Kansas City Fed President Jeffrey Schmid voting for no decrease. Schmid's vote and Powell's language was likely what sent the market lower after the announcement as many essentially had the December rate cut factored in as a sure thing. Powell also added that there is “a growing chorus” among the 19 Fed officials to “at least wait a cycle” before cutting again. This resulted in traders lowering the odds for a December cut to 67% from 90% the day prior. Given the lack of data and an economy that still appears to be in an alright position, I do believe the Fed needs to be careful cutting too quickly especially since they are taking another accommodative stance with the announcement that they would be ending the reduction of its asset purchases – a process known as quantitative tightening – on Dec 1. This in theory will stimulate the Treasury and mortgage-backed securities markets, which should help with longer dated debt instruments, as the Fed was allowing these assets to just roll off the balance sheet and now will need to step in and buy new debt to replace the securities as they mature. While QT shaved off around $2.3 trillion from the Fed's balance sheet, Covid led to a major expansion from just over $4 trillion to close to $9 trillion. The question is with the rapid expansion just a few years ago, was enough removed from the balance sheet to put it at a more normalized level. Like with the Fed cuts, I do believe if monetary policy eases too much, we risk a return of inflation and a further increase in many speculative assets that could cause problems down the road. Financial Planning: When does a Solar System Make Sense? Buying a solar system generally makes the most sense if you use a lot of electricity and plan to stay in your home long term. Installing by the end of 2025 allows you to capture the 30% federal tax credit, which significantly shortens the payback period. If the system is financed with a mortgage or home equity line of credit (HELOC), the interest may be tax-deductible, allowing for little or no upfront cash outlay and after-tax loan payments that can be lower than the monthly electricity savings. Owned solar panels usually increase home value, though not always enough to fully offset the system’s cost, which is why longer-term ownership is important to recoup the investment. In California, including a battery is almost always recommended so you can store power generated during the day for use at night, reducing the need to buy expensive electricity from the grid. Leasing can be attractive for shorter-term homeowners if lease payments are well below current utility costs, but leases generally don’t increase home value and don’t qualify for tax credits. The main advantage is immediate monthly savings without an upfront investment, though leased panels can complicate a future home sale. In some cases, it may be best not to install solar at all—for example, if you don’t plan to stay in the home long term, or if your electricity usage and potential savings are too low to justify the hassle and possible roof wear from installation. Don't ignore the concentration risk in the indexes! I've talked about this before, but the S&P 500 is not as diversified as you think. The Mag Seven, which consists of Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla now accounts for nearly 35% of the entire index. If you look at the QQQ, or the Nasdaq 100, the concentration is even more problematic with the Mag Seven accounting for nearly 45% of that index. If you include Broadcom in the mix, those companies would account for nearly 40% of the S&P 500 and 50% of the QQQ. While the indexes continue to climb, people continue to have the false belief that they have a sound diversified portfolio. It is when the music stops that people will come to realize how over reliant they were on the tech sector. Congratulations if you have consistently held these indexes, but the more I read, the more concerned I am that we are heading towards something similar to the Tech Bust that occurred more than 25 years ago. Maybe we will see a decline in the federal deficit next year I have said before that at this point, the federal debt is not a huge problem, but it’s something that needs to be taken care of before it does get too far out of hand. There only seems to be two ways to reduce the federal debt, one is to reduce spending, which would hurt the economy, or two is to increase taxes, which would probably hurt the economy even more. I recently read something in the Wall Street Journal that gave me a glimmer of hope that there’s another way that maybe we can reduce the federal debt. In one of the articles it mentioned that at the NATO summit in June, President Trump achieved something that has not been possible by every other president since Richard Nixon was in office over 50 years ago in the early 70s. Somehow President Trump convinced the Europeans to make a commitment to increase their defense spending from 2% to 5% of their GDP. This means they’ll be taking care of themselves and that’s less money that the United States has to spend to defend them. In addition to that, President Trump has also pretty much ended most aid to Ukraine and instead offered to sell Tomahawk missiles to the Europeans, which they can give to Kyiv if they want. That would make a lot more sense for the Europeans, and it would save the United States billions and billions of dollars, which should help reduce our spending and generate some revenue to add to our GDP. The tariffs are also generating billions and billions of dollars of revenue for the federal government. I think we could see maybe more ways to reduce spending and increase revenue that no one has thought of. What all this means is, we could see a slightly lower federal deficit by the end of 2026. Let’s keep our fingers crossed as this debt needs to be addressed before it becomes out of control. The much anticipated meeting between Trump & Xi ended with little news I would say it was positive that Trump and Xi finally met, but the meeting ended in what looks like a trade truce instead of a trade deal. Trump agreed to cut fentanyl tariffs on China to 10%, which brings the overall levy on Chinese imports to 47% from 57%. This also means the 100% tarriffs Trump threatened to go into effect on Nov. 1st over rare earths will not occur. The US also agreed to postpone a rule announced on Sept. 29th that blacklisted majority-owned subsidiaries of Chinese companies on an entity list. Beijing said it will work to stop fentanyl coming into the U.S. and buy American-grown soybeans along with other agricultural goods. China also agreed to pause for one year the export controls on rare earths that were announced on Oct. 9th, but China’s rare earths restrictions announced in early April remain in place. The two countries also agreed to suspend fees for one year on ships that dock at each other’s ports. A big problem here according to Trump, the rare earths deal will need to be negotiated every year. I'm concerned by this because there could be a major difference in philosophy with the next administration. Another negative was details were quite light after the meeting and it wasn't really clear what China agreed to in terms of agriculture and energy purchases and their cooperation on fentanyl trafficking. Treasury Secretary, Scott Bessent, said China will buy 25 million metric tons of soybeans annually over the next three years, but all China said was the two sides agreed to expand agricultural trade without providing specifics. Other major points of contention including TikTok and chip exports from Nvidia appeared to go unresolved. Moving forward, Trump said he plans to visit China in April and Xi will come to the U.S., either Palm Beach, Florida or Washington, D.C., at a later date. If we lower interest rates, it is possible we may never be able to raise them again I know that seems strange, but you have to realize that the United States is now nearly at its 1946 peak of indebtedness relative to the size of the economy. It's important to remember 1946 was just after World War II and the country was paying off all the debt that was run up during the war. I do believe going forward, if the economy can maintain or continue to grow and the plans from the current administration generate more revenue, I think we will be fine. However, if they don’t work and the debt continues to rise, it would be hard to raise rates as it could scare current owners of treasury debt as interest expense would climb dramatically, which would make it difficult to recover. This is one problem that Japan is already faced with. Their large amount of debt to GDP and the debt itself cannot keep going up forever as people will eventually become scared and begin selling their treasury bills, notes, and bonds. The average interest rate on US debt is around 3.4%, which is not too excessive and could be paid off overtime. Increasing interest rates in the future would be a problem because as debt matures, it could have to be refinanced at much higher levels than the 3.4%. I believe the best way out of this situation is to maintain the current debt but increase the GDP, which would then in the long term generate more revenue to not only service the debt but also potentially be in a spot to begin paying the debt down. Some states are thinking of putting price caps on insurance companies, bad idea! Illinois is considering a ban on insurance companies being able to increase rates because of catastrophes in other states. At first thought this sounds like a great idea, but the problem is it makes the pool of insurance much smaller and if Illinois would have a catastrophe of their own with a smaller pool to cover the losses, insurance premiums could skyrocket perhaps even double. Louisiana gave its regulator the power to reverse excessive premiums. New York and Michigan are looking at imposing reductions on insurance premiums on both homes and cars. These states need to review what happened in California when the state refused to let insurance companies increase their premiums. Many insurance companies said we will lose money if we stay so we are pulling out of California. After a while California realized their mistake and allowed double digit increases insurance premiums and the insurance companies came back. People, regulators and the government forget that in many places home prices in just a few years more than doubled, which is ironic since people loved to brag about it. The reason this is important is when thinking about insuring an asset, if your house went from $400,000 to $800,000, would it not make sense to have your insurance premium increase 100% as well? States need to think more like Utah that has 130 insurers in their market. This gives consumers the ability to shop for lower prices and in order to compete insurance companies will have to figure out how to keep their rates competitive. I also don’t believe that people in government understand how rigorous the actual analysis insurance companies do to figure out how to cover the losses is and that they still need to make a profit for their shareholders. If someone thinks profit is a bad word, just think about that the next time you look at your pension plan or the growth in your 401(k). If companies were not making profits, the value of your pension plan or 401(k) would never grow. Small business owners may not be putting your deposits into your 401(k) I was surprised to see this, but apparently there are some small businesses that deduct the money from your paycheck but then fail to make the deposit into your 401(k) account. Part of the reason could be retirement plans with less than 100 participants are exempt from an annual audit that the federal law requires. The Labor Department has retrieved almost $24 million in missing 401K loan payments and contributions over the last 10 years through 3,100 civil investigations. The agency has also recouped $14 million through 115 criminal cases involving theft of 401(k) money. What is more staggering is that on top of that, there was roughly $260 million that was voluntarily returned to employees after the companies got caught. They often said the mistake was due to confusion around the rules. A former Principal Deputy Assistant Secretary at the Labor Department’s Employee Benefits Security Administration, which regulates 401(k)'s, says when small companies are facing financial difficulties, they tend to use those deposits as a short-term loan with the intention of paying them back quickly. But unfortunately, that doesn’t always happen and in the meantime, it is possible that your 401K account is missing gains because the money is not invested. If you work for a small company, I recommend at least once a quarter looking at your 401(k) not to see how well it’s doing, but to verify that the deductions from your paycheck are actually going into your account. I would guess roughly 99% of small businesses withdraw the money and put it into your 401(k), but for those 1% that is not happening for it is something you want to be on top of and make sure the money is coming out from your paycheck and going into your 401(k) account. If you find that is not the case, I recommend stopping your 401(k) contributions as soon as possible. If it goes on too long, there are companies that just close the doors, leaving the employees with little help of getting their money back.

Inflation report likely solidifies Fed rate cut this month The September Consumer Price Index, also known as CPI, showed inflation climbed 3% year over year for both the headline and core numbers. Core CPI, which excludes food and energy, came in better than both the estimate and the previous month's reading; both stood at 3.1%. It was a surprise to get this data with the government shutdown, but since it is used as a benchmark for cost-of living adjustments in benefit checks by the Social Security Administration it was a rare economic point in an otherwise quiet period. Energy, which provided such a benefit to the headline number for many months, has started to reverse course as it climbed 2.8% compared to last year. Gasoline was a small benefit as it was down 0.5%, but energy services climbed 6.4% thanks to an increase of 5.1% for electricity and an increase of 11.7% for utility gas service. What I would look to as tariff impacted areas, has still remained quite muted considering apparel prices fell 0.1%, new vehicles were up just 0.8%, and food prices had maybe the hardest hit with an increase of 3.1%. Much of this came from food away from home, which was up 3.7%. Food at home saw a more muted increase of 2.7%. Shelter inflation remained above the headline and core numbers at 3.6%, but it is much less problematic than it was in prior periods. Another positive was owner's equivalent rent climbed 0.1% compared to the prior month, which was the smallest month over month increase since January 2021. Overall, this report likely produced enough evidence for the Fed to cut rates at this month's meeting as odds stood above 95% after the inflation announcement. The likelihood for a December cut also initially climbed to 98.5% following the report. The bank earnings from last week had some surprising undertones. Overall, the third-quarter report from the big banks showed things are pretty much going along OK. But then a couple of the big banks brought up the issue of private credit and some bankruptcies that led to write-downs. Jamie Dimon, the CEO of JPMorgan Chase, pointed out that even though he said he probably should not say it that "if you see one cockroach, there are probably more." Some smaller financial institutions like Zions Bancorp and Alliance Bancorp took a $50 million charge and $100 million charge respectively due to potentially fraudulent loans. The issue here is commercial banks have been making loans to nonfinancial depository institutions or NFDIs and I point out that this type of funding is not very transparent for investors to see what is going on behind the scenes. I was surprised to learn that these NFDIs now account for roughly 1/3 of commercial and industrial loans originated by large banks. One may think if you’re invested in AI companies, you’re safe but research has shown that even your deep pocket players of AI are funding investments with these private loans. As time passes, the more I read, the more I become concerned about what we don’t know about leverage in this economy. Risky investing behavior continues to amaze me! Many people will point out that we have missed the boat on crypto, but I continue to worry about the space long term as there is no true way to value what these cryptocurrencies are worth. While this is a major concern for our firm, I would say leverage in the space is another major risk. A big problem is the rules and regulations and ultimately the transparency in the space is not as clear as when you invest in public equities. I was blown away reading an article on CNBC by how crazy the leverage can be, and I bet most investors have no clue about it. While there are ways to leverage crypto in the US, the offshore market is where things get wild! Offshore, decentralized exchanges Hyperliquid offer maximum leverage of 40-times for bitcoin and 25-times for ether and Binance Labs-linked Aster offers as much as 100x leverage, depending on the token. Leverage is so dangerous because if a decline comes and investors need to unwind a position it can create a cascade of selling that leads to massive losses. It is not just the crypto market where people are gambling though. We saw a return to meme craziness with Beyond Meat producing massive gains of 128% Monday and 146% Tuesday. On Wednesday, the stock at one point produced another triple-digit intraday gain, but it ended up closing down 1% on the day. I also saw a nuclear power development company by the name of Oklo have a sizeable pullback after the Financial Times noted the 500% advance in 2025 and $20 billion market value has come despite “no revenues, no license to operate reactors and no binding contracts to supply power.” These are examples of pure gambling and examples like these typically come during frothy times before reality hits and big pullback comes. Financial Planning: The real cost of financial mistakes When it comes to financial wellbeing, avoiding mistakes can be even more powerful than chasing great decisions. Too often, people lose ground not from lack of opportunity, but from unforced errors. Drawing retirement income without tax strategy can quietly cost thousands in extra taxes or Medicare premiums. Holding too much cash or being overly aggressive both expose you to risk, one to inflation, the other to unrecoverable losses. Maintaining investing discipline sounds simple but emotional reactions like selling when markets fall or chasing what’s hot can destroy more wealth than poor returns ever could. Many homeowners also miss out by not structuring their mortgage correctly resulting in more short-term fees, long-term interest, and missed investment returns. The key isn’t perfection; it’s recognizing that protecting yourself from big mistakes is often the best investment you can make. When making a financial decision, do your best to get your information and advice from accurate and unbiased sources so you can fully understand the impact of the decision. What signals you should watch if you are holding gold. Wouldn’t it be nice if there was a flashing red light that came across your phone saying this is the peak for gold and now is the time to get out. Obviously, that never happens on any investment so investors have to watch for signs that could cause the investment to decline. There are many signs that could arise, and it might be one or a few of them that could cause gold to turn and begin dropping. One area that could bring more stability is President Trump has been trying and trying to get a peace deal between Russia and Ukraine. I know that he is meeting again, I believe in a couple of weeks and if peace is reached with the Russian and Ukraine, it could be a negative for gold. Another thing that could derail gold from its increasing value is for the first time in 45 years silver hit a record high. Many times, investors of gold will buy silver as well and they may decide rather than buying more gold to diversify they will buy silver instead since they have so much gold already. This could hurt the demand for gold, which could stall the rally. Higher oil prices can also take away gold demand. Currently there seems to be a glut of oil on the market, but the Middle East is never a stable area of the world and any disruption there could cause oil to turn around and climb 10 to 20%. Currencies are currently weak and if we were to start seeing currencies like the yen or the dollar start to get stronger along with higher interest rates, this would also not be good for gold. Placing a value on an ounce of gold is difficult to say the least. So, it does make it hard to value, but hopefully these points we have laid out assist you in trying to attach some value to the price of gold. Gen Z is turning their back on buying a home and investing more into stocks. This is good news and bad news at the same time. It is nice to see younger investors have interest in stocks, but they seem to not understand the risk they’re taking. Young investors have only seen stocks average around 14% per year and believe that will happen over the next 40 to 50 years. Since they have been priced out of the housing market, they feel they might as well invest their money, which is wise, but I worry that when we have a long downturn, which will happen someday, these young investors will sell their stocks at a low price and have nothing to fall back on since they don’t own a home. The home ownership rate for Gen Z, which are those between 13 and 28 years old, is just 16%. This is on the low side compared to history. A study from JPMorgan Chase showed in the last ten years, 25-year-olds with investment accounts has risen from 6% in 2015 to now 37%. I’m all for investing in equities if people understand how to invest properly and not gamble. I always love the stories about how somebody bought a house back in the 1970s, they’re now up 1500%. Which means a $25,000 house is not worth $375,000, what could be better? How about if you had your money invested in stocks, you would be up over 6000% and that same $25,000 would be worth $1.5 million, which is four times as much. Just imagine if you put those stocks in a 401(k) and received a tax deduction, your employer matched some of your deposits and it grew tax deferred, wow. The problem is they all want to buy the next hot tech company and make 1000% over the next couple years, rather than focusing on the long term. Unfortunately, that is a formula that will fail for many of the young investors, leaving them without a home and a small amount of investment savings. Lays potato chips will become healthier Because of the campaign to make America healthy again that has gained traction in Washington and with consumers, artificial colors and seed oils are becoming a thing of the past. Lays potato chips are a top selling brand and have been around for 80 years, but because of the switch to healthier foods, the potato chips are switching to olive oil or avocado oil from seed and corn oils. The new chips will be easy to recognize because Lays, which is owned by PepsiCo, is changing the packaging from that shiny crinkly bag we have become so used to, to a heavier matte finish displaying potatoes and chips. With consumers buying less snacks and their preferences changing faster than anyone expected, Pepsi had to change course. It’s surprising that back in 2021 research revealed that 42% of people didn’t know that Lays chips were made out of real potatoes and Pepsi will need to do a better job with their messaging so consumers know what they are actually eating. Having more natural ingredients will be a challenge for the company because colors that come from plants, vegetables, or other natural products don’t behave the same as artificial ones and are more sensitive to light and temperature. The shelf life of potato chips with natural ingredients may also be shorter, which could be a problem for PepsiCo. Sales of potato chips increased dramatically during the pandemic and PepsiCo increased prices substantially during that timeframe. To get consumers to try the new improved healthier chips, the company might need to lower prices to bring consumers back. I personally can’t wait to try the new chips. I hope that they’ve also reduced the sodium content as well. The government thinks it’s OK for some fees in your investments to be hidden Your first reaction to that may be that there’s no way that could be possible. Why would the government allow investment funds to hide their fee? I can’t give an answer why, but a bill that was recently passed by the House and is now waiting for approval from the Senate would authorize portfolios to skip reporting expenses of certain funds they may invest in. I read this stuff and I can hardly believe it, but what they are trying to allow is if a fund owns BDC's, which are Business Development companies, which have very high expenses and can range anywhere from 1% to 5%, Congress is saying it’s OK not to disclose those expenses. BDC's are very high-risk investments but over the last five years their assets have grown from $127 billion to over $450 billion. What is concerning for me is if this does pass in the Senate, will it also be ok to hide fees for private equity, venture capital, private debt, and other alternative vehicles that would want the same treatment as BDC’s. I’m not a big believer in big government, but I do believe that the government should have rules and regulations for investors like they have rules for speed limits on highways. With more young people renting, the furniture market is changing Furniture stores like Ethan Allen and RH do well when people buy new homes. New homeowners will generally have to fill entire rooms and change many things in the house to personalize to the way they like. But now with the price of homes becoming nearly unaffordable, many young people are shopping differently to make their long-term rentals feel comfortable and personalized. When I’m talking about young people, I’m not talking about those just in their early 20s because according to the National Association of Realtors, the average age of the first-time homebuyer in 2024 climbed to 38 years old. So, until home prices become affordable again, which may be a while, some major furniture stores will probably suffer. Those that serve renters such as Wayfair and Williams Sonoma will probably continue to do well though. Renters are generally more practical about shopping for their apartments and in many cases will buy single items at lower prices from different vendors. However, don’t think that means they’re spending only $10-$15. Since they know they will be in that rental for a while, they are still spending sometimes thousands of dollars to buy multiuse products like folding tables and pullout couches with built-in storage. Business has always fascinated me following consumer trends, this is the new trend for younger people as they try and make these long-term rental homes and apartments a place they are proud of. This trend will change someday, but I believe it is probably down the road at least a few years. Are the best days for packaged food companies over? With the diet drugs, and the campaign to "Make America Healthy Again" from RFK, your packaged food companies are struggling. They’re also fighting inflation and tariffs, which is making the environment even more challenging. But consumers, whether they are high or low income, if they like a certain product, they’ll pay a premium for it even if it is not the cheapest thing on the shelf. One may think the best thing for these companies is to really become healthy fresh food companies, but they may be able to have some other options that are healthier than before. What they need to do as time passes is to get creative at what they’re good at and not try to be something they're not. There are many companies in this category like Mondelez, Hershey’s, Kraft Heinz and Conagra. Some of these companies have seen their stocks drop 30, 40 or even as much as 50%. Even with that drop many of their dividends have remained the same, which means the yield for that dividend is much higher. I think for long-term investors there may be some opportunities here as the companies become more creative and the tariffs just become part of doing business. Also, these companies will change their products somewhat to meet consumers expectations, and eventually some consumers will still want to have some good cookies or a hotdog as a treat.