Retail Resilience, Retailer Stable Coins, AI’s Web Impact, Widow’s Penalty, Entrepreneur Optimism, Vanishing Miles, Market Fragility, Alt-Meat Decline, Avoid Going Public & At Home Bankruptcy

May retail sales look stronger than headlines show

After seeing headlines from several media outlets, I was worried May retail sales were slowing to a problem point, but I would say they actually looked quite strong. Compared to April, sales did fall 0.9%, which was larger than expectations for a 0.6% decline. It’s important to point out though that consumer rushed to auto dealers in April to try and beat the tariffs. This led to a 3.5% decline in motor vehicle & part dealers when comparing sales in the month of May to April.

Gas stations have also seen declining sales largely due to lower gas prices and actually fell 2% when compared to the previous month. Excluding these two categories, sales would have fallen just 0.1% when compared to April. While the month over month numbers point to a slowing consumer, when we look at the annual comparisons the numbers are impressive. Headline retail sales climbed 3.3% compared to last May, but if we exclude motor vehicle & parts dealers & gas stations, sales climbed 4.6%. It was largely impacted by the 6.9% annual decline at gas stations.

Areas of strength in the report included nonstore retailers, which were up 8.3%, food services & drinking places, which were up 5.3%, and furniture and home furnishing stores, which were up 8.8%. Overall, I’d say this report still shows a healthy consumer. I am still looking for the consumer to slow, but I believe people still have the ability and desire to spend in this economy, which should allow for continued growth, albeit at a slower rate. 

Why are big retailers looking at issuing stable coins of their own?

Stable coins seem to be the new buzzword for 2025. It seems at least once a week when I pick up the Wall Street Journal, I see something about stable coins. I recently read that Walmart and Amazon may be looking into using stable coins to get away from using traditional payment systems, which is costing billions of dollars in fees each year. This includes interchange fees that occur when customers make purchases using their credit cards. If you’re not sure what a stable coin is, briefly, it is a coin that is supposed to be backed by a one-to-one exchange ratio with dollars or other government currencies. In other words, reserves of cash and dollars would have to equal the value of the stable coins that were in the market.

Who would be hurt most by this? Visa and MasterCard, who collect billions of dollars in fees from the merchants, would likely be most at risk. I believe if the stable coins were to become a reliable source of transactions, you will see huge declines in the stock prices of Visa and MasterCard. Merchants have tried in the past to somehow get around the card-based systems from Visa and MasterCard, but each time they have failed. I personally still don’t have a clear comfortable feeling or understanding of stable coins, which is true of many regulators and others as well, but it does appear new technology is coming and if Visa and MasterCard are replaced, I wonder who will get the benefit of those billions of dollars in transaction fees? Will it be the retailer or the consumers?

ChatGPT and Perplexity are hurting the Internet

You may not think about it, but Alphabet’s Google search engine is seeing huge declines. This is not just hurting Google, but it also hurts many companies who get their business from people searching on Google. This could have a major impact on companies like TripAdvisor as it gets 58% of its global visits from search. If people get the answer, they need right away from ChatGPT, there’s no need to continue searching and you’ll not see any other ads directing you to other sites that may want to do business with you.

Many companies from Netflix to US travel and tourism companies are seeing declines in traffic to their websites by 10 to 20% from one year ago. For example, search referrals to top U.S. travel and tourism were down 20% year over year last month and news and media sites saw a decline of 17%. ChatGPT had 500 million weekly active users in March and that was up almost 70% from the 300 million they saw in December. The reason this is hurting Internet search is since you get your answer from one platform, you close the book and move on. You don’t need to do any more searches on other sites.

Google‘s lawsuit for being a monopoly with the federal government will still not disappear, even though things have changed as they are being penalized for what they have done in the past. I have noticed that when I’m using Google now the AI search function now pops up. The big question is will this help Google retain its search business? This is extremely important considering more than half of Alphabet’s business still comes from Google search ads.

For investors, you may want to be aware of how much business the company you’re investing in gets from search off the Internet because there could be a decline in the business if it is a large amount. One company that could benefit from the decline in search is Meta. This would come from the Facebook and Instagram platforms because that’s still a way for businesses to be online and in front of potential new customers and clients. There’s still some concern on copyright infringement from many companies and this could be something that really hurts the advancement of AI. Are you finding yourself using AI more and doing less Google searches? 

Financial Planning: The “Widow’s Penalty”

When a spouse passes away in retirement, the surviving spouse typically transitions from filing taxes jointly to filing as a single taxpayer in the following year, a shift that often triggers what’s known as the “widow’s penalty.” This penalty arises because single filers face higher tax rates at lower income thresholds and receive a smaller standard deduction, which can significantly increase their tax liability even if their income stays the same.

To make matters worse, household income often drops after a spouse’s death. For example, if both spouses are collecting Social Security, only the higher of the two benefits continues. This combination—less income and higher tax rates—can lead to a surprising and painful spike in effective tax burden and reduction in cashflow.

To mitigate this risk, couples can take proactive steps such as performing Roth IRA conversions while both spouses are alive to lower future taxable income, carefully coordinating Social Security claiming strategies to maximize long-term benefits, and planning pre and post death retirement withdrawals to keep cashflow consistent. Thoughtful retirement planning can help soften the financial blow and preserve more wealth for the surviving spouse.

Small Business Owners Are Optimistic

In a recent survey by the NFIB, a small business survey revealed small business owners are looking optimistic going forward. I think this is a huge indication of a good economy going forward because small businesses account for 99.9% of all businesses in the United States. There are 33.2 million small businesses in the United States that employ roughly 62 million employees, which is almost half of the private workforce in the United States.

Small businesses also account for roughly 2/3 of job creation in the United States. The health of a small business is very important and from the survey 14% reported the business was in excellent health and 55% reported their business was in good health. 28% said that their business was in fair condition and only 4% reported that their business was in poor shape.

They do point out that the single most important problem they’re dealing with is labor costs. 26% are raising compensation for their employees and 20% of small businesses say they plan to raise compensation for their employees in the next three months. 56% of small business owners reported capital outlays in the next six months with 40% spending on new equipment and 26% acquiring new vehicles. 15% of small businesses spent money to improve or expand their facilities while 10% spent money on new fixtures and furniture.

People are uncertain of the economy going forward and many are still concerned about how the tariffs will play out. This small business survey and the recent jobs report gives me optimism going forward and while we are still somewhat cautious on investing in the broader based stock market, we believe things are looking pretty good for the economy as a whole.

Airlines Will Take Your Miles When You Pass Away

I guess many people don’t think about the value of how many miles they have accumulated and what happens to them if they pass away. I’ve heard of some people having a half million to 1,000,000 miles and they probably don’t realize that when they pass away the airline will cancel all those miles. When you think about the value of a large number of miles you are probably talking about tens of thousands of dollars. It is estimated that over 2% of Americans 55 and older do have more than 500,000 reward points or miles to their name.

If you read the fine print in regards to your airline miles, you’ll see the terms and conditions don’t allow miles to be treated as something you own. Some airlines like American and JetBlue reserve the right to approve point transfers after a person‘s death, but they don’t automatically permit them.

The best way to allow your family to use your miles is to give them your account login information while you are alive. Once you pass, they can still use your airline miles as long as the airline is not notified that you are deceased. If they find out that you have passed away, they will cancel the miles, but I doubt that the airlines are reading the obituary pages every day. I would tell people not to let the miles get too high since your points don’t earn interest or grow in value. Sometimes you may get special perks for a large amount of miles or points, but they are not an investment or a retirement fund.

Why this is a fragile stock market

There are three main reasons why I believe the stock market is in a fragile position. You could say four if you include the fact on how quick the stock market rebounded from lows just set a couple months ago. The most recent reason is obviously in the Middle East with Israel and Iran as we are seeing rockets and drones flying through the skies blowing up pieces of each country.

Not to call a winner, but it appears at at this point in time Iran is suffering the most. A war is never good for the stock markets and we did see oil prices rise over 7% on Friday, which if it holds that level, this could be passed along to US consumers who have been enjoying lower gas prices. That would come to an end and could cause inflation to reverse course and start increasing.

The Federal Reserve met on Wednesday and did not cut rates. The President once again expressed his frustration and there could be more talk about relieving the chairman of his duties. I do not think he will ultimately be removed before his term ends, but it still stirs up concerns in the stock market on the negative side.

We also can’t forget the extension of tariffs, which ends on July 9th, is now only a few weeks away and that too can start to scare investors as the back-and-forth in negotiations is not all going to be positive. Could we see another extension? Could we see the full tariffs implemented again? Or will we see agreements with most of the nations and tariffs become less of a concern going forward? At our investment firm, we still remain cautious.

We did invest 6% of the portfolio in a great investment a little over a month ago, but we remain patient with the cash we have left, and as much as we would like to invest in a great company at a great price today, we are still looking for a better opportunity. I recommend investors proceed with caution as well.

What happened to those alternative meat companies?

In 2019 the alternative meat companies were all the rage and Beyond Meat, which trades under the symbol BYND, was over $200 a share. Today, you can pick up a share of the stock for about $3. The other popular alternative meat company was Impossible Foods and even though they never went public, it still raised around $2 billion in the private market. Still to this day, the company has not made a profit.

The CEO, Peter McGuinness, says he still sees profits just a few years away along with maybe an initial public offering. They are still fighting to try and build their companies and they are now focused on what is known as flexitarians, which are people who occasionally include meat in their diet. They’ve also changed the packaging colors from green to blood red and they even hired a hot dog-eating champion as a brand ambassador. They’ve added to their meat alternatives and now have steak bites, hotdogs, and chicken tenders.

The CEO admits that the biggest problem is their taste and they are currently on their fifth edition of burgers, and he feels they probably are going to need at least a couple more versions to perfect it. He does mention that there are still concerns about the health effects of highly processed foods as well as higher food prices. In my opinion, those are two big ones and I don’t see how they will overcome them.

Avoid watching a show called Going Public

The show is now in its third season and can be viewed on X for the final episode, which is supposed to be on June 24th. In my opinion, the show is very dangerous because the reality show is about entrepreneurs doing some crazy things trying to raise money for different types of startup businesses. It appears to be more about entertainment and excitement rather than looking at the truth and fundamentals of investing. Since X is a social media company, they do not have to comply with normal media broadcast disclosures.

What is even more dangerous about the show is that there will be a click to invest button where viewers can invest in the business as they’re watching the show. I don’t see how anything can be more dangerous when it comes to investing than seeing the hype of somebody talking about their investment who has paid handsomely to be on the show. I have seen that some of the guests have paid a half million dollars to be part of the show.

X and the show producers don’t seem to vet their guests very well. A couple of the guests on the show, Dutch Mendenhall and Amy Vaughan have been under investigation by state and federal regulators. Apparently, they had a private real estate investment trust and investors appeared to have lost all their money and no one knows where the money went. Now they’re on the show promoting investing in golf courses across the United States. I know some people will watch the show and get excited and click on the invest button because of their emotions.

The show is so full of hype that the producers on June 3rd sent out a promotional email via a mailing list that began with F*** CNBC, forget Bloomberg and ignore Fox, we are rewriting the rules. It was just last week when I wrote about the high risk of alternative investments in private equity and private real estate and here, I see this show promoting to probably 1million people these risky investments. Unfortunately, some will probably take the bait, don’t let it be you.

Retailer At Home files for bankruptcy

I was so disappointed to see this week that one of my favorite retailers, At Home, is filing for bankruptcy. I had a love-hate relationship with them because I would go there and find so many good things for our house and even though they weren’t expensive the quantity of what I would buy would be over the top. The problem for the company is it amassed nearly $2 billion in debt and is facing declining demand along with uncertainty about the tariffs from China, which will come up in talks about a month from now on July 19th.

The company apparently receives most of its products from China and as we know those products have been hit with 55% tariffs. This will definitely increase the price of their products, which is one of the main benefits of going to their stores. The company will be taken over by a group of lenders that will provide $600 million in financing to fund the bankruptcy proceeding and use $200 million of that for fresh capital. The company plans to close 26 stores in 12 states. I have my fingers crossed the At Home store in Carmel Mountain Ranch is not one of them. This is not the first time the company filed bankruptcy since its beginnings in Texas in 1979 as in 2004 it filed for bankruptcy reorganization.