Retail sales surprisingly strong, Are quarterly reports necessary for public companies? Is your financial advisor "quiet retiring"? Understand low rated bonds risk, Underwater Cars & More

Retail sales are still surprisingly strong

Although the labor market has been softening and consumers say they are worried about inflation, people are still spending money. August retail sales were up 5% compared to last year and if the annual decline of 0.7% in gasoline stations was excluded, sales would have increased 5.5% compared to last August. Strength was broad based in the report and outside of gasoline stations the only other major categories that saw declines were department stores where sales were down 1% and building material & garden equipment & supplies dealers, which fell 2.3%. Non-store retailers continued to be a dominant category as sales climbed 10.1% and food services and drinking places still saw impressive growth of 6.5%. It's because of reports like this that I worry the Fed may make a mistake if they cut rates too quickly. If they overstep, they run the risk of overheating the economy and putting added pressure on inflation. 

Are quarterly reports necessary for public companies?

President Trump floated the idea of switching company reports from quarterly to semiannual. It appears Trump believes this will help companies focus more on the long-term business performance rather than fixating on short-term quarterly numbers. There's also hope this will save time and money for public corporations. The SEC acknowledged they are actively looking into the plan as a spokesperson for the agency stated, "At President Trump’s request, Chairman [Paul] Atkins and the SEC is prioritizing this proposal to further eliminate unnecessary regulatory burdens on companies." Being a long-term investor, I can see the benefits of changing this requirement as one quarter should not dictate your decision on whether you should buy, sell, or hold a business.

Ultimately, a change like this wouldn't have a real impact on my investment philosophy and if this enabled companies to focus more on the long term and helps with costs, I would be in favor of giving companies the option to make this switch. In terms of the long-term focus, both Jamie Dimon and Warren Buffett have spoken out against not necessarily the quarterly reports, but the quarterly guidance. In a 2018 op-ed piece for the Wall Street Journal, the pair said, “In our experience, quarterly earnings guidance often leads to an unhealthy focus on short-term profits at the expense of long-term strategy, growth and sustainability.” As for the regulatory burden, I'm sure there is hope this would help entice companies to come public. There has been a huge shift in companies staying private longer and I do believe the compliance piece deters some from coming public. I'm sure there are other reasons for staying private, including control and other liquidity avenues that weren't as prominent years ago. Nonetheless, it is concerning that the number of publicly listed companies in the U.S. has fallen from more than 7,000 in 1996 to around 4,000 today. 

Is your financial advisor "quiet retiring"?

You may not completely understand what “quiet retiring” means, but a few years ago, my son Chase and I were on the Dr. Phil Show because they were doing an episode on what they called “quit quitting”. Chase and I were on the pro side for business and working hard, while the other side essentially felt they should still get paid the same amount and not work hard. So, I have coined the phrase, “quiet retiring”. I have been seeing this happen in the financial service industry, especially considering the fact that the average US financial advisor is 56 years old. I have noticed more of them feel they deserve to play more golf or travel more than the average person since they seem to be in retirement mode. They are not telling their clients this and they have their admin staff handle most of the routine details so you, the client, really don’t know that they are not working that much behind the scenes. Hence the term "quiet retiring".

Something you definitely should find out is how much your financial advisor is working? Especially if they're in their mid to late 50s because you may not have the person with the most experience watching your investments. This is very important when it comes to preparing for and weathering through difficult times. If your financial advisor is talking about retiring in the near future, be sure to understand fully what the succession plan is and who you will be dealing with. It has now been known in the industry for a few years that the average age of financial advisors is getting older and less younger advisors are coming into the industry. Be sure you understand who your financial advisor really is, who is watching your portfolio and is your investment advisor one of those that is quiet retiring?

Understand the risk of low rated bonds

Some investors rightly so have started selling some stocks and they are not excited about buying more stocks at this time. As we’ve been saying for quite a while now, we think this is a wise move to sell some stocks that are overpriced, but unfortunately, it seems investors got used to the high returns and they have turned to low rated high-yield bonds. According to JPMorgan Chase, issuance of junk rated bonds and loans hit a monthly record of $240 billion in July. In 2025, $930 billion has been raised through junk bonds and loans. Add that to the over $1 trillion in junk bonds from 2024 and you can see that the risk for investors is starting to increase. Most investors will not buy these individual junk bonds, but they have been plowing money into the high yield mutual funds and exchange traded funds, also known as ETFs. If you dig a little bit deeper, you find some companies are raising money foolishly like a company called TransDigm Group. The company issued nearly a $5 billion high yield bond in August to pay a dividend to their shareholders.

We like companies that pay dividends, but it should be from cash flow not from borrowing money that has to be paid back. Business development companies are also back in the news, and these businesses make private loans to small and midsize companies. Over the 12-month period ending in June, private loan activity increased by 33%. I have similar concerns with business development companies and private credit, which I believe will have a crash sometime in the future and cost investors more money than they anticipated. The current default rate on higher yield bonds is 4.7%, which is not bad, but it is not good either. If interest rates on the long end were to increase, which I think is a good possibility the need for debt increases. This could slow the economy and cause some of these smaller companies that have these high-yield loans to default and file bankruptcy, which means investors would lose money. It is nice to get a 10 to 20% return on your portfolio, but sometimes when things are expensive, you have to be conservative and while that may cost you some of the upside, the downside can be a lot nastier than you realize!

Financial Planning: Dealing with underwater cars

About a quarter of vehicles traded in today carry negative equity, with the average shortfall around $6,500. This happens because cars depreciate quickly, and the trade-in value offered by a dealership is the lowest number you’ll see—less than what you might get in a private sale, and well below the dealer’s eventual resale price. Because of this depreciation, about 40% of financed vehicles on the road carry negative equity. While it’s possible to roll negative equity into a new auto loan, that often creates a deeper hole: you’re financing more than the car is worth, and the new vehicle immediately begins its own depreciation cycle. Lenders may approve the loan, but the higher loan-to-value ratio can lead to higher interest rates or tighter terms. GAP insurance can be used to cover the difference between a car’s actual value and what’s owed in the event of a total loss, but it doesn’t prevent the financial strain of trading in too early, and it comes with an extra cost. With so many vehicles underwater, the safer move for most people is to keep driving the current car until the balance catches up with its value rather than trading in and compounding the problem or bring more cash to the deal, so you don’t have to finance as much.

Who will benefit the most from the Federal Reserve rate cut this past week?

You may think it is people looking to buy a home, but that is incorrect because mortgage rates generally follow the longer-term 10-year treasury yields rather than overnight rates. Real Estate developers, who borrow on the short term to develop different projects will benefit from the short-term lower rates. Who benefits the most will be the United States government with their massive $37 trillion in debt. This is because they should be able to get a better rate on short term debt issuance. The other concern with the federal debt is roughly 61% will mature in a little over two years. This puts the government in a precarious situation as they will need to determine how to best finance these debt maturities.

On the current path, by 2029 the interest the government pays on their debt would be close to 4% of GDP. It is also estimated that on the short term, a one percentage point cut in rates would lower interest costs by 0.51% as a percent of the current GDP. Other than the psychological advantage, the consumer will not benefit much. The reason for that is chief global strategist at JPMorgan Asset Management, David Kelly, noted in a research note that the reduction in interest rates reduces household income more than what they save on interest expense. His calculation is that a one percentage point drop in short term rates would be a decline in interest income for household of roughly $140 billion annually in money markets alone. This number does not include all the short-term CDs and T-bills that will come due in the near term at lower rates as well.

In 2025 who is performing better gold or Bitcoin?

One would think with a higher risk, Bitcoin would be outperforming the more conservative inflation hedge of gold. But that is not the case, year to date gold is up a surprising 39%, which is almost double Bitcoin's gain for the year of 22%. There is still crazy talk of companies like Eightco Holdings that announced a private stock sale and said it plans to use the money to buy Worldcoin, which is a cryptocurrency that is backed by OpenAI founder Sam Altman. I guess that’s more competition in the crypto world for Bitcoin? Bitcoin currently has a market capitalization of around $2.2 trillion, and I was surprised but also disappointed to see that corporate treasuries now hold roughly 6% of the total Bitcoin supply. If you do the math that is roughly $132 billion of Bitcoin. It’s important to note that the aggressive company called Strategy, which used to be MicroStrategy, run by Michael Slayer holds over half of that amount with an estimated value of about $72 billion.

I couldn’t resist but take a look at the market capitalization of this company and discovered it’s at $95 billion, not much more than the cryptocurrency it holds. It looks at this point that if you want to hold cryptocurrency, you’re far better off to hold it yourself rather than buy this stock, which had a high this year of $543 and is now down 39% from that peak. On a side note, the company has been denied membership in the S&P 500. I was glad to see that this crazy company got rejected from what should be a more conservative index.

If you like going to concerts, you may have interest in investing in StubHub

You may enjoy going to concerts and events and feel like you’re spending a lot of money on the tickets through a well-known company called StubHub. In 2024, in the United States total concert and event sales were nearly $430 billion. I’m sure you have thought about how great it would be to get a piece of the action. One possible way is by buying StubHub, ticker symbol STUB, since it is now a public company, but based on some recent information I saw about the business, I would recommend you just spend your money on the tickets, not on the stock. If you ever wondered how much StubHub gets from the fees, it’s around 20% of the total price of the ticket which averaged around $200 last year. That may sound enticing, but competition in the secondary ticket market is coming on strong from companies like Ticketmaster and Live Nation.

The Federal Trade Commission is now requiring total fees for tickets to be displayed at purchase to avoid what is known as bait and switch tactics. Even the musical acts themselves are tired of the premiums charged for tickets and some tours have invalidated any tickets that were sold at a premium on the secondary market. The primary ticket market, which is much larger and is around $150 billion annually, is currently dominated by Ticketmaster with a market share of over 50%. StubHub just recently entered this market last year and is hoping to gain share, but once again there’s heavy competition, which is not a good thing for an investor in a business. We don’t like competition because there’s no moat to prevent people or other companies from reducing prices to take some of your market share and reduce or eliminate your profits. It looks like the market may have seen some of these concerns as it was not overly excited by the IPO considering the price action was quite lackluster. The IPO price was $23.50, and the opening trade came in at $25.35. While it did climb as high as $27.89, it actually ended the day below the IPO price at $22.

Can the Trump administration fix the housing emergency?

Treasury Secretary Scott Bessent recently said the administration may declare a national housing emergency. This may sound very appealing to the roughly 75% of American households that can’t afford a median priced new home, this data is according to a builder's trade group. I would believe those numbers considering we have a housing shortage that started back in the aftermath of the 2008 global financial crisis. Since then, 20 million households have been formed, but yet only 18 million new homes have been built. There was a lot of concern from builders that they could get hit hard like they did in the 2008 Great Recession, and they became more hesitant about building too many homes. They didn't want to get stuck with them or have to sell them below their cost. The question is, what could the US government do to help bring down prices?

A large portion of the housing prices come from local laws and zoning along with a difficult permit process to build homes. These roadblocks come from local governments and are quite the revenue generator for them. I doubt that they would be willing to give that up to let the federal government control the process. Another problem in many high demand areas such as the Northeast is would they be willing to give up local regulation over control of safety and environmental concerns. I do believe a push in this direction would lead to unfortunately more court challenges that cost more money and tie up our legal system and while an emergency may be announced nothing will likely get done.

Will we get more bank mergers?

This has been talked about for the past year or so and the number of bank mergers has increased with 118 bank mergers so far this year worth almost $24 billion. In 2024 for the entire year, 126 deals were completed for $16.3 billion. In 2023, only 96 deals were made with a total value of $4.1 billion.1998 was the peak of deal making for banks when 500 deals were completed. There is talk that we could see as much as $100 billion in bank consolidation within the next few years. The table appears to be set for that to happen with the Trump administration reducing many of the stringent merger guidelines and providing a more favorable attitude towards such activity. We also have the prospect of lower short-term rates, which helps in deal making because funding costs are less expensive and at this time we have favorable valuations with potentially higher multiples.

Many banks have stronger balance sheets than they did just a few years ago, which allows them to make more deals. With over 4400 banks of different sizes in the US, we have the most banks of any major country around the world, but even that number is down 75% from 1986 when we had over 18,000 banks in the United States. Generally, when a bank acquires another bank, the bank being acquired increases in value. Some potential names that look like they could be absorbed would be Zions Bank Corp. in Salt Lake City, Eagle bank Corp. in Maryland, First Foundation located in Irvine, Texas, and BOK Financial in Tulsa, Oklahoma. Before taking advantage of any of these potential bank takeovers, be sure they have strong fundamentals. You want to make sure that in case a takeover doesn't happen, your investment will give you good dividends and growth in the years to come.