Crypto Crash, ETF Complexity, Dark Pools, Tax-Free Social Security?, Vanguard Greed, Harvard Endowment Doubts, Charity Boom, Manufacturing Labor Gap, Gen Z Spending Drop & Investing in OpenAI?

Are tariffs impacting inflation yet?

The Consumer Price Index, also known as the CPI, in the month of June showed an annual increase of 2.7%, which was in line with expectations. Core CPI, which excludes food and energy, came in at 2.9% and was also in like with expectations. It was slightly above May’s reading of 2.8%, but given all the news around tariffs I think most would be surprised to see the limited change in prices given all the concerns.

Some economists who tried to find evidence of the tariffs pointed to areas like apparel that had an increase of 0.4% compared to the month May. My concern with pointing out limited areas like that is prices can be quite volatile when looking at single areas, plus if you look at prices for apparel compared to last June, they actually decline 0.5%. Shelter is becoming less of a problem for the report, but it is still the largest reason why inflation remains stubborn, considering the annual increase was above the headline and core numbers at 3.8%. I’m still looking for these tariffs to have an impact on inflation, but as a whole they didn’t seem to have a large impact in the month of June. I also want to point out I don’t think they will be as problematic for consumers as some economists have illustrated. 

Is the market in a bubble?

I have been hesitant to use the word bubble when describing the current state of the market, but as valuations get more and more stretched, I must say I believe we are now in bubble territory. Apollo’s chief economist, Torsten Slok, released a graph showing the 12-month forward P/E today versus where we were in 2000 and other 5-year increments. The forward P/E for the market as a whole is higher than it was back in 2000, but Torsten raised further concerns that valuations for the top 10 companies in the index are now more stretched than during the height of the tech boom.

This is problematic considering these ten companies now make up nearly 40% of the entire index. Even looking at just the top 3 companies: Nvidia, Microsoft, and Apple, those now account for nearly 20% if the index. I recently heard a gentleman say on CNBC that valuations don’t cause bubbles to pop and while that may be true, when a catalyst comes the larger the bubble, I worry the larger the pop. All I can say at this time is be careful if you are investing in the index as a “safe”, diversified investment as I believe it is far riskier than many people believe. 

Retail sales show another strong economic data point

Even though people remain concerned about a slowdown in the economy, their fears haven’t shown up yet in their spending habits. In the month of June, retail sales climbed 3.9% compared to the previous year. Due to the lower price for gasoline, gas stations were a large negative weight in the month and actually declined 4.4% compared to last June. If gas stations were excluded from the headline number, retail sales grew at a very impressive annual rate of 4.6%. Strength was broad-based, but I was surprised to see areas like health & personal care stores up 8.3% and food services & drinking places up 6.6%. These are two areas that show me people are still getting out and spending money, which generally wouldn’t happen in a weak economy.

There are some areas where consumers may be trying to get ahead of tariffs, like motor vehicle & parts dealers, which saw an annual increase of 6.5% and furniture & home furnishing stores, which saw an increase of 4.5%, but it has now been a few months of strong sales in these categories. It will be interesting to see if there is a slowdown in those specific categories in the coming months as there could have been some pull forward in demand with consumers trying to beat those tariffs. Even if that is the case, spending still looks strong in areas not impacted by the tariffs, so I anticipate the consumer will remain healthy. Given the current state of the consumer, I still believe the economy is in a good spot overall. While I’m not looking for blockbuster growth, I’d be surprised to see anything close to a recession given all the recent data. 

Financial Planning: What’s the Deal with These “Trump Accounts” for Kids?

Under the new One Big Beautiful Bill, children under 18 are eligible to open special long-term savings accounts, nicknamed “Trump Accounts”, with a unique blend of benefits and caveats. Kids born between 2025 and 2028 will receive a $1,000 seed deposit from the U.S. Treasury, regardless of family income. Parents, relatives, and friends may also contribute up to $5,000 per year in after-tax dollars. The account grows tax-deferred, and extra contributions (but not the Treasury seed or earnings) can be withdrawn tax-free.

However, like a non-deductible IRA or non-qualified annuity, withdrawals of earnings or seed money are taxable at ordinary income rates, and early withdrawals (before age 59½) face a 10% penalty unless used for qualified purposes like a first-time home purchase or education. While the free $1,000 should be taken advantage of, families may find that 529 plans, Roth IRAs for teens with earned income, custodial accounts, or even accounts in a parent’s name offer better long-term flexibility and tax treatment for ongoing contributions.

Why are the markets hitting new highs?

The markets, which are heavily based in technology, still continue to hit highs, even with uncertainty with interest rates, the economy and world trade. I’m not sure who is doing all the buying, but I know with our portfolio when new money comes in we are being very cautious and only investing 20 to 25%. We are being patient and waiting for the right opportunity to invest the new money strategically. We will be ready to invest when there’s a pull back and we can find companies to buy at much more reasonable prices, which should enhance our investors long-term returns.

Some warning signs away from the regular stock market would be M&A activity in the second quarter did less than 11,000 deals and that was the lowest level since 2015, excluding the pandemic. Also, when wealthy investors feel good, they generally invest in art and it appears they are concerned as well. Based on sales numbers from the three big auction houses Christie’s, Sotheby’s, and Phillips, there was a decline of 6.2% in global sales for the first six months of 2025.

Experts who analyze art investors say concerns include inflation, growth and geopolitical tensions. Another concern in the art world was the percentage of artworks sold at auction with negative returns has increased to 50%, which rose dramatically since 2008 when the percentage of artworks sold at auction with negative returns was only 11%. I will keep ringing the bell for investors to be cautious and day by day you may see some tech stocks rise but we seem to be at a tipping point.

Diet drugs known as GLP-1 are hitting some headwinds

Diet drugs, along with stocks like Eli Lilly, have done very well especially considering their stock has more than doubled since the beginning of 2023. In late August 2024, the stock of Eli Lilly was as high as $970 per share, but there has been push back in 2025 because of the high costs for these drugs. Today the stock is around $800 per share.

Medicare and numerous state benefit plans have declined to pay for the new weight loss drugs because of the high prices and CVS’s pharmacy benefit manager Caremark recently said it is removing coverage of the drug. The company said this will save their clients 10 to 15% year over year. If other pharmacy benefit managers or insurance companies follow the same path, it could be a big hit to the diet drug industry.

Some medical professionals and drug companies are complaining that insurance companies should not be dictating what drugs their patients have access to. I have been concerned that if insurance companies covered these drugs, insurance premiums, which are high already could go even higher as more people want an easy way to lose weight. Some people who are on the diet drugs will be upset, but most people that pay for health insurance will likely be pleased not to see their insurance premiums rise. I personally believe health insurance premiums are high enough already.

A FICO score is no longer the only game in town

After years and years of pretty much being a monopoly, the FICO score, which is run by Fair Isaac Corporation, has competition. Mortgage lenders can now use what is known as VantageScore 4.0. This model was developed by a joint effort between Experian, Equifax and TransUnion. VantageScore has already been adopted pretty well with credit cards and auto lending, but is having a hard time breaking into the mortgage lending business. FICO says its scoring model is used for over 90% of mortgage credit decisions in the United States.

Fair Issac has seen its stock dramatically increase in value over the years largely because the fee that FICO charges credit bureaus has increased from sixty cents seven years ago to almost 5 dollars today. VantageScore 4.0 appears to be a little more thorough as it incorporates alternative data like rent, utilities, and even telecom payment history, while the traditional FICO models have ignored these types of payments. It makes sense to me, but it could make it a little bit harder for some consumers to have a good credit score. Fair Isaac’s monopoly appears to be doomed in the coming years, which should benefit consumers but shareholders of the stock will probably suffer because it will likely hurt the growth in earnings for the company.  

Even with tariffs, producer prices have seen little increase

After seeing little lift in prices in the Consumer Price Index, I thought it was possible producers might be covering part of the cost from tariffs. That wasn’t the case as the June Producer Price Index, also known as PPI, showed an increase of 2.3%, which was below the 2.7% reading in May and marked the lowest level since September 2024.

Core PPI, which excludes food and energy, came in at 2.6% on an annual basis, the smallest gain since July 2024. Perhaps one thing we continue to discount in the US economy is the fact that it is driven by services rather than goods, which could help reduce the burden of tariffs. As I said with CPI, I am still looking for inflation to increase in the coming months, but it definitely was not a problem in the month of June.

China should not own any US farmland

I was happy to see that Brooke Rollins, who is the US Secretary of Agriculture, is working with state lawmakers to prevent any US farmland from being bought by the Chinese or other countries of concern. Through the back door, the Chinese already own some farmland through a company that does not sound Chinese at all, Smithfield Foods. 93% of Smithfield’s stock is owned by WH group, which is a Chinese pork company.

The Chinese are very sneaky in how they do things because I’ve heard of Smithfield Foods before and from the name, I had no idea that they were majority owned by the Chinese. The Chinese also have other entities that own roughly 300,000 acres of farmland that supplies food for our nation. It is not a big amount yet, but I believe it should be stopped immediately. If the Chinese had more ownership in our food supply from farmland, they could use it as a weapon against us by either stopping food production or increasing prices rapidly to cause inflation across the country. I hope that all the politicians will work together on this to prevent and hopefully even try to reverse what ownership the Chinese have of our farmland. 

Should interest rates be lower?

There are some good reasons why here in the US interest rates should be lower. The current fed funds rate in the United States is between 4.25% to 4.5%. We are the strongest country in the world, but yet there’s other countries that aren’t as strong like Japan that has an equivalent rate of 0.5%, Cambodia has a rate of 0.45%, and Switzerland has a rate of 0.25%. We have the largest economic powerhouse to pay our debt so it makes no sense to me why those countries have lower interest rates than the United States. Unfortunately, the interest expense on the national debt is just about to top $1 trillion.

With lower interest rates, the interest expense would decline and it would in theory leave more money to go to principal. The key would be to make sure this money goes to pay down the principal and not to other government programs, which unfortunately has happened in the past. The concern from the Federal Reserve is if they lower rates, we’ll see an increase in inflation. I continue to believe that the tariffs might cause a one-time price increase rather than imbedded inflation, so I believe it would be a mistake to hold off on cutting rates much longer.

A major reason I believe this is the tariffs would not stoke a major demand increase, which would be problematic if that increase occurred. What generally causes inflation is too much money chasing too few goods, so if there isn’t a huge surge in demand, I believe long-term we should be alright. A big question on the other side though is how this would impact supply. If supply were drastically cut, I do see how inflation could become problematic, but I personally don’t see that concern at this point in time.

One other area to consider is that these tariffs are helping with the government’s budget, as they are bringing in roughly $30 billion a month to the United States. What are your thoughts? Do you think the Federal Reserve is way behind on reducing interest rates?