Heartland States, Consumer Actions, TV Network Sports Deals, Life Insurance, Apple Credit Card, Buy Now Pay Later, Cathie Wood, Employers and Weight Loss Drugs, Weight Watchers & Raising Chickens

Can the heartland states save our country?

The heartland states are 20 states pretty much in the center of the country. They have been regaining economic strength over the years and currently about 39% of the US population lives in these states, according to the census bureau for 2024. The population growth in this area was above the rest of the country for the last five years with numbers that have not been seen in over 65 years. Employers in this area grew by 13.2% between 2020 to 2023 and business capital expenditures totaled $76.9 billion in 2023 and have seen an average annual growth of 9.43% since the beginning of Covid.

These 20 states on average have established more business-friendly policies along with tax incentives and grant programs that draw businesses to their area. The East and the West Coast just can’t seem to compete with the affordability of states in the middle of America. These mid America states have lower cost for land and utilities are far less being as much as 1/3 less than the rest of the country. This is according to the Energy Information Administration (EIA). The overall cost of living is lower, so wages can also be lower and still provide a good standard of living for their employees. In my opinion, states like California and others need to wake up and realize that perhaps stats in Middle America are on to something with policies that are attracting new residents. It would appear that foreign companies coming to the United States would build and prosper in one of these 20 states rather than states that are against business or have high taxes and other costs.

Consumer actions aren’t matching their words

We continue to see negative surveys about consumer confidence and sentiment, but you wouldn’t think consumers feel bad after looking at the recent retail sales report. March sales climbed 4.6% compared to last year and if gas stations, which fell 4.3%, are excluded the report was even more impressive as it climbed 5.3%. Some of this is likely due to concerns over looming tariffs as consumers pull forward demand before expected price increases. Some areas that are likely more impacted did see large gains as motor vehicle and parts dealers saw an increase of 8.8% and sales at furniture and home furnishing stores climbed 7.7%. With those said gains were quite widespread in the report and areas that would not see a pull forward in demand like food services and drinking places still saw a nice gain of 4.8%.

If people were truly worried about the economy, they would not be spending money at restaurants, especially considering the fact that dining out has gotten quite expensive. While I am expecting the tariffs to have a short-term impact on the economy, we must remember the consumer is coming from a point of strength with relatively low debt levels, a low unemployment rate, and balance sheets that have seen asset prices significantly increase over the last several years. I continue to believe that our economy and the consumer will be able to whether this volatility, but the numbers will likely decelerate from here. We will continue to watch these reports closely, but I again remain confident we will get through the concerns about these tariffs. 

Are TV networks tapped out on sports deals?

Last year Disney signed a $2.6 billion a year deal with the NBA; however, ESPN said goodbye after a 35-year relationship with the MLB where they were paying $550 million a year for their package of games. One area of growth that surprised me was Formula One car racing as over the last six years it has seen viewership double to 1.1 million viewers in a season. Liberty Media, who owns F1, is trying to get a rights package between $150-$180 million a year and all they’re hearing is crickets. Research firms estimate that it is worth over $100 million but it is not at the $150-$180 million that Liberty wants.

Netflix, Warner Bros. Discovery, Fox, Amazon and NBC are not showing much interest in the asset. Netflix will probably not bid since there’s no real gain for them considering the estimate that 75% of F1 fans already have Netflix subscriptions. With so many people having Netflix, multiple big dollar sports packages probably don’t make much sense for the company. In a couple of months around June, Warner Brothers is distributing an Apple film called F1, starring Brad Pitt. If you want to watch this movie, which is projected to be a blockbuster, you must subscribe to Apple TV. I almost feel like I want to add Apple TV to the five or six other subscriptions I have, but I can’t watch everything I have access to now, so I should probably resist. 

Financial Planning: Why Life Insurance Is a Poor Retirement Vehicle (And What to Do Instead)

Cash value life insurance is often pitched as a tax-free retirement strategy. On the surface it sounds great. You get tax-deferred growth, tax-free loans, no contribution limits, and a death benefit, but when you look under the hood the numbers often don’t work out. First, the returns simply don’t compare. With Indexed Universal Life (IUL) or Whole Life, your cash value growth is limited by caps and participation rates, and you miss out on dividends. Add in the cost of insurance, admin fees, and other hidden charges, and the actual return on cash value often falls well below the market.

Second, the fees get larger over time. The older you get, the higher your cost of insurance becomes which directly eats into your cash value. If you’re taking policy loans and the policy lapses, you could even get hit with a massive tax bill in retirement.

Third, the opportunity cost is huge. The high premiums needed to fund a policy could instead be invested in assets with better returns, more liquidity, and lower fees. Meanwhile, better tools for tax-free retirement income already exist. Most 401(k)s now offer a Roth option, allowing you to contribute after-tax dollars and grow your money tax-free, exactly what cash value life insurance offers. You can pair this with a Roth IRA or even a Backdoor Roth IRA if your income is too high to contribute directly.

Together, these vehicles allow for substantial tax-free retirement savings without the complexity, high fees, or risk of policy lapse that come with life insurance. Don’t let marketing hype cloud your long-term strategy. Run the numbers and stick with what works.

The Apple credit card is up for bids.

Goldman Sachs has been the credit card provider for Apple for a while now, but they have found being in the consumer lending world is not profitable enough for them. This has sparked the beginning of a bidding war with Visa offering roughly $100 million payment to be the exclusive credit card provider for Apple. Also looking at bidding are two other major players, American Express and MasterCard.

If you’re wondering why a company would bid $100 million, understand that the Apple credit card program has about $20 billion in account balances and remember every time a card is swiped, credit card companies get paid a fee. Apple is one of the biggest co-branded credit card programs along with Costco who also brings in a lot of fee revenue to the credit card company. This could be a small boost to Apple and it comes at a good time considering the difficulties they are having with the tariffs, dealing with China in the trade war, and struggling with rolling out AI.

At this time, it is unclear if Goldman Sachs will receive any payments or profits for giving up exclusive rights to the Apple credit card. I do know that Goldman Sachs is a very a smart investment bank, and I find it hard to believe that they would receive no financial compensation of any kind for giving up this deal. The consumer will probably not notice any difference other than the change of the name on the card. Visa does have a great reputation for service so I would not expect any problems with the changing of the guard on the Apple credit card.

Buy Now, Pay Later loan volume sky rockets

If you’re not familiar with the term buy now, pay later I’m sure somebody else that you know is using it. It is also known as BNPL which is what you will see many times in print. In 2019 the BNPL loan volume was only about $1 billion. Fast forward to 2022 and it has increased roughly 30 times to over $30 billion. It is a way of getting short-term credit so if you buy something you can pay for it over a short period of time.

In the past, the short-term loans were not showing up on your credit history, which in my opinion was a mistake because one could buy an expensive luxury item and have high payments, but yet still go into a car dealership or apply for a credit card and get themselves into a negative cash flow situation since their real debt and monthly payments are not revealed. Retailers love using BNPL and sometimes you see it right at the checkout stand. In 2021 there was 180 million BNPL loans for roughly $24 billion.

The next year that was up nearly 50% to 277 million loans with a value around $34 billion. Since no one was reporting these loans there were people that would stack the loans and in 2022 just under two thirds of the users had more than one loan. I’m happy to report that those offering these short-term loans like Affirm are now sending to the credit bureaus the balances and the payments so it will show up on people’s credit reports. I know some people are going to disagree with me but I do believe it will help prevent consumers from getting in over their heads.

Is Cathie Wood still worth listening to?

Over the weekend, I read an article that contained opinions from seven market pros on Wall Street about the recent extreme volatility. Three of them stood out to me as good long-term investors. Mario Gabelli has been managing money for 49 years. Michael Cuggino, who runs the Permanent Portfolio has always made sense to me, even though I don’t always agree with his decisions.

Lastly, Chris Davis runs investments for Davis Advisors and is the son of Shelby Davis who began value investing probably about 75 years ago. Who was part of the panel that I thought should not be there was chief executive officer of ARK Investment Management, Cathie Wood. I say that because her investments ideas in my opinion have always been overly aggressive and over the last five years her flagship ARK Innovation fund is down over 10%. Since the peak in early 2021, the fund is down more than 70%! Back in June 2021 when investors were buying many crazy things, she was managing $25.5 billion.

Today it is at around $5 billion, about 1/5 the value just four years ago. She still has the crazy ideas like before, I’m just surprised that she is still relevant enough for anyone to follow her. There is so much information out there for investors, I feel an investor has to be selective on what they read and listen to. They should make sure there is experience and wisdom behind the thoughts on paper or whatever avenue the information was delivered on.

Employers are still wrestling with paying for weight loss drugs

Insurance companies say that going forward employers and employees will be fighting over paying for weight loss drugs like Ozempic. Some companies have already ended coverage for the weight loss treatments known as GLP-1s. Although it’s a nice benefit for the employee, it has been discovered that some employees go to work for a company that will pay for the drug and then leave that company eight or nine months later after they lost the weight that they wanted. It is also suspected that the benefit of paying for these weight loss drugs does not offset enough of the cost.

The added costs are really difficult on small businesses and it appears they are either cutting out the drug completely or restricting it to people with diabetes or they require that employees on the drug also join a weight loss program. It appears the cheaper copycat weight loss drugs from companies like Ro and Hims and Hers Health, who is charging around $200 a month for the same service, is coming to an end. The reason for this was the FDA allowed these companies to offer their knock off drugs while the name-brand drugs were in short supply. That is now changing and that special allowance from the FDA is coming to a close.

On the bright side, the FDA did approve its first generic GLP-1, which could be priced between 60 to 80% lower than the current drugs. Unfortunately, it appears that is still about two years away. That lower price for the new generic brands would likely be somewhere between $150 to maybe $200, and I believe it will be a big problem for the major drug companies that have seen their stocks skyrocket due to the big profits from these weight loss drugs. A big benefactor of the drug has been Eli Lilly, their symbol is LLY. The stock peaked in August 2024 at around $948 a share, it is now trading around $740 a share. I’m not sure what else they have in the pipeline, but I think you could see more air let out of the balloon as we get closer to 2027 and these generic weight loss drugs are released.

Weight Watchers has slimmed down way too much!

Weight Watchers, now known as WW International, has seen its stock fall from $92 a share back in mid-2018 to a recent price of around $.15. With the new weight loss drugs, I’m not sure why anyone was buying the stock over the last couple years. They just can’t compete with the success of weight loss drugs like Ozempic. In January, they took out the remaining $120 million on their credit facility and now have over $1.4 billion of loans and bonds that come due in 2028 and 2029.

S&P Global Ratings downgraded the stock just a couple months ago and stated the subscriber base has aged and its brand is not in favor, especially among young consumers. What lifted the stock in recent years was the endorsement from Oprah Winfrey, but she stepped down from the board about a year ago. It had something to do with avoiding a conflict of interest over a TV special she was making about weight loss drugs. If you’re thinking at $.15 a share, what have you got to lose? I will tell you your entire investment. It was reported on April 9th by the Wall Street Journal the company was preparing to filed for bankruptcy in the coming months. If this does come to fruition, shareholders would then likely lose everything.

If the company desires to stay around they will then need to it by recapitalizing. I don’t believe this would be a wise move though as I just don’t think weight loss companies like WW International can compete with the weight loss drugs. 

Are you thinking about raising your own chickens to save on the cost of eggs?

With the recent market decline and all the talk about tariffs, discussions around the price of eggs seems to have fallen off the radar, but the price of eggs are still rather high. I say rather because it depends on what area of the country you live in. If you thought about getting a couple of chickens for yourself to produce your morning breakfast eggs, you’re not alone.

In 2018, there were about 5.8 million American households with backyard chickens. But now with the doubling and sometimes tripling in the cost of eggs, 11 million households have backyard chickens, nearly a 100% increase. It sounds like a good idea, but be aware like anything in life there are pros and cons to it. You will absolutely get fresh healthy eggs on a regular basis every morning for free. but the word for free comes with the caveat that there is work involved. It will take some of your time and obviously investment in housing and feeding them. And don’t forget that you have to provide some type of predator protection because you’re not the only one that likes chickens.

There’s a lot of wildlife around that could find your chickens and have them as a tasty meal. Don’t forget that wild birds do carry the bird flu and your chickens could contract that disease as well. As a chicken farmer, you will also have to put up with the noise of the chickens, the odor and what goes into a chicken must come out the other end. If you have a big family or even a family of four, you may need a few chickens because a chicken only produces one egg every 24 to 26 hours. So, if you think you might save a few dollars raising your own chickens as opposed to paying five dollars for a dozen of eggs, you may discover that raising your chickens is not for you.