SMART INVESTING NEWSLETTER
Tariffs Push Back, 401(k) Investors, Contradicting Inflation Readings, Credit Score Boost Before a Mortgage, Car Technology, Tesla, AI, Quantum Computing, Bootlegging Eggs & US Dollar Weakening
Brent Wilsey • March 28, 2025
US retailers push back against tariffs
I believe it is good news retailers are not pushing back against the US, but against countries where they buy products from. Companies like Home Depot, Walmart and Target are pushing back against production coming out of China. If a tariff is 10% the companies are pushing for the country to pick up the total cost and when tariffs jumped to 20%, they are getting push back on reducing costs by that amount but still having China producers pick up at least half. The companies are also looking at their profit margins and what they are doing is not increasing prices across the board, but perhaps raising prices on other items that are in higher demand and only raising the price slightly on products with less demand. The companies are also absorbing some of the cost themselves as opposed to passing the entire cost onto the consumer. In the end, the producer, the company, and the consumer will all absorb part of these tariffs and there may not be that much of an increase in price for many of these products. Unfortunately, I’m sure the regular media will find some products that went up dramatically and only discuss those. The big companies are also pushing for alternative places to produce products if China will not negotiate any reduction at all. Some companies are looking at producing the products here in the United States, which would be a win all the way around and I believe it would be the best thing for the United States.
Are 401(k) investors starting to panic?
A 401(k) is designed to be held for many years and should not be traded based on short term news. Unfortunately, the past month has seen the most trading activity in almost 5 years for 401(k)s. Individual investors added over $30 billion to money market funds in the first week of March alone. That type of activity in money markets has not been seen in the past year. In the first couple weeks of March, trading in 401(k)s was 400% above the normal level as people watched the market decline and they let their emotions take over as they headed to money markets. This is a huge mistake! Decision making seems to be politically driven. If people like the current administration, investors are seeing it as a buying opportunity. On the other hand, if they hate the new administration investors are either looking at going to cash or maybe shifting their investments internationally. Your retirement account is for the rest of your life and an investor should not be making decisions based on the current administration’s actions considering it’s such a small blip in the timeline of 30, 40 maybe 50 years of investing. Investors should go back to the basics and realize they are investing into American companies based on their earnings and what they are paying for those earnings. The country and the economy will always ebb and flow, but to try and figure out the best time to sell and buy has always been a losing game in the long term. If you have in your 401(k) good quality investments that are not overpriced, don’t worry about the short-term movements on a month-to-month basis. You should think about your investment plan not just year to year, but 5, 10, 15 years down the road, maybe even longer.
Inflation readings and consumer expectations are telling two different stories
The Fed’s preferred measure of inflation known as the core PCE showed an increase of 2.8% in the month of February, which was above the expectation of 2.7% and last month’s reading of 2.7%. Headline PCE includes the volatile categories of food and energy and showed an increase of 2.5%, which was in line with expectations and matched January’s reading. While the core PCE was a little hot, I don’t believe that rate of inflation is overly problematic. It would likely not be enough to get the Federal Reserve to lower rates, but it also would not be concerning enough for them to even consider increasing rates. Their wait and see approach is likely still in place and I’m optimistic, even with upcoming tariffs, there should be room to lower rates as we procced through the rest of 2025. Many consumers on the other hand seem very concerned about inflation with the final reading of the University of Michigan’s consumer sentiment survey showing expectations for inflation at a 5% rate one year from now and over a five-year horizon, the outlook now is for 4.1%. This marked the first time since February 1993 the reading was above 4%. I do believe these respondents are way off on their forecast and would be shocked if it came to fruition as that would be more than double the Fed’s 2% target. We talked about why we don’t like this survey in the past, but in case you missed it, the survey is tiny. It appears the survey typically interviews around 600 households each month for the preliminary report and around 800 for the final report. Considering there are over 130 million households in the US, I just don’t see the survey as a strong indicator.
How to Boost Your Credit Score Before Applying for a Mortgage
Your credit score plays a crucial role in qualifying for a mortgage and determining the interest rate you'll receive. In recent years, lenders have introduced additional credit score tiers when setting interest rates. Previously, a score above 740 was considered excellent, qualifying borrowers for the best rates. Now, two higher tiers exist for scores above 760 and 780, offering even better terms. While making on-time payments is essential for maintaining a strong credit score, it may not be enough to reach or stay above the 760 or 780 thresholds. One key factor influencing your score is credit utilization—the percentage of available credit you're using at any given time. It’s generally recommended to keep this below 30% (e.g., if your credit limit is $10,000, keep your balance under $3,000). However, before applying for a mortgage, paying off all credit cards completely and reducing your utilization to 0% can boost your credit score by 10 to 30 points—potentially elevating you into a better rate tier. To maximize this benefit, don’t just pay your statement balance by the due date (which you should do anyway). Instead, pay your total outstanding balance down to $0 before your statement period closes. Most credit car6d issuers report your statement balance to the credit bureaus, which determines your utilization rate. After paying off your cards, maintain a $0 balance for at least a couple of weeks to ensure your updated score is reflected. During this time, use cash or a debit card for purchases to prevent new charges from affecting your utilization. This simple strategy could save you thousands of dollars on your next mortgage or refinance by securing a lower interest rate.
Has car technology become too difficult?
I remember the days when it was so exciting to get a new car. The smell of the car, the feeling you got driving the car, looking at the car, it was such a joy! But today, there is so much technology you may own a car for two or three years and still not understand everything the car does. Some of the items that drivers like are wireless phone charging pads, heated and ventilated seats, rain sensor wipers, and one I have not seen, which is built in vacuum cleaners. On the other side, what gets people aggravated is a touchscreen that can take multiple taps before getting what you need making you wish for the old twist of a knob or press of a button. The touch screens are very dangerous when you’re driving because sometimes, you’re focusing on the screen and taking your eyes off the road. A couple of tips, your base model without all the bells and whistles can retain more of its value at the end of a lease because the high-tech is less valuable in the used car market. Be aware if you get into a fender bender or a cracked windshield as all those cameras and sensors that are built in will add to the cost of your insurance because repairs are much more expensive than just replacing an old bumper or windshield that did not have technology.
Don’t you wish you shorted Tesla stock on December 17th?
Obviously, it’s always easier to look back after the game and say you should’ve done this or should’ve done that, but whether you’re playing a basketball game or investing in stocks you still have those feelings after the fact. Had you known and shorted Tesla stock on December 17th, which was its closing high, you would have done really well considering the shares have lost about $700 billion in value since then and short sellers have made profits of $16 billion. While it’s easy to sit here and see that should have been done, we don’t recommend shorting because it has an unlimited risk as no one knows how high the stock will go. Will Tesla drop further from current levels? It is possible because the stock is not cheap but on the other side of the coin, Elon Musk always seems to pull a rabbit out of the hat to help the stock reverse course and go back up. It is possible there are no more rabbits left in the hat, but there is the potential for more news about robotaxis and self-driving Tesla cars. I still would feel uncomfortable investing in any company with a P/E ratio over 100, but if you think the stock will drop further, you can short the shares. This means you borrow the shares today and pay for them at hopefully a lower price down the road, which is where you make your profit. If it sounds too risky or too confusing, we agree with you and no matter how exciting or how much money you think you could make off shorting we recommend you stay on the sidelines.
AI does not benefit all companies
AI, which is also known as artificial intelligence, may not be the best thing for every company. I say that because while it may give their stock or the company a short-term boost, it may cost them more money in the long run which could hurt the business. Remember AI uses a lot of data to produce various responses and if the company has not been collecting data over the past few years, there is no way to train AI models to do things more efficiently. If the company hasn’t collected that data and now, they want to do it, it would take a lot of time and money to go back and re-create quality data to be used by an algorithm for accuracy. It should also be noted because of the short-term history of AI, many management teams lack experience or knowledge about building an in-depth AI strategy. This could cause more expenses from trial and error by the management teams and executives who make up an AI strategy that is perhaps not only misguided, but may not be able to be executed and benefit the company. This could waste millions maybe billions of dollars depending on the size of the company. If the company you’re investing in does not have an AI strategy, don’t be too concerned as it should come eventually. For now it may be best to stay the course with what has worked well in the past and slowly build out a great AI strategy for the long term.
Understanding quantum computing
While it may seem like it, quantum computing did not just come out last year. It’s actually been around for about 25 years. In the year 2000, Microsoft brought on a physics professor named Chetan Nayak to build the first quantum computer. Microsoft is not alone in this endeavor as many of the major technology companies are trying to build the first practical quantum computer. The reason why quantum computers are worth all the expense and time is they expect big leaps forward in areas such as medicine, which should bring in billions of dollars, maybe hundreds of billions of dollars to the first company that develops a well-functioning quantum computer. Quantum computing will be much faster because it won’t use classical bits that are either a zero or one. Quantum computing uses a bit known as qubits that can exist in both states at the same time. This is similar to a transmission in a Lamborghini that can already be in the next gear while it’s still in the current gear. This means quantum computers could perform certain calculations at the same time and exponentially faster. The future while it can be exciting it can also be quite scary. Quantum computing, AI, and robotics could change life for the good or the bad for many people in the US and around the world. I’m sure it was very exciting but concerning during the industrial revolution that began around 1760 in Great Britain and lasted about 60 years before the next industrial revolution came in the early 1900s. The rapid changes we are seeing reminds me of the old saying that the only thing that stays the same is change.
There’s a new hobby, bootlegging eggs
Back in the early 1930s during prohibition, bootlegging alcohol was a big thing. Bootlegging is the illegal manufacturing, distribution or sale of a product. Because of the high cost of eggs, people have started to cross the border in border towns like San Diego from Mexico bootlegging eggs for sometimes less than two dollars a dozen, which is a huge savings from grade A large eggs that average $5.90 in the US. It sounds like a great idea, but it is illegal and if you get caught, you are an egg smuggler. Besides looking for drugs or other illegal substances, eggs are now something border agents are searching for. Border officials say they have seen a 36% increase in egg smugglers. People that get caught say they were unaware that it was illegal to transport eggs across the border, many people don’t know there are many things that one cannot bring across the border. If you get caught smuggling eggs, you may have to pay a $300 fine and they will confiscate the eggs and destroy them.
Why is the US dollar weakening?
While interest rates on the long end have pulled back somewhat, which can cause some weakness in the dollar I still find it rather strange that the US dollar is declining against the euro. I say that because our economy is still rather strong. When I was reading the Wall Street Journal last week, I noticed an article titled “The dollar is tested by uncertainty” but below that article was one titled “Tariff threat jolts Europe’s wine industry”. It is pretty certain that the landscape of tariffs for Europe will be changing going forward, it will hurt their economy more than ours and that should take away the gain in their currency. I believe it is very unlikely that there’ll be any sharp decline for the US dollar in the near term. One area of strength for Europe will be their move to increase military spending. This should boost their economy and also maybe benefit ours if they purchase some military equipment from our large defense contractors. It is also important to note that the current administration has talked about having a weaker dollar because that would make our exports less expensive for the world to buy and it would make the world’s products more expensive for our consumers. In other words, it would give the US products a better competitive landscape in the world economy.
Will gold hit $5000 an ounce? With all the excitement surrounding the run up in gold this year it seems to be an easy target. However, as investors pour money into precious metals, such as gold, people have to remember that President Trump has pledged to stimulate the economy through tax cuts. The run up in gold has been due to investors that worry about the future of the dollar and other major currencies. Wall Street has labeled this the debasement trade. The dollar did decline in the first six months of 2025, but it has since stabilized. September saw a record $33 billion invested in exchange traded funds tied to physical gold. The excitement continues for gold buyers, but it is important to remember that normally during uncertain times investors will find safety in dollar denominated assets like treasuries that can push-up the dollar's value. The danger for gold investors is if the narrative shifts, gold could have a major decline. If you look back 165 years to 1860, you will see that gold has other multi-year runs but has consistently had a major bust after those run ups. Investors in gold should also look at what happened in 1979 with a major rally in gold but 3 1/2 years later all the gains accumulated had disappeared. Investors may want to take some of their profits because the higher gold climbs, the bigger the fall could be. In my view, $5000 per ounce for gold is a big gamble. Great news, more working-class Americans than ever before are in the stock market. That does sound like good news, but then when you dig a little deeper, it is rather scary! 54% of Americans with incomes between $30,000 and $80,000 have taxable investment accounts. There are several reasons for this like no more commissions for trading stocks, the excitement of investing on certain social media sites, and it’s so easy to trade stocks now as anyone who has a cell phone can pretty much trade stocks instantaneously. I remember an old saying from years ago that when your barber starts talking to you about stock tips that is the peak of the market. This seems to be where we're at today and unfortunately, these investors have only been investing for probably the last five years and have not experienced any long, lasting declines or turmoil in the markets. Many of these investors are simply trading stocks and don’t understand the fundamentals of investing for the long-term. Some of them have experienced very good returns, not because of any specialized knowledge but because of the luck of picking some highflyers that have done well for them in the short term. In many cases, they do not believe it’s luck and they feel they now know what they’re doing. These investors probably have no idea what the earnings or debt is for the stocks they are trading. They just see that they continue to make money as they buy and sell. It is a shame because many of them are young investors from 25 to 45 years old and a big mistake could cost them years of compounding. Over my 40+ years of working in the investment industry I’ve heard the same story many times, and it never turns out well. When you try to help them understand how things really work in the investment world, they justify what they’re doing with such statements as “this time it is different”. I wish these young investors would understand that investing in stocks and earning a 10% annual return per year is very good. I’m sure many who read this or hear the words I speak think I have no clue what they’re doing, and they have a specialized technique that can’t fail. When the day comes, which it will, these investors will be left with a small amount of capital and not much time left to invest because they are now older and closer to retirement. Only then will they realize that their risky trading strategy proved to be nothing more than gambling! Lower end consumers are having a hard time making their car payments With the rising cost of cars and higher interest rates, lower end consumers are falling behind on their car payments, and the numbers are starting to get a little scary. 14% of new cars that were sold to people had a credit score under 650, this is the highest percent going back to 2016. People seem to be getting in over their head as subprime loans that are 60 days or more overdue are at a record 6% this year. The number of repossessed vehicles is also climbing to a record not seen in 16 years to an estimated 17.3 million repossessed vehicles. Some consumers overbought a car probably due to a good salesperson and that new car smell that sometimes is hard to resist. Some consumers are starting to regret their new car purchase considering the average car payment is around $750 and 20% of loans and new leases are over $1000 a month. We will continue to watch this indicator along with others to verify that we are only seeing a slowdown of growth in the economy, rather than a declining economy. It's important to remember to be careful where you invest. It appears that some of these subprime loans for cars ended up in private loan deals that were sold as low risk because of no market fluctuation. The problem here is we are starting to see write-downs from publicly traded banks for bad loans and with private credit you might not know there is a problem until it's too late since they don't have to disclose the same info as these publicly traded companies. Financial Planning: Upgrade Your Emergency Fund to an Emergency Plan When paychecks stop, as many federal employees are currently experiencing, having an emergency plan with multiple layers of liquidity is essential. The first line of defense is your credit card. When used strategically, it can buy you up to two months of interest-free spending since no interest accrues until after the statement due date. However, you don’t want to carry a balance beyond that point. Next comes cash reserves, ideally kept in a high-yield Treasury bill money market fund, where your money earns competitive interest while avoiding state tax. Beyond cash, having credit lines such as a HELOC provides deeper, low-cost access to capital without forcing you to liquidate investments. These can take a couple of months to establish, and since they generally don’t have origination fees, it’s best to set them up before you need them. After that, investment accounts can serve as a secondary safety net. Taxable accounts may generate capital gains, but withdrawals are unrestricted. Roth IRA contributions can be withdrawn tax- and penalty-free at any age, and HSA accounts can issue reimbursements for qualified medical expenses incurred in prior years. In a true last-resort scenario, you can even access retirement funds through a 60-day rollover, temporarily using the cash before redepositing it. By layering these tools, from credit to cash to credit lines to investments, you build a structured, flexible liquidity plan that can withstand extended income disruptions and operate far more efficiently than simply keeping 12 months of expenses in a savings account. Not a good time to be a Qualcomm shareholder Qualcomm, a San Diego based business, has made many people millionaires over the years. However, what made them successful years ago is now one of their biggest problems, and that is their relationship with China. In fiscal year 2024, almost 50% of Qualcomm's revenue came from China. About six months ago, we came very close to investing a large portion of our portfolio into Qualcomm, but decided against it for a few reasons, one of which was the relationship with China. On Friday, Chinese regulators said they launched an investigation into Qualcomm for perhaps violating the country's anti-monopoly law. In 2024, Qualcomm tried to acquire a company called Autotalks, which was based in Israel and dealt with the communication between cars and their surroundings, but ultimately gave up on the deal. In June of this year, the company went ahead and acquired that auto chip designer. Now the company is facing the investigation from China. We have written many times that we are concerned on any tariff deals with China because they are very slow negotiators and very hard as well. I would love to tell you this is a buying opportunity for Qualcomm, but there are just too many concerns in the current environment that could cause Qualcomm to fall further than the 7% decline experienced last Friday. I will not feel comfortable until China and the United States have a trade deal signed in writing. Another sign of a slowing economy is the number of people quitting their jobs It’s a pretty obvious indicator because if there’s a lot of jobs out there for higher pay, people are more willing to quit their job to obtain a higher paying job somewhere else. When going back about 20 years you will see the number of people quitting their jobs declined rapidly during the Great Recession as the rate fell to under 1.5%. It fell again in 2020 to about 1.7% during the pandemic, but after Covid the percentage of people quitting their jobs increased substantially to nearly 3.5%. The labor market changed dramatically during this time period in part to all the stimulus and loose money that was floating around in the economy from the government. As the economy has started to tighten, the most recent report released from the federal government before the shutdown shows that the percentage of workers quitting their jobs in the private sector has fallen back down to 2.1%. Based on the data, we are seeing a slowdown in the economy but I'm still not expecting a major recession. We will continue to watch other important data and keep you informed of how the economy is doing. AI does consume a lot of energy, but it can also reduce energy consumption as well. There’s no secret AI is hogging a lot of energy with bigger demand needed in the future. On the positive side, it can also make transportation and other uses of energy more efficient to help save energy. It is estimated ground freight trucks using AI dynamic route optimization could cut emissions by 10 to 15%. According to Texas A&M University, AI could also analyze traffic in real time and quickly come up with better routes to reduce stop and go driving which leads to sitting in traffic and burning fuel. It is estimated that 3.3 billion gallons of gasoline and diesel fuel in 2022 was consumed, that is over 215,000 barrels a day of petroleum. Commercial buildings could also benefit from AI with the use of sensors that can track occupancy in real time and shut down some elevator banks and turn off lights that aren’t needed as the number of people declines throughout the day. Heating ventilation and air conditioning systems with the use of AI could receive forecasts on heat waves and pre-cool buildings ahead of the heatwave, which would also lower energy use. Buildings could also be equipped with smart window shading that could adjust to sun angles and avoid glare and reduce heat coming from the windows. I doubt these energy saving ideas will completely offset the high demand of energy by AI data centers, but it could at least help somewhat. Will Tesla ever be able to use their self-driving cars in the US? I ask this question because it seems like they are so close but yet so far away when it comes to having their Full Self Driving system operate with no drivers on the road. It seems that even though they claim 2.9 million vehicles are currently equipped with the FSD System and they have millions of miles of test data, the National Highway Traffic Safety Administration, known as NHTSA, keeps finding problems with the system. NHTSA has found some concerns that could cause injuries. One such incident was when a car approached an intersection with a red light, it drove right through it without stopping. There’s also questions about how the FSD system works in reduced visibility conditions such as heavy rain or fog. Questions have also come up on Tesla‘s being able to be operated remotely. What is interesting about NHTSA is they do not advise when new products come out, instead it is only after they have been road tested do they issue a recall if it is not performing well. It is then up to the car manufacturer to voluntarily fix the problem. If they do not correct the problem, then NHTSA launches an investigation which could lead to court battles and years before a solution is found. There is no doubt in my mind that Tesla's will eventually be seen on the road driving themselves, but the big question is when? The excitement of drinking wine is going sour Over the last few years wine consumption has been falling. California is starting to feel the pinch since the state produces roughly 80% of wine shipped in America. Since 2021, cases of wine shipments from California to the US are down 15%. There are several reasons for this, but a large one is the percentage of US adults who drink alcohol is now 54% and that’s the lowest in nearly 90 years according to a Gallup poll. People are eating and drinking less for health reasons and due to the diet drugs people just don’t eat or drink as much they used to. Wine sales recovered and grew in 2004 after the popular movie called Sideways about Pinot Noir and then again during the pandemic wine sales spiked. Good news for wine consumers is with the current glut of wine on the market; it is causing prices to fall. There are currently wine producers in Northern California that are ripping out vines to reduce production because they can’t sell their full harvest of grapes. Adding to the oversupply problem was the great weather this summer for grapes on the vine as wine makers had one of the biggest producing seasons of grapes. Big companies like Constellation Brands, which sells roughly $900 million of wine, have cut back on their purchases of grapes because their warehouses are filled with it. Adding to the problem is the wine business in Canada. Even though the tariffs of 25% for US wine going to Canada have been lifted, there are certain provinces like Ontario and Nova Scotia that still ban the sale of US wine. This has all culminated into a difficult time period for wine producers in the US. Will the new electric Ferrari be able to carry on the tradition? To answer that question quickly, I’m going to say no based on how poorly EVs have been accepted by Porsche consumers. If you want a cheap Porsche, go to the dealership and you can pick up an electric Porsche relatively cheap. Ferrari thinks they can convince people who can afford a $300,000 car that their electric vehicle will have the same prestige as their internal combustion engine. It has taken Ferrari years and hundreds of millions of dollars to come up with a battery powered sports car, including building a factory just to build the electric vehicles. The new Ferrari is called Elettrica, it goes 0 to 60 mph in just under 2.5 seconds and has a top speed of 193 mph. It is estimated that a single charge will last about 329 miles. Don’t start searching the Internet for what one looks like, they have kept the model looks under wraps and will not release images until spring of next year with delivery starting later in 2026. Over the past year, the stock, which trades under the ticker RACE, has declined by about 12% but over the years it has done very well. I do worry that going forward the company is reaching for growth considering over the next five years the company is expected to release 20 new models, which I think will hurt the exclusivity of a Ferrari and also create confusion around what Ferrari to get. Apparently, the company may feel this way as well, since they have reduced their annual revenue growth for the next five years to only 5%, which is below the expectations of the analysts. Time will tell, but sometimes a company has to realize what they’re good at and known for and not try to keep up with the most recent hot items like electric vehicles.
Do stock dividends give you better returns? With the S&P 500 currently paying a dividend of only 1.1%, which is the lowest in about 25 years, people may wonder if they should even care about dividends. In 2024, dividends were only 36% of profits, which was 20 points below the average going back nearly 100 years. Looking at return figures, if you go back 65 years, reinvested dividends did account for roughly 85% of the S&P 500’s total return. With the market at all-time high valuations, investors should not give up on investing in companies that pay good dividends, but they also should do plenty of research to verify the dividend is strong and will last. And never ever buy a company just because it pays a dividend! When looking for companies that pay dividends, look for stocks with new or increasing dividends because since 1973 they returned on average 10.2% versus 6.8% for those companies that did not increase their dividend. Over the same timeframe, those stocks not paying dividends had a return of only 4.3%. Remember when looking at investing in dividend stocks to check that the company has a good amount of cash flow, a reasonable payout ratio to pay that dividend and a strong balance sheet that does not have excessive debt and a good amount of cash for liquidity. How will the US government shutdown affect you and the economy? Over the last 50 years, the government has shutdown 21 times with the longest being December 2018 when it lasted 34 days. The shutdown will affect mostly those consumers who are traveling with experts from the travel industry saying it will lose about one billion dollars a week. Think about all the national parks that will be closed and the frustrations at the airports will probably curtail travelers' enthusiasm for traveling. Even with all the negative headlines, stocks tend to do well during a government shutdown with the average three month return after the shutdown at 9.5% and one year later at 22.4%. I would not encourage people to think they will get a 22% return this time around because of the valuation on the stock market these days. Unfortunately, bonds don’t do as well with the three-month return being a -37% and a one-year return on bonds being a -10.7%. What this means is during a government shutdown generally long-term interest rates increase as bonds fall, and this would be detrimental to the housing market as we would then see mortgage rates increase if history repeats itself. On the shorter end of the yield curve, the Federal Reserve who sets short term interest rates will be handicapped because they will not be getting economic information such as the labor report and other government data to make their decision for interest rates cuts. It is possible if the shutdown is still ongoing at the end of October, the Federal Reserve may not cut interest rates because of the lack of data. The million-dollar question of how long it will last is a difficult one to answer as no one knows for sure but it appears since both sides are so far apart, they will not come to the negotiating table and until some negativity starts showing up in the economy there is not much pressure on the politicians. That means this shutdown could be one for the record books and could perhaps last a month or two! Public debt looks strong, but private debt not so much Public debt, which are bonds that trade on the public market, is looking rather strong based on the small yield margin between investment grade and speculative grade securities compared with the risk-free government debt. In September, $207 billion of corporate bonds were issued and that’s the fifth highest monthly amount on record. Year to date returns for those holding public corporate bonds stands between 7 to 8%. Private debt on the other hand is starting to have issues as companies such as Tricolor Holdings, which is a lender to individuals with low credit ratings, filed for chapter 7 bankruptcy in September. The debt holders may get something, but when a company files chapter 7 bankruptcy, the government receives their money first along with the attorneys and then what is left over if any, goes to the debt holders then equity holders. Also, last month an auto parts company called First Brands filed for chapter 11 bankruptcy, they had $6 billion of leveraged loans outstanding. This could be the beginning of an avalanche of defaults in private credit as I believe if the economy continues to slow down, these products will have some major problems. Hopefully you weren't sold anything that deals with private debt, equity or real estate by your broker. Financial Planning: Updated Tax Brackets for 2026 For 2025, married couples filing jointly will see their standard deduction rise from $31,500 to $32,200 with an additional $1,650 per spouse for those age 65 or older and a new $6,000 deduction per spouse for households with adjusted gross income (AGI) under $150,000, bringing the total possible standard deduction to $47,500. The 12% federal tax bracket will now apply to taxable income up to $100,800 (up from $96,950), and the 0% capital gains and qualified dividend threshold will increase to $98,900 (from $96,700). When calculating tax liability, AGI minus the standard deduction equals taxable income. For retirees, this means the $150,000 AGI level is an especially important threshold to stay under. It unlocks the extra $6,000 standard deduction, keeps all ordinary income in the 10% and 12% brackets, and ensures that capital gains and dividend income remain tax-free. These inflation adjustments give married couples, especially retirees and middle-income earners, more room to keep their income in lower tax brackets and reduce their overall taxable income going into 2026. Why would any company set up manufacturing in the country of India? I say that because their rules are ridiculous when it comes to running corporations. India's government is a Sovereign Socialist Secular Democratic Republic. The country is having problems with manufacturing because of how difficult it is for a company to leave India if the manufacturing plant is not profitable. It is estimated in India it takes an average of 4.3 years to completely close a factory because of the control of the government. There are laws from the government that if a company wants to shut their factory, the state government can refer it and dispute the closing of the factory at an industrial tribunal. In other words, you can’t just close your factory and go somewhere else unless the government says you can. The unions in India also have additional ridiculous requirements, which General Motors experienced when they tried to close their factory. The union insisted they either guarantee a new owner that would provide jobs for all of the workers or a severance package that paid out full-time salaries and medical benefits until retirement. I thought things had gotten bad here in the U.S. because of the push to socialism but take a look at India and one can see how bad socialism can be to a country. I doubt the growth in India can match the growth of the United States long term as I believe capitalism is a much better system. The clock is ticking on home energy tax credits Because of the One Big Beautiful Bill that was passed, at the end of the year many home energy tax credits will be gone. So, if you’re thinking of appliances that save energy or heat pumps or solar systems you need to act fast. The big question you should ask here, is it worth it? If you’re looking at adding a new natural gas, propane or oil furnace, hot water boiler, or air conditioning units, if they meet certain energy efficient standards you could get a $600 tax credit. Heat pumps are supposed to be pretty efficient, and you could get a tax credit up to the limit of $3200, which is around 30% of the cost of the unit and installation. Does your electrical panel look rather scary, and are you concerned about a fire? Here you can also get a $600 credit with an electric panel costing somewhere between $2000-$4000. If you’re not sure what is the best for your home, there are certified contractors or auditors that will assess your appliances, heating and cooling systems, insulation, lighting, and pretty much anything else that could save you money with tax credits. There is a cost for the audit that generally ranges from $300-$500, but you can receive a tax credit of $150 which comes from the energy efficient home improvement credit. Are you being too cheap? When we are younger, we are taught to be careful with our money, watch our pennies and don’t overspend. But as you grow your net worth over time, there may be certain levels where you can loosen up a little bit. I’m not talking about going crazy and that you should go on a spending spree, but using rules of thumb that maybe prove you don’t have to watch every penny. Research from a professor at the University of Michigan’s Ross School of Business found 15 to 25% of people have trouble spending money. Unfortunately, the opposite holds true as well and about 15 to 25% of people have no trouble spending money and they actually overspend. While that is a whole separate problem, here we’re talking about the people who have trouble spending money. The rule that has been established is called the 0.01% rule. What it states is that you should not fret over spending something that cost 0.01% of your net worth. If you have a $1 million net worth exclusive of your home and you’re debating about buying something that would cost up to $100 that would make you happy, don’t worry about it spend the hundred dollars. I will caution people this does not mean you do this every day or apply the same thought over and over again as that can add up in the long term. This concept of what I'll call realistic spending is designed to relieve some stress as you should not beat yourself up about spending an extra hundred dollars once in a while. I myself have lived with very frugal spending since I had a paper route when I was a boy and will now apply this rule going forward. I’m sure this will make my wife happier and there will be less disagreements about some purchases going forward. For young people today, financial stability comes before marriage Up until probably 20 to 30 years ago, couples got married and worked together to afford to buy a home and build a nest-egg. But with the young people of today, that has changed to where they would rather hit financial stability, advance in their careers and then get married. The current median age for a first marriage in 2024 was 30 years old for men and 29 years old for women. Going back just 17 years, a man was getting married for the first time at 28 and women at 26. During that same timeframe, there was a 9% decline in first marriages among 22- to 45-year-olds. Women over the years have improved their relative economic position while men have been pretty much staying the same. What this has done to marriages is that the man is no longer the ultimate breadwinner and therefore a woman does not need to get married just because a man makes more and he is not needed to bring home the bacon. Those with a college degree have a higher rate of getting married than those without one, but even that rate has been declining. 25 years ago, 68% of those who got married had a college degree or greater and that has only fallen to 64% today. Those with less than a college degree saw rates fall from 62% to only 53%. While there are many blue-collar jobs that pay very well, some women may not want to marry someone who does not have a college degree if they have one. I would love to get women’s comments on how they feel about this. Do you need a daily money manager? With the population getting older and more people having wealth as they hit their later years, the need for a daily money manager makes sense for many elder Americans. A daily money manager is a financial professional who provides personal financial services. The service they provide would include bill paying, reconciling checking accounts and investment statements, organizing tax documents, negotiating with creditors and even reviewing medical insurance papers. Be aware they’re not an investment advisor and should not be giving investment advice. This industry has grown rapidly over the last few years, and there are now Certified Daily Money Managers known as CDMMs. These are professionals who have advanced knowledge of the management of personal financial matters and have earned the certification through meeting the eligibility requirements along with passing an extensive exam that was developed by the American Association of Daily Money Managers. What you can expect to pay for a Daily Money Manager can range anywhere from $30-$150 per hour depending on your geographic location, the services they provide, and the CDMM‘s expertise. When looking for a daily money manager, be sure to ask for references and verify their bonding. It should also be important to understand how they’re going to bill you and when asking about a consultation, verify that it is a free consultation. Could there be a nuclear reactor on the moon in four years? It sounds ridiculous being such a short timeframe, but Sean Duffy, who is acting administrator for NASA, wants to fast track an effort to place a nuclear reactor on the moon by late 2029. We are now in a race with China and Russia, who also want to claim the moon for nuclear power before we do. Why a nuclear reactor on the moon? It’s because a moon outpost could generate new scientific and economic activities around research, mining, and even tourism. There are challenges with a nuclear reactor with a big one being keeping the reactor cool. On earth, reactors are built near bodies of water, which are used for cooling the reactor's core and can also dissipate heat into the atmosphere. On the moon there is no water or air so they will have to use large radiation panels to disperse the heat and heavy radiation shielding to protect the lunar environment and astronauts from the radiation. With private industry in the U.S. and expertise from companies like SpaceX, which is run by Elon Musk, and Blue Origin, which is run by Jeff Bezos, I think the moon is the limit. Maybe that saying is no longer applicable since the moon is not that far out of reach any longer.
Is a reduction in cardboard demand a warning sign of a slowing economy? The simple answer is yes, but it also is one of many indicators we are seeing. Cardboard is used in many items in the economy from pizza boxes to the multiple items you get delivered from online stores. The numbers show that box shipments after reaching record highs during the pandemic are now down to levels not seen since 2016. If you look at a per-person basis, the numbers are pretty staggering, as they are down over 20% from their 1999 peak. Part of this decline could be from companies like Amazon that have reduced cardboard consumption by shipping some items in paper and plastic mailers and potentially even becoming more efficient in their packaging practices, I remember seeing many times a box inside of a box. From what I can tell, I think they no longer do that, which would be a big reduction in cardboard. The price of container board has been on the rise over the years, which can cause users of cardboard to reduce their consumption as the price of corrugated sheets has risen 30% from six years ago to $945 per ton. I would not predict based on this data about cardboard that the economy is heading into a recession, but it is something definitely worth adding to the list to remember! Will the revenue from AI cover all the debt and expenses it created? AI is definitely part of the future, but has overbuilding surpassed the revenue that it can create? When one steps back and looks at the numbers they are staggering. Over the past three years, major tech firms have committed more funds towards AI data centers than it cost to build the U.S. interstate highway system that took 40 years to build. These numbers are even adjusted for inflation. In the next five years, the AI infrastructure spending will require $2 trillion in annual AI revenue. If you think that’s a lot of revenue you are correct. In 2024 the combined revenue of Amazon, Apple, Alphabet, Microsoft, Meta and Nvidia did not hit $2 trillion. It is also five times the amount of money spent globally on subscription software. Consumers have enjoyed the free use of AI, but it appears for businesses paying more than thirty dollars a month per user is the breaking point. AI executives claim the technology could add 10% to the global GDP in the years to come. With that thought they are saying the benefit comes when it can replace a large number of jobs and that the savings would be enough to pay back what they invested. My question is, if you’re replacing all these jobs, consumers will have less money to spend and probably won’t need or care about AI. There are many history lessons about bubbles that did not pay off because of the over excitement on inventions with such things as canals, electricity and railroads just to name a few. People may remember the excitement over the Internet and the building of tens of millions of miles of fiber optic cables in the ground. The amount spent was the equivalent to about one percent of the US GDP over a half a decade. The justification from the “experts” was that the Internet use was doubling every hundred days. The reality was only about 1/4 of the expectation came to fruition with traffic doubling every year. Most of the fiber cables were useless until about 10 years later thanks to video streaming. A report out of MIT said they found 95% of organizations surveyed are receiving no return on their AI product investments. In another study from the University of Chicago showed that AI chatbots had no significant impact on workers earnings, recorded hours or wages. I still believe AI will be here to stay, but the question is have the expectations gone too far? I think they have! Finally, some scrutiny on private investments from the SEC! The SEC has an investment advisory committee that was formed back 15 years ago that provides guidance to the regulator. Recently, the committee approved a set of recommendations on how to deal with the private market and protect the less sophisticated investors. The recommendations cover the key problems with private investments for investors, which include how they come up with valuations, how complex they are and that they are not a liquid investment. I thought it was also a wise move that they recommended the SEC demand better disclosures and also who can and cannot invest in private markets. I was very happy to see that they’re not just putting across the board if you have a net worth of X amount you can invest in private investments. The recommendation was based on the investor's level of investment sophistication. I’m hoping the SEC comes up with these rules quickly before more people find themselves in a private investment that they cannot get out of and perhaps lose all their money. Today would not be soon enough to pass this legislation. My recommendation is if you’re not in any type of private investments, don’t go into them! No matter how good your broker makes it sound, remember he or she is likely getting a big fat commission to put your money into these high-risk investments. Financial Planning: Keeping more of your Home Sale Proceeds Selling your primary residence can result in a substantial profit, but the IRS provides a valuable tax break to help offset that gain. Individuals can exclude up to $250,000 of capital gains ($500,000 for married couples filing jointly) if they’ve owned and lived in the home for at least two of the past five years. Be careful not to confuse this with selling an investment property, which does not qualify for the primary residence exclusion. Instead, gains from investment property sales may be deferred using a 1031 exchange, where the seller reinvests the proceeds into another investment property. By contrast, with a primary residence sale, you can use the proceeds however you like, and the gain is excluded up to the allowable limit without any reinvestment requirement. Importantly, even if your income exceeds the thresholds for the 3.8% Net Investment Income Tax (NIIT) ,$200,000 for single filers or $250,000 for joint filers, the portion of the gain excluded under this rule is not subject to NIIT. Only any gain above the $250,000/$500,000 exclusion could be subject to the tax. Most states, including California, conform to the federal exclusion, meaning they also will not tax gains up to the $250,000/$500,000 limit. For those expecting taxable gain, timing the sale in a year with lower income can help reduce the capital gains tax rate, since some or all of the gain may fall into the 0% or 15% capital gains brackets. It’s also wise to keep records of capital improvements such as remodels, additions, or system upgrades since these increase your cost basis and reduce the taxable portion of any gain. With proper planning, documentation, and a clear understanding of these rules, many homeowners can sell their primary residence while minimizing or even avoiding capital gains tax. Looks like some investors are getting the message that the stock market is too high. Money market funds recently hit an all-time record of $7.7 trillion, showing that some investors are concerned about the overvaluation of the markets. This is good that all investors are not throwing caution to the wind and are satisfied to put some of their money into short-term funds, earning 4%, while they wait out the potential storm heading our way. It appears that since 2022, money market funds have seen a nice increase considering they were just around $5 trillion at that time. If you’re wondering if nearly $8 trillion in money market is a large amount, go back to 2017, that year there was only a little over $2.5 trillion in money markets. Investors in money markets will experience over the next month or so probably a quarter percent drop in their yields, but that should not be enough to scare them into risker assets at this time. I would hope that from the reading that I did, it appears that some investors are just being cautious and putting 20 to 30% of their money into money markets, while keeping the rest invested. A 100% allocation in money markets is never a good idea. I think holding that 20-30% allocation is a prudent move at this time because no one knows when the storm will come. It could come tomorrow or next year, but we are confident a storm is coming, and I believe it's better to be prepared for it. Don’t blame rising food prices just on tariffs Last month consumers saw fruit and vegetables increase 2% and prices for apples and lettuce in particular climbed 3.5%. Tomato prices climbed another 4.5% on top of July's 3.3% increase. Beef prices continued to climb as they saw an increase of 2.7% and coffee climbed 3.6%, which now makes it 21% more expensive than one year ago. Before you jump all over the President and say this is all because of the tariffs, you have to look at it from the perspective of the farmers. Yes, some of the cost increase is from tariffs, but the cost of fertilizer in August was up 9.2% from the previous year. Labor costs have also risen, but it’s hard to get an exact figure since roughly 40% of agricultural workers were undocumented. The reason for rising food costs is not just the higher costs for production, but distribution and higher transportation costs are also having an impact as well. Weather this year has not been in favor of the farmer and has caused some disruption with harvest and livestock production. Unfortunately, going forward, it is predicted that these issues will continue to push the price of food higher for the near future. That means for those going grocery shopping, you need to continue to compare prices and look for the sales. AMEX raises platinum card fee 29%, is it worth it? It was only a matter of time before AMEX raised their fee on their Platinum Card after Chase raised their fee on the Sapphire Reserve Card to $795. If you want the status of having an AMEX Platinum Card, it will now cost you $895, a 29% increase from the $695 they were charging before. The AMEX Platinum Card came out over 65 years ago in 1958 with an annual fee of just six dollars. The marketing AMEX does is phenomenal and I think many will continue to hold the card and pay the extra $200 because the company has increased the rewards by $2000 to $3500. Holders of the card will still get access to airport lounges and seats at fashion week events in New York, which I’m not sure how that benefits holders around the country. But what holders may not realize is these other perks like the $600 hotel credit is $300 every six months. This is true with many of the perks you get like the $300 reward at Lululemon is really only $75 a quarter. If you buy all your stuff at Christmas time, you only get a $75 credit. Don’t expect to receive $200 off your next Uber bill for that Black car ride, it is only $15 a month, except for December when you get an additional $20. The highest earning 10% of Americans accounted for 49.2% of all the spending in the second quarter of 2025, which is the highest on record since 1989 when they began keeping track. I have a hard time believing that these people with that income are going to spend time going on the website and doing all the accounting to keep track of their credits to maximize their rewards. I think many hold it just because of the status that comes with the card. Myself, I like my 2% cash back reward on all my purchases from my Wells Fargo credit card. I don’t have to keep track of anything; I just get a nice check in the mail when I ask Wells Fargo to send it. I save $895 every year because my annual fee on the Wells Fargo Active Cash Card is zero. I like clean and simple when it comes to my credit card rewards. Which way are mortgage rates heading? That’s a big question many people ask and I wish I could say with certainty I could give you the exact direction, but all I can do is give you information to hopefully allow you to make a more intelligent decision if you’re dealing with a mortgage. People wonder why mortgages are tied closer to the 10-year Treasury than the Fed short-term overnight interest rate, which is impacted when the Federal Reserve cuts rates. The reason for the tie to the 10-year Treasury is that the expected amount of time a homeowner will hold their mortgage before either selling their house or refinancing that mortgage is longer term. The only tool that the Federal Reserve has to really move the price of mortgages is purchasing Mortgage-Backed Securities, which they did back in 2008 and during Covid in an effort to restart the housing market and help improve the overall stability. When the Federal Reserve purchased Mortgage-Backed Securities, they kept interest rates low on mortgages, and it encouraged people to buy homes and refinance their mortgages to put more money in their pockets. The reason I don’t see that happening now is even though the housing market is slow, if they stimulated the market further, they could increase inflation, which is not the goal of the Fed at this time currently. Based on the information I see I believe we will see mortgage rates in a current trading range up or down around a quarter of a percent for the next six months or so. Will the revenue from AI cover all the debt and expenses it created? AI is definitely part of the future, but has overbuilding surpassed the revenue that it can create? When one steps back and looks at the numbers they are staggering. Over the past three years, major tech firms have committed more funds towards AI data centers than it cost to build the U.S. interstate highway system that took 40 years to build. These numbers are even adjusted for inflation. In the next five years, the AI infrastructure spending will require $2 trillion in annual AI revenue. If you think that’s a lot of revenue you are correct. In 2024 the combined revenue of Amazon, Apple, Alphabet, Microsoft, Meta and Nvidia did not hit $2 trillion. It is also five times the amount of money spent globally on subscription software. Consumers have enjoyed the free use of AI, but it appears for businesses paying more than thirty dollars a month per user is the breaking point. AI executives claim the technology could add 10% to the global GDP in the years to come. With that thought they are saying the benefit comes when it can replace a large number of jobs and that the savings would be enough to pay back what they invested. My question is, if you’re replacing all these jobs, consumers will have less money to spend and probably won’t need or care about AI. There are many history lessons about bubbles that did not pay off because of the over excitement on inventions with such things as canals, electricity and railroads just to name a few. People may remember the excitement over the Internet and the building of tens of millions of miles of fiber optic cables in the ground. The amount spent was the equivalent to about one percent of the US GDP over a half a decade. The justification from the “experts” was that the Internet use was doubling every hundred days. The reality was only about 1/4 of the expectation came to fruition with traffic doubling every year. Most of the fiber cables were useless until about 10 years later thanks to video streaming. A report out of MIT said they found 95% of organizations surveyed are receiving no return on their AI product investments. In another study from the University of Chicago showed that AI chatbots had no significant impact on workers earnings, recorded hours or wages. I still believe AI will be here to stay, but the question is have the expectations gone too far? I think they have! China controls roughly 85% of the global processing in rare earth materials. Can the USA compete? It really is not a question; the USA has to compete or else our economy and our country will be in dire straits perhaps as soon as the next decade. There are 17 rare earth elements with names that most cannot pronounce, but they’re becoming more important because they are used in catalytic converters, to refine oil, and even polish glass. The big one that is not really thought of as rare earths is magnets. Magnets account for about 40% of total rare earth demand because they are used in many items like iPhones, electric vehicle batteries, and even the F-35 fighter jets. There are now some public companies in the U.S. like MP Materials coming on strong and they have their own mining and processing plants. The US government has taken through warrants a $400 million preferred equity stake in the company, which now makes the US the largest shareholder. As time goes on, we will see other types of incentives for rare earth companies in the United States. China got so far ahead of us because of the red tape and permitting that was required in the US. China fast tracked many of their mines and processing plants to get them up and running, while here in the US the plans sat on someone’s desk waiting for approval. It should also be noted in China the government is the largest shareholder in some of these mining companies, and they are willing to take small margins like 4%, which would be unheard of in the United States. Going forward, I think you will see less red tape and a faster permitting process with rare earth minerals so we can have more rare earth minerals here and not be held hostage to the communist Chinese government in the future. Back to the office has hit a slowdown! Companies like Amazon, JPMorgan Chase, and Dell have pretty much gone back to having most employees in the office five days a week and there are companies like Paramount Studios and NBC Universal that told employees to commit to coming to the office five days a week or else take a buyout. With that said, there are still your diehards out there who got used to working from home and are refusing to go back to the office full-time. Some companies like Amazon ran into trouble when they required employees to come back to the office full time as they forgot to match up the number of people coming back to the number of desks for people to sit at. Also, there weren't enough parking spaces and even video conferencing rooms were overflowing. To get the diehards back, it may take some more time. Numbers show that if they want perfect attendance from their employees that are still working from home, they can get that with the employees coming in one day a week. But when they start asking for three days or more per week, that is when the resistance starts, and the success rate falls below 75%. If the economy does slow down, you will see a higher compliance because employers will want employees to be more efficient, and employees would likely be more scared to lose their job as getting another one quickly would be more challenging.
Investors have a false sense of safety in the stock market A psychologist by the name of Gerald Wilde came up with the term homeostatic years ago and I believe this is totally relevant in today's market. It essentially means that when the environment comes to feel safer, people’s behavior becomes riskier. A great example he used was people will probably drive faster in a big SUV than in a little tin can of a car. Relating it to today's market, investors seem to feel safer because of the long bull market. As the market continues to rise in the longer term, investors' appetite for risk increases. They do not realize that their behavior is risky because they have a false sense that the market will not drop. While the risk of their investments is high, because of the confirmation day after day of the market going up, they don’t feel that they are taking any risk. From my perspective, the risk just seems like it continues to climb as people chase quick returns. AS an example, out of 672 launches of new exchange-traded funds so far this year, according to FactSet, 28% are tied to a single stock and 25% are leveraged and at least three seek to double the daily gains or losses of cryptocurrencies! You may not want to believe it, but there is a lot of risk in markets today and this could all end very poorly for those gambling in the market. Ultimately, there are two different types of investors, one is the long-term investor who is investing to build long-term wealth, while the other investor is in it for entertainment and they enjoy the roller coaster ride with the thrill of gains and the pain of the losses. This is a lot like the addiction that gamblers get. The difference is that long-term investors have odds of nearly 100% when it comes to making money over the long-term. Unfortunately, for those who do a lot of trading and take the higher risk road, well the odds of making money over the long term is closer to zero. If you check the prices of your stocks, I would say much more than a few times a year, you’re probably in it for the entertainment and will probably make poor emotional decisions when difficult times come, and they will! IPOs look hot, don’t touch them, you’ll get burned! So far in 2025 there have been over 150 IPOs which if you’re not familiar with the term, it stands for initial public offering. These IPOs have raised about $29 billion so far this year and it is a nice increase in the total number of IPOs when compared to recent years. At this time last year, just 99 IPOs had occurred and in 2023 it was even worse at 76. The exciting news reads “first day gains are averaging 26%, which is the best since 2020”, but it’s important to understand that those eye popping first day gains are not based off of the first public trade but rather are gains on shares that were issued prior to heading to the market. Unfortunately, you as an investor have little to no chance of getting those shares as you generally see these go to your institutional investors and high net worth clients of Fidelity, Charles Schwab and other big firms. So, if you can’t get the shares before they begin trading is it worth riding the bandwagon? I’m going to explain why the answer is a solid no. First off look at an ETF called Renaissance IPO (IPO). Back in 2021 it hit a high around $75 a share and by 2023 it fell to about $25 a share. With the recent frenzy in IPOs, it has climbed back above 50, but that is still a disappointing return to say the least. Also, this means any investors who bought it in 2021 through 2022 are still underwater. There is generally a ton of volatility around these trades considering when companies do an initial public offering, they’re only releasing 15 to 20% of their equity many times and they often come with an initial lockup period of around 180 days, which really reduces the number of shares that are trading. Also, make no mistake that the investment bank that is issuing those shares has an obligation to try to get the opening price as high as possible to get full value for their clients. If it’s an oversubscribed IPO, the demand will be higher than the supply, and the price will rise. Unfortunately, that means the company left money on the table that they could’ve put in their pockets rather than letting investors benefit from those gains. I believe investing in IPOs is a high-risk game, not to be played with by the average investor. A good example is Newsmax, which was a hot IPO with an issuing price of $10 a share that very quickly went to $265, as of today it is trading around $13 a share. A lot of people have lost their shirts, and I doubt they will get them back. To me the safer play to benefit from the increased number of IPOs is the banks handling this process considering they should be seeing a nice increase in profits. This would include your large players like JPMorgan Chase and Goldman Sachs. As of now there are other highly anticipated IPOs that could occur over the next year with names like robo-advisor Wealthfront, crypto firm Grayscale Investments, financial-technology firm Stripe, and sports apparel and betting company Fanatics all potentially hitting the public market. What's going on with the real estate market? This week we got both existing and new home sales for the month of August and there was a stark difference in the reports. The headline number for new home sales showed an increase of 15.4% compared to last year, while existing home sales were up just 1.8% over that timeframe. The first important consideration here is new home sales can be extremely volatile on a month-to-month basis, and they make up a smaller portion of overall sales. Pre-pandemic, new home sales were normally around 10% of total sales, but with the limited listings in recent years they have been closer to 30% of all sales. One other reason for the large difference is how the reports are calculated. New home sales look at people that were out shopping and signing deals in August, while existing home sales look at closings in the month, which means these were deals that were signed in June or July. Interest rates may have played a factor here as rates for the 30-year fixed mortgage were around 6.7-6.8% in June and July vs around 6.5-6.6% in August. This also doesn't include the fact that many homebuilders offer lower rates to entice buyers. The supply of new homes also looks much better for buyers considering there was a 7.4-month supply in August and that was down from a nine-month supply in July. This compares to a 4.6-month supply for existing homes in the month of August. Homebuilders have a much larger need to move homes quickly as many of them don't want them sitting on their balance sheet as that can create risks. This compares to the average home seller that may not have a need to sell their home and when looking at the crazy market from just a couple years ago, I believe many of them have unrealistic expectations for how much their homes are worth and how fast the property will sell. Homes are staying on the market longer at around 31 days on average, which compares to 26 days last year. These factors have led sellers to either pull their listing or even delay listing in the first place. One similarity between the two reports was the annual price appreciation with the median price on existing home sales climbing 2% to $422,600 and the price on new home sales climbing 1.9% to $413,500. These high prices and higher mortgage rates have continued to impact the first-time buyer as their share in the existing home sale market was near historical lows at 28%. With everything considered here I still believe the housing market will remain on a slow upward trajectory with limited supply continuing to battle against affordability concerns. Financial Planning: Insurance Vs Investments When building a financial plan, it’s important to recognize that investments and insurance serve very different purposes. Insurance is designed to protect against loss. Life insurance provides for your family if you pass away, health insurance shields you from crushing medical bills, and auto insurance protects you financially from accidents or damage. You pay a known cost, the premium, to avoid a potentially devastating unknown cost, which makes insurance a valuable safety net. Investments, on the other hand, are meant to grow wealth and produce income. Stocks, bonds, and real estate help your money work for you overtime. While they can experience short-term volatility and uncertainty, most high-quality investments are built on solid foundations and have historically rewarded patience; those who can tolerate the ups and downs are almost guaranteed to come out ahead in the long run. The confusion comes when insurance products, like permanent life policies or annuities, are marketed as investments. While they may promise guarantees or cash value, they usually come with high fees, low returns, limited flexibility, and lots of fine print, making them poor substitutes for true investments. That doesn’t mean insurance is bad, it simply means it works best when used for protection, not growth. The healthiest financial plans keep the roles clear: use insurance to protect and use investments to build wealth. Mixing the two often results in an expensive compromise that doesn’t perform well on either front. Should you be able to do a sleepover at the house before you buy it? Buying a house is a big commitment and recently some buyers have asked sellers if they can stay overnight for one night if not longer. The argument is you get to test drive a car before you buy it, why can't you do the same thing when you're buying a home, which is your biggest purchase. Some buyers and some agents are open to the concept, others are not. It appears to be trending with your higher price homes, but even some mid-price homes see buyers make this special request to "test drive" the house. It is up to the seller and sometimes they will allow it if the buyer is willing to pay a reasonable rent and if they have the renter's insurance to cover any liabilities. The concept is unconventional but is catching on and can really make the buyer very comfortable with their buying decision. Sellers have to be careful of all the liability that can come with this process and the person that is buying the house should be checked out thoroughly before you let them stay in your house. The real estate market is changing, I remember just a few years ago during Covid there were people buying houses sight unseen, which is very dangerous. Now with a slowing real estate market, it is more friendly to buyers, and they can ask for and many times get extra things such as staying in the home to make sure it fits their needs. Adult children living at home could be hurting your retirement The most recent data from 2023 shows 18% of adults ages 25 to 34 years old were still living at home with their parents. Another survey by the American Association of Retired Persons, also known as AARP, found that 75% of parents were still providing some form of financial support to at least one adult. The average amount of support per year was $7000. If you notice, that is the same dollar amount as the contribution limit for an IRA for your retirement and just think how nicely that will compound in the years to come. This is putting a larger burden on people in their 50s or 60s since many people had children later in their lives as opposed to back 50 years ago when people had children in their 20s. For the first time on record, there are more babies born to a woman over 40 at 4.1% of all births than to teenagers which was 4% of all births. If you’re going to have a baby in your 40s, that child will still be living with you in your 50s and maybe even your 60s. So, what can parents do about it? Be upfront with your children about your situation. In most cases, kids don’t understand about saving for retirement and they probably have no idea about your current financial situation. Let them know that you need to save for retirement because you don’t want to be a burden on them when they get older and there’s no reason why they can’t chip in financially as part of the household. Even if you only charge them $500 a month to help out, that is $6000 a year that you can contribute to your retirement account. A mistake that people make is thinking it’s not a problem and they can work forever but sometimes your health issues prevent you from working into your 70s. You need to be realistic about how long you can work. It is also very important to invest wisely with good investments because you’ll probably need more than you think when you retire. The reality is when you hit retirement there is not much help and your own children may be struggling with their family. I always say prepare for the worst and hope for the best. Are corporate managers being overworked? At first glance, if you’re not a manager, you might think they get paid more and they should work more. Which is true to a certain degree but unfortunately in the long term the business and the employees suffer if managers are overworked. A research firm Gartner showed that in 2017, one manager managed roughly five employees but data from 2023 show they were managing 15 employees. Corporate boards and upper management view less managers and employees as a sign of company strength as they can make more money with less people. But the reality is when a manager has more people to manage, they are unable to spend as much time with each employee, which means they have to cut out things such as helping employees with career goals, building a relationship with that employee or helping with productivity in their jobs. Some managers are using AI tools that will handle routine approvals and not spending any time with employees going over important items. Going back to 1950, Peter Drucker came up with and developed a management style where managers set objectives, motivated workers and helped develop them throughout their careers. Managers were not just supervisors but would build trust to inspire employees and help them understand their sense of purpose with the company they were working at. The theory worked very well for nearly 70 years, but now many employees feel less engaged because they don’t get feedback from their managers. In a recent Gallup survey, more than 50% of employees don’t really know what is expected of them. Across US public companies, the number of managers has dropped by over 6% in just the last three years. This may be great for the bottom line; however, I think long-term it will hurt productivity as employees become lost in the corporation or move on to another job because there’s no connection to the company or a manager. The Fed is cutting interest rates, and you may think what a great time to refi your mortgage. Not so fast.... Before you call your mortgage broker to refinance your mortgage it’s important to understand the difference between the federal reserve cutting rates, which is the cost of overnight money versus mortgage rates, which generally tracks the yield on 10-year treasuries. A good example was one year ago in September 2024 when the Federal Reserve began cutting interest rates. At that time the 30-year mortgage was about 6.2%, but even as the Federal Reserve cut rates three times over the next few months, mortgage rates climbed above 7%. So many people were able to refinance their mortgages when rates were low so many people do not stand to even benefit from lower mortgage rates. If your rate is below 6% you likely would not see any benefit from the current rate environment, but if your rate is above 7%, it may be worth exploring. Just make sure you understand all the costs associated with refinancing and I would again make sure you don't pay points at this time. If the broker is quoting you a rate in the 5's, that is likely too good to be true, and you are likely paying unnecessary costs. What does benefit from the Federal Reserve reduction in short-term rates are what are known as HELOCs, which are home equity lines of credit. Rates still remain somewhat high on these products, but with the reduction it may be tempting to tap that credit line. I always tell people to be careful doing so, because if rates go up again your interest costs will also rise. It generally makes sense to use these lines to pay off other high interest debt or for home improvement expenses. The big thing here is you need to remain disciplined and have a plan on how you will repay the credit line. Credit card rates also closely follow the Federal Reserve rates, and while a decline in the APR may be nice, borrowing with credit cards long term should be avoided as the cost of debt will still remain high on these products. How to get more out of your short-term money with the Federal Reserve cutting interest rates If you’ve been lazy with your investments and have just been throwing a lot of money into money markets or high yield savings accounts that were paying around 4%, you are going to start seeing those yields drop due to the Fed rate cuts. The question is what should you do now? The good news is you’ve got a few weeks before it begins to hit your money markets. First off, ask yourself a question, do I really need that much liquid in a money market? It is generally advised to have somewhere between 3 to 6 months in easily accessible funds, but ultimately it really depends on your situation. One area investors can look at for this short-term money is short-term bond funds, which can be found as mutual funds or ETFs. The yields will be slightly higher between 4.1 to 4.3% and your yield will stay higher for longer since those bonds don't all mature at once and are spread out over varying time periods, but as rates continue to fall these rates will also fall. As bonds mature those funds will likely be used to repurchase other bonds at now lower interest rates. Since you are going out a little further on the yield curve, the rates should still be more promising than the money market accounts. The big thing you need to understand here is the duration risk and the further you go out on the yield curve, the larger the impact rising/declining rates have on the price of the bonds. If it is truly for short term money, I wouldn't use any ETF or mutual fund that has maturities that go out more than a few years. Be sure to comb through all your accounts, like your checking accounts and your brokerage accounts as sometimes you may not realize how much you have sitting there, earning very little for you. Make sure you move your liquid funds to either a higher yielding money market or again the short-term funds and then longer-term monies should be utilized for investing. You can also search the Internet for high-yield savings accounts but be sure to read the fine print that you’re not getting a teaser rate and then next month you’ve got to do the process all over again. Also, you may want to look at some financial institutions that have CDs from 6 to 12 months. Some financial institutions may need to increase their capital and will pay slightly higher rates to get that money into their institution. Be careful not to go over the FDIC insurance limit just in case that institution was to fold. Some of them will even offer a CD for a certain timeframe but may have a special provision to get the money out without a penalty. Again, be careful of being enticed into long-term or higher yielding bonds that have greater risk due to the rating and duration. If the yield sounds too good to be true, it probably is. Going to an elite college does not guarantee you’ll be in the top 1% of earners in the United States I believe parents and some high school counselors put way too much weight on kids going to elite colleges like Harvard or any one of the Ivy League schools. It seems like both parents and counselors feel that going to an elite college guarantees success and will get you into the top 1% of earners in the country. That current threshold comes with earnings of around $700,000 a year. Yes, going to an Ivy League school does give one a slight advantage, but if you look at the numbers such as a study that looked at the CEOs of the Fortune 500 companies, only 34 of the CEOs came from elite colleges. Both Duke University and Brown University had three graduates on the list, but so did Ball State, Louisiana State and San Diego State University along with many other similar schools that would be viewed as less prestigious. David Doming, who is an economist at the Harvard Kennedy School, did a study on the differences between those students attending an Ivy League school versus selective public flagship schools like Ohio State, UCLA and the University of Texas. What he discovered was in the beginning of their careers those that attended an elite college did outperform those who did not. They were 60% more likely to have earnings in the top 1% and they were three times as likely to work for a prestigious employer, such as a top law firm or consulting firm, but when looking at the average income of Ivy league graduates it was pretty close to the public flagship schools. It was also revealed that not all graduates were chasing a job on Wall Street, some big consulting firm, or the most recent Silicon Valley startup. Most students, when they graduated, stayed close to where they either grew up or graduated from. It was also pointed out that employers generally want employees who remain with them for a while, and sometimes when you have a student that comes too far from home or where they graduated from, they end up leaving. What generally doesn’t make the headlines is the number of students who work hard and outperform the elite school graduates that sometimes might feel they don’t have to work as hard when they get to the interview or in the job. If you look at most successful people that are in the top 1%, the one thing they generally have in common is they do not just work the basic 9-5 and put in 40 hours a week. Not everyone wants to work 50 to 70 hours a week, but if you love what you do and you have the discipline you may not need that degree from Cornell University to be in the top 1% of earners.