January 20, 2024 | Banks & the Economy, Office Space, Consumer Spending and Taxes when Selling a Home

Smart Investing with Brent & Chase Wilsey

#Smart Investing #Chase Wilsey #Trading #Business #Brent Chase Wilsey

44:18

AI and Generative AI are transforming cybersecurity by enhancing threat detection and response. These technologies offer unmatched accuracy and efficiency, making them crucial for protecting sensitive data. As cyber threats evolve, integrating AI into security strategies is essential. This week, Dave, Esmee and Rob talk to Corence Klop, CISO at the Rabobank, about the expanding role of AI and Generative AI in cybersecurity, and how to begin integrating these technologies into your organization. TLDR 04:45 Rob is confused about wrong AI information for a hotel booking 08:20 Conversation with Corence 33:40 How can you identify the state of flow for your end-user in agile practices? 40:50 Going to the swimming pool and disco with your daughter Guest Corence Klop: https://www.linkedin.com/in/corenceklop/ Hosts Dave Chapman: https://www.linkedin.com/in/chapmandr/ Esmee van de Giessen: https://www.linkedin.com/in/esmeevandegiessen/ Rob Kernahan: https://www.linkedin.com/in/rob-kernahan/ Production Marcel van der Burg: https://www.linkedin.com/in/marcel-vd-burg/ Dave Chapman: https://www.linkedin.com/in/chapmandr/ Sound Ben Corbett: https://www.linkedin.com/in/ben-corbett-3b6a11135/ Louis Corbett: https://www.linkedin.com/in/louis-corbett-087250264/ ' Cloud Realities' is an original podcast from Capgemini…

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Banks and the EconomyEach quarter we get very excited to see what the major banks have to say about the consumer and the economy. Last Friday, JPMorgan, Wells Fargo, Bank of America and Citigroup all reported earnings. The overall comments were the consumer is still strong. The CEO of Wells Fargo said average deposit balances per customer remain above 2019 levels and loans to businesses were up in the quarter. There were some write-offs on commercial office buildings with Bank of America charging off the most at $100 million. In total the four banks charged off $6.6 billion of all loans which was double what it was one year ago. Profits for the four banks in the fourth quarter were up 11% from one year ago coming in at $104 billion. JP Morgan Chase accounted for roughly half of that profit with $50 billion in the quarter. These profits are pretty amazing because in addition to the $6.6 billion charge off for loans, they also had to set aside $9 billion to pay a special Federal Deposit Insurance Corporation (FDIC) fee which was related to the failures of Silicon Valley Bank and Signature Bank. So, I’m happy with the report and do continue to believe 2024 will be a good year for the economy and the consumer, but as always, we will receive our bumps and bruises as the year progresses.Office SpaceIt was reported that 19.6% of office space in major US cities was sitting empty in the fourth quarter of 2023. That is the highest number on record which goes back to 1979. The problem is twofold. First, there are still some people working exclusively from home, which I still say as time passes more people will be coming into the office as businesses need to increase their profits and productivity. Second, overbuilding occurred for years with commercial buildings. It was noted that the bulk of the vacant space in buildings were built from the 1950s through the 1980s. If you’re going to get an employee to come back to the office, they don’t want to go back to some rundown building. They are asking for beautiful buildings with coffee bars, gyms, and Pickleball courts. There are some good opportunities for investments in class A commercial buildings that are in booming areas, but investors have to be wary that they are not investing in lower grade class B or C buildings in run down cities.Consumer SpendingI think someone forgot to tell consumers to slow down on spending. Retail sales were strong in December as they grew 0.6% for the month, which topped the estimate of 0.4%. Looking compared to last year, December sales were up an impressive 5.6%. Areas of strength included food services and drinking places (+11.1%), non-store retailers (+9.7%), and electronics and appliance stores (+10.7%). Areas that weighed on the report included gas stations (-6.6%), furniture and home furnishing stores (-4.7%), and building material & garden equipment & supplies dealers (-2.3%). While this is good news and shows the consumer is still strong, it is leading to concern around the Fed’s rate cut path. I’m still optimistic the Fed can balance the economy and rate cuts to navigate a soft landing. Financial Planning: Taxes When Selling a HomeA house is considered a capital asset, and when a capital asset is sold for a profit, a capital gain is produced which can result in a tax bill. For homes that have been the primary residence of the seller for at least two years out of the last 5 years, a home sale exclusion applies which reduces the amount of capital gain by up to $500k for a married couple or $250k for a single person. For example, if a home was purchased for $250k then sold years later for $1,250,000, there would be a capital gain of $1,000,000. This gain may then be reduced by the $500k exclusion, resulting in a taxable capital gain on the remaining $500k. If the home was instead sold for $700k after purchasing for $250k, the gain would only be $450k, which the exclusion would completely cover resulting in no taxes on the sale. If

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Smart Investing with Brent & Chase Wilsey

January 20, 2024 | Banks & the Economy, Office Space, Consumer Spending and Taxes when Selling a Home

Smart Investing with Brent & Chase Wilsey

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Smart Investing with Brent & Chase Wilsey

1
March 29th, 2025 | Tariffs Push Back, 401(K) Investors, Contradicting Inflation Readings, Credit Score Boost Before a Mortgage, Nike, Stanley Black and Decker (SWK), Wingstop (WING) & Viasat (VSAT) 55:39

4 дні тому55:39

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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... 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... 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... 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... 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... 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... Companies Discussed: Nike (NKE), Stanley Black and Decker (SWK), Wingstop (WING) & Viasat (VSAT)…

Smart Investing with Brent & Chase Wilsey

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March 22nd, 2025 | Stock Market Pain, Top Consumers, Long-Term Stocks, Form 5498, Tesla, Inc (TSLA), Lockheed Martin Corporation (LMT), Lear Corporation (LEAR) & Gilead Sciences, Inc. 55:40

9 днів тому55:40

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Is there more pain coming for the stock market? Both the NASDAQ and the S&P 500 have now hit correction territory and people are hoping that the worst is behind us. I would tell people to be prepared for more pain. The tariffs are still a big concern and the uncertainty around them has not cleared. Also, even with the pullback valuations for stocks are still high. We base our concerns on the fact that many valuation ratios are elevated compared to historical levels, but one that really stands out is... How much more do top consumers spend? When looking at consumer spending it is obvious that is not a constant level straight across the board and people making more money would obviously be spending more money in the economy. But just how much more is the high-end consumer spending than the average consumer? The top 10% of consumers account for 49.7% of consumer spending. If you’re... Holding stocks long-term doesn’t always pay off You probably have heard that you should hold stocks for the long-term and you’ll be fine. I generally I agree with this statement, but there are always exceptions to the rule and that holds true here. If you look at different 10-year holding periods, you will see more losing periods than you probably expected. As an example, the 10-year period ending February 2009 had a loss of 37.4%. There are other 10-year holding periods such as the ones ending September 1974, August 1939, June 1921, October 1857 and April 1842 that all had losses ranging from 23 to 37.3 percent. Those losses are in real terms adjusted for inflation. One reason these periods had great losses is they were generally periods when there was high speculation that then caused prices to rise to elevated levels just to see them fall back to reality. This is why it is important for investors to not just buy into a story of a stock, but to understand what they are... Financial Planning: What is Form 5498? When funds are distributed from a retirement account, a 1099-r is generated and used to file your taxes to report what kind of distribution it was. This is true whether the distribution is taxable or not. For example, if you rolled money from a 401(k) to an IRA, it is a non-taxable rollover, but a 1099-r is still created since funds left the 401(k) which needs to be reported. A Form 5498 is generated when funds are received by any type of IRA for any reason. So, if you made contributions, conversions, or recharacterizations with a traditional, Roth, SEP, or Simple IRA, you will receive a 5498 stating what happened. Depending on what you did, you will likely need to report the activity on your taxes. The problem is, in many cases the Form 5498 is not ready until May of the following year, even though taxes are due the previous month, on April 15th. Here are some examples where this can create problems. If you did an indirect rollover where you withdrew retirement funds and replaced them within 60 days, the withdrawal should not be taxable. However, if only the 1099-r from the distribution is reported because there is no 5498 that shows money was replaced, it may be reported as a taxable distribution rather than a rollover. If you are doing backdoor Roth contributions, a 1099-r is generated when the funds are converted from the traditional IRA to the Roth. If it is not also reported that a non-deductible contribution was first made to the traditional IRA, the conversion may be treated as a taxable conversion. Lastly, if you have been making deductible traditional IRA contributions, but there is no 5498 showing the contributions, you may not receive the tax deduction. I don’t know why this form... Companies Discussed: Tesla, Inc (TSLA), Lockheed Martin Corporation (LMT), Lear Corporation (LEAR) & Gilead Sciences, Inc.…

Smart Investing with Brent & Chase Wilsey

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March 15th, 2025 | Private Equity in 401K’s, Bitcoin Strategic Reserve, Inflation Report, Inflation Front, State and Local Tax (SALT), DoorDash, Inc(DASH), Rocket Companies, Inc.(RKT) & Verizon (VZ) 55:40

18 днів тому55:40

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Should private equity be allowed in your 401(k)? A bitcoin strategic reserve is a terrible idea Inflation report puts stagflation risks at ease Another win on the inflation front Who Benefits from Repealing the “SALT” limit? Companies Discussed: DoorDash, Inc (DASH), Rocket Companies, Inc. (RKT) & Verizon Communications Inc. (VZ)…

Smart Investing with Brent & Chase Wilsey

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March 8th, 2025 | Church Pension Plans, Structured Products, Job Report, Avoid State Taxes from Federal Debt, Sempra (SRE), The Mosaic Company (MOS), Zoom Communications (ZM), & Discover (DFS) 55:40

28 днів тому55:40

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Church pension plans may be at risk I hate to say this because we all want to believe that one of the safest places to go is church. Unfortunately, there are church pension plans like Saint Claire’s Hospital in Schenectady, New York and Saint Joseph Hospital in Rhode Island that had no or very little money left for retirees when it was time for their retirement. You may be wondering how can that be? Pension plans should be safe especially under federal law where there are protections from the Employee Retirement Income Security Act of 1974, which is commonly known as ERISA. You may also think if you know something about pension plans that employers must pay into the pension benefit guarantee corporation or what is also known as the PBGC. Unfortunately, when the government came up with the federal law on pension plans to protect retirees, there was concern about the constitutional separation of church and state and they did not want to cross that line. So they exempted churches and employers related to the church, which would include schools, hospitals and publishers. Church pension plans are allowed to contribute to the pension benefit guarantee corporation, but they’re not required to and unfortunately most do not. It is sad that we cannot trust some of our religious leaders to protect our financial future. If you or someone you know works for a type of association related to a church and they have a pension plan they may want to dig deep into it to make sure it’s really there. Unfortunately, there have been church pension plans that have exaggerated the returns on their investments in their pension plan and ultimately collapsed when people began retiring. It may be unfortunate but it could be wise to have a secondary retirement plan if you work for a church just to be on the safe side so you have something there in your golden years! Structured products are back from 2008 Structured products that destroyed the economy in 2008 are back once again. In 2008 there was nearly $1.8 trillion of structured products issued. For 2025, the experts are forecasting structured product issuance of $2 trillion. If you don’t understand what a structure product is, it is nothing fancy other than Wall Street creating loans that hide their true value. In 2008 these were mainly mortgage-backed loans that Wall Street sold and told people there’s no way that these borrowers would default on their real estate loans. Today, they are even riskier with the loans backed by weak assets such as credit card debt, lease payments on cars, airplanes, golf carts and even plastic surgery loans. Recently in Las Vegas there was a convention for four days that was packed with bankers from Wall Street and around the country that were all in the buzz about the hype of the profits they can make off of these structured products. So far investors have been safe and have not had any losses, but that will change in the years to come especially if the economy weakens. With higher demand, prices for these products are now higher and I believe overpriced. The higher demand also creates riskier investments that look similar to products with less risk but make no mistake, they have far greater risk. It appears to me that the greed on Wall Street is back and the bankers are trying to tell you that stock investing is out. They tell you that you should be putting your money into these structured products for diversification to avoid market fluctuations, but the real reason for this is the fees they make are so much higher than if you just invested in good quality equities that pay dividends and grow over the long-term. Wall Street makes nothing off of that! Jobs report seems uneventful, which is a good thing February nonfarm payrolls increased by 151k in the month, which was less than the estimate of 170k. While I wouldn’t say that’s a positive, it was better than last month’s reading of 125k and it still shows the labor market remained healthy. Revisions to th…

Smart Investing with Brent & Chase Wilsey

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March 1st, 2025 | Home Sales, Home Sellers, Overpriced AI, Berkshire Hathaway, Full Retirement Age, Freeport-McMoRan Inc.(FCX), Qualcomm Incorporated(QCOM), Super Micro Computer (SMCI) & (LLY) 55:41

5 weeks тому55:41

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Home sales are starting to look weak Last week we saw the release of existing home sales in the month of January and the decline was far bigger than expected. The number of units sold on an annual basis was 4.08 million, which was a decline 4.9% compared to the prior month. Analysts were expecting a smaller decline of 2.6%. While inventory remains tight at a 3.5-month supply, it is improving. Month over month inventory increased 3.5% and when compared to last January, we saw an increase of 17%. For now, it appears that housing prices are stable with the median price of a home sold in January at $396,900, an increase of 4.8% over last January. The number of cash buyers slipped from 32% one year ago to now only 29%. What is more disturbing is the numbers on first time homebuyers. Over history, first time homebuyers have generally made up around 40% of home sales, but January data shows that has slipped to only 28%. I don’t see a crash in the housing market coming, but I do believe people buying a house thinking they will make 10 to 20% on their investment over the next year or so is a mistake as I’m pretty confident those days are gone. If you’re going to buy a home, buy it as a place to live and raise your family, do not try to make a quick investment return on the short term. Some home sellers are giving up As a whole, the US home selling market has had some cracks, which we have talked about in the past. The rising interest rates have kept buyers on the sidelines and people selling their homes still think they’re worth more than what they can get in today’s market. Also, sellers have been spoiled over the past few years thinking you put your house on the market and you should be able to sell it in less than a month. Over a longer period of time, which looks out further than just the last few years, it used to maybe take 3 to 6 months to sell a home. Home sellers really became discouraged in December as delistings soared 64% in the month compared to last year after not finding an interested buyer to purchase the home. At 73,000 delistings, this was the highest level since 2015. We could see that change if interest rates come back down, but at this point in time there’s no indications that that will happen in a major way. I’m still looking for a low growth environment for the price of real estate in the coming years. Another comparison showing AI is overpriced Many people have used the comparison of the tech boom and bust when looking at the high prices for a lot of these AI stocks, which I believe has a lot of relevance. But if you go back 100 years, there’s another comparison with Radio Corp. of America, which was a booming technology back then. If your company put radio in the name somewhere, you got to ride along on the upward trend. Sound familiar? RCA stock rose 200 times its value during the 1920s, but then by 1932 it fell 98%. What is even more amazing is in 1986 General Electric acquired RCA for about 72% higher than the price peak back in 1929. It has never been a wise investment strategy to overpay for any investment, which seems to mostly happens in technology. Over the years this hype cycle has happened with cannabis, electric vehicles, and 3-D printers just to name a few. No one knows where the top will be for AI, but one thing I know for certain is many people will lose far more than they could even imagine, which unfortunately will destroy their retirement portfolios. Berkshire Hathaway historically high cash balanceIt is no secret that Warren Buffett’s company, Berkshire Hathaway, is sitting on over $300 billion in cash, which is invested mostly in T-bills. As a percent of assets, it is now just over 25%, which has never been seen before. The excess cash is caused by two things, first reducing ownership of Apple and some other stocks. Last year alone Berkshire sold 605 million shares or about 70% of its holdings in the stock. It now has a market value of only $75 billion. The second reason for…

Smart Investing with Brent & Chase Wilsey

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February 22nd, 2025 | Senior Housing Market Boom, Young Investors, Weak Consumer Sentiments, Tax Traps with Rentals, Intel Corporation(INTC), Illumina Inc.(ILMN), The Kraft Heinz Company(KHC) & (HIMS) 55:37

6 weeks тому55:37

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Will the senior housing market boom continue going forward? Investors may think with the population getting older that investing in senior housing could be a great investment going forward. They could be right as the oldest boomers turn 80 at the end of this year. What’s even more amazing is that the US population of 80-year-olds and older will hit 18.8 million in the next five years, that is a 27% increase from today. Senior housing hit a brick wall when the pandemic hit in 2020 and with the high infection rates, loss of life, and social distancing restrictions the demand fell drastically for senior housing. Both the high cost of labor and the shortage of it did not help either. It is estimated in five years they will need 560,000 new units to meet the expected demand. However, due to the high cost of development and the concern that about half of the seniors won’t be able to afford private senior housing costs, it’s estimated that only about 191,000 units will be added. The good news is more than 40% of seniors could afford senior housing on their income alone, which increased from 30% eight years ago. Unfortunately, those who can afford senior housing would rather not use it and prefer to age at home. Developers are willing to risk their capital on the higher end of the wealthiest seniors building luxury senior housing with fine dining, spas and movie theaters. One high end luxury senior housing project is expected to break ground this year at Rancho Santa Fe in San Diego with 172 units available. I think this sector for investing at this point is worth watching, but I don’t think I’d want to commit any capital at this time given there seem to be some substantial risks. Are young investors taking too much risk? A comparison of Gen Z, who were born between 1997 through 2012, versus baby boomers, who born from 1946 to 1964, show that Gen Z is taking on much more risk compared to when baby boomers were their age. In a study from the FINRA Investor Education Foundation, 36% of respondents between the ages of 18 to 34 had traded options. This compares to 8% of investors who were 55 years and older. Also revealed in the survey was younger and new investors were more likely to use margin when investing. This came at a surprisingly high rate with 23% of investors between the ages of 18 and 34 saying they had used margin when investing. This compares to just 3% of respondents age 55 and older. What was also interesting and informative is the lack of investing experience as 19% of investors with less than two years of investing experience stated they had used margin. However, just 6% of investors with experience of 10 years or more have used margin. I think many of these older investors are more cautious because they had learned their lesson. There’s no doubt that the younger investor today is taking on more risk than the more experienced investors. I believe this is for two reasons. First off, the access to trade and invest is so easy and it can be done on the phone in your hand at essentially any point in time. Compare that to 25-35 years ago when investors had to go through a broker to trade. The second reason I see is the Great Recession in 2008 was 17 years ago and the young investors today were only 5 to 15 years old and had no interest or care about the economy and the crash of the stock market. Investing successfully long-term involves many years of experience and research and unfortunately, I believe the younger investors will learn by experience that the risk they are taking today will not end well. Weak consumer sentiment brings down stocks Stocks fell on Friday after the headline consumer sentiment index came in at 64.7, which was down 9.8% from January and below the estimate for 67.8. This reading was also down 15.9% compared to this time last year. I was surprised to see the one-year expectation for inflation came in at 4.3%, which was the highest level since November 2023. The five-year outlook increas…

Smart Investing with Brent & Chase Wilsey

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February 15th, 2025 | AI Electricity Usage, Mag Seven, Producer Prices, Credit Card Interest, Dollar Tree, Inc. (DLTR), Grand Canyon Education, Inc. (LOPE), Mondelez International, Inc. (MDLZ) & (PSX) 55:40

7 weeks тому55:40

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How much electricity will AI need?To train AI models companies use graphics processing units, also known as GPUs. They are now starting to build larger clusters of GPUs, which requires even more electricity. How much electricity you may ask? AI data centers use about 30 Megawatts of electricity at a time. If you don’t understand megawatts, let’s just say it’s a lot of power. Picture 30 Walmart stores and how much electricity they use at any given time, that is estimated at 30 megawatts. Fast forward five years into the future when there will be more data centers and larger AI models. It is estimated they will require 5 gigawatts of electricity. 5 gigawatts is a huge amount of energy, it is about the same amount of energy needed to power a city like Manhattan in New York. Also, a big concern is within the next five years these massive data centers could consume up to 17% of US electricity. You may be thinking just build more power plants. The problem is data centers can be completed within 18 to 24 months, but to build a power plant can take over three years and that’s provided all permits and regulations are met on time. There’s also the concern of how do you get that energy to the data centers, you’re going to need more transmission lines, but that can take 10 years or longer to get that task completed. Wind and solar are not the answer because data centers need power 24 hours seven days a week and when the sun goes down or the wind stops, there’s no power. I see some roadblocks ahead with fast moving AI, maybe we need to slow down a little bit? Mag Seven capital expenditures could be a big problem! The Mag Seven, which includes Apple, Alphabet, Amazon, Microsoft, Meta, Nvidia, and Tesla has been a group that has dominated the stock market the last couple of years. Much of the excitement around the stocks have been tied to advancements in AI, but there has still been little evidence these companies (outside of Nvidia) have been able to profit from the trend. A major concern I have is these companies are investing tons of money and the big question is how profitable will these investments be? It is estimated Alphabet, Microsoft, and Meta will spend $200 billion on artificial intelligence this year alone and their budgets have continued to grow. If we look at total capital expenditures, also known as capex, the budgets have grown immensely for many of these companies. Amazon is projected to spend around $105 billion on capital expenditures in 2025, up 27% from 2024, which came after a 57% increase over 2023. Microsoft has guided to $80 billion in capex for its fiscal 2025, up 80% from 2024, which was up 58% from the year before. Alphabet estimated capex of $75 billion in 2025, up 43% from 2023, which was up 63% from 2022. Meta has a forecast of $60 billion to $65 billion of capex in 2025, up 68% at the midpoint from 2024, which was up by 37% from the year before. The big problem with major capex is investors won’t see much of a difference in earnings, but there will be major hits to free cashflow. Capex is generally expensed or depreciated over time, which means it won’t hit earnings in a major way initially, but it could weigh on earnings growth over time as that expense remains for years to come and potentially grows if capex budgets continue to climb. As an example, Meta is projected to see $68 billion of net income this year, but free cash flow could slide 25% to $40 billion. Investments of this magnitude need to pay off, especially considering the high valuations for these stocks. Time will tell if these investments work out for all these companies, but I must say I’m skeptical they will all be winners from this movement 5-10 years from now. Investors need to look at the full picture and understand all the moving parts, which includes how all the financial statements work together. At our firm we don’t just look at earnings, we also want to see good cash flow and a strong balance sheet. Producer Prices come…

Smart Investing with Brent & Chase Wilsey

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February 8th, 2025 | Job Openings, Jobs Growth, Climate Mutual Funds, Private Equity, 401(k) Loans, Fox Corporation (FOXA), PVH Corp. (PVH), Dollar General Corporation (DG) & (UPS) 55:40

8 weeks тому55:40

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Job openings post a sharp decline The Job Openings and Labor Turnover Survey, also known as the JOLTs report, showed job openings of 7.6 million in the month of December. This was below the estimate of 8 million and the reading of 8.09 million in the month of November. While this may sound disappointing, this still leaves the ratio of open jobs to available workers at 1.1 to 1. A softening labor market is still not a bad thing considering it is coming from such a strong spot where workers have had an immense amount of power over employers for a couple of years. The Fed wants to make sure the labor market isn't too strong as it could cause inflationary concerns, so I actually see this as a positive considering it is still a good report, but not too strong. I still believe the labor market could soften further without it being problematic for the economy. Jobs growth still looks positive Although the nonfarm payrolls growth of 143,000 in the month of January missed the expectation of 169,000, I still see the number as healthy for a growing economy. This number also came after upward revisions of 100,000 for December and November. The January number was slightly off the average of 166,000 in 2024, but I would expect to see a lower total in 2025 given the fact that the unemployment rate is extremely healthy at 4%. I was surprised to see wage growth accelerate to 4.1% in the month, which was higher than last month’s reading of 3.9% and was at the highest level since May 2024 when it also registered 4.1%. At this level I wouldn’t say wage inflation is problematic, but I would say it is worth watching. If it reaccelerated to a higher level that could pose problems for the battle over inflation. I would say overall the job report looked healthy with no major surprises and for the most part it would point to a labor market that is continuing to soften, which I believe is good for our economy as a whole. Redemptions are high for climate mutual funds Climate mutual funds, sometimes called green funds, grew quite rapidly from 2019 through the beginning of 2024. Apparently, investors began realizing that the equity concentration in these mutual funds really hurt their returns in 2024. Redemptions of $30 billion means investors wanted to leave these climate sensitive mutual funds to invest elsewhere. It is estimated worldwide that climate focused mutual funds are approximately $534 billion. Redemptions of $30 billion is a pretty big hit considering that equates to around 5 to 6% of fund assets. Based on how times are changing, I believe going forward investors should not expect their returns to keep pace with the overall market. Another problem for investors is when redemptions in these funds are high, the fund manager must sell off assets to raise cash, perhaps at lower prices which can really hurt the performance of the fund going forward. This is because the stocks have been sold out of the portfolio to raise cash and if the stocks rebound, the fund performance will lag because of the missing equities that had to be sold. On the other side, if they sell positions with a gain, this will create tax consequences for investors. Behind the curtain of private equity Private equity over the last few years has become the cool thing in investing. Investors have been trying to get into private equity as an alternative asset, which I personally do not believe in because of the behind the curtain details no one knows what’s going on. Over the last 10 years, private equity assets have increase 300% to around $4 trillion. What’s even more amazing is that the fees collected by these private equity firms has increased 600%! A trade group by the name Institutional Limited Partners Association has had enough. They are pushing for new guidelines to standardize financial reporting for private equity investors including public pension plans, university endowments, and charitable foundations. What I thought was crazy is that private equity…

Smart Investing with Brent & Chase Wilsey

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February 1st, 2025 | 2025 Bank Earnings, DeepSeek News on AI, Custodians are not Fiduciaries, GDP Growth, Tax Time, Electronic Arts Inc. (EA), CSX Corporation (CSX), Dole PLC (DOLE), Juniper... 55:40

9 weeks тому55:40

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What bank earnings reveal for 2025 Most big bank earnings are out now and the news and the guidance did lean on the positive side. A concern was revealed, which was no surprise to us that loan growth was only up 1.1% from a year ago. It is expected to see loan growth for 2025 of around 2.6%. Bank of America was the big winner here reporting loan demand grew 5 % from last year, but regional bank KeyCorp disappointed investors with their guidance as they are estimating loan balances would drop 2 to 5% in 2025. A positive in their report was net interest income would rise 20%. That was not good enough for the analyst community as the stock sold off following the report. Net interest income, also known as NII is the difference of what a bank pays for money and what they loaned it out at. This is a big factor when one is investing in banks considering it is such a large part of their profits. We have talked before that we do expect to see more mergers and acquisitions, also known as M&A going forward. This could help banks like KeyCorp and other smaller banks that go on sale as their stock drops, as there may be a floor to the fall with bigger banks potentially having some interest in scooping up the smaller banks as they go on sale. There are over 4500 banks in the United States, that is a lot of potential for bank M&A. Expected reductions in regulations for banking would also be a great benefit to Wells Fargo and some other banks as well. I do believe in having a strong balanced portfolio and if you don’t have some type of financial bank or financial institution in your portfolio, I believe you are missing out. DeepSeek news sends US AI stocks into freefall! DeepSeek AI is a Chinese artificial intelligence start up that rivals US companies like ChatGPT, Anthropic, and several others. DeepSeek has seen it’s popularity surge after releasing its reasoning model known as R1. This model apparently tops or is in line with the US competition and on Monday the DeepSeek app took over OpenAI’s spot for the most downloaded free app in the US. Many of you can probably guess my thoughts on this after my concerns with TikTok, but I do feel this is extremely dangerous and users must be careful in understanding what type of data they are giving to China. The main reason this news sparked panic in the markets was DeepSeek was apparently able to launch its free, open-source large language model in just two months at a cost of under $6 million. That is million with an M and that is important considering all these US businesses that are spending billions and billions of dollars on AI. The first big question here is was all that money a waste and is there a more efficient way to achieve AI success like DeepSeek? Also, there have been curbs to insure China didn’t receive the best chips. Did they steal trade secrets, find a way to get their hands on the chips, or most troubling would be, did they create their own technology that would rival a company like Nvidia? Personally, I was not too troubled by the decline on Monday considering we have no exposure to the AI space. I continue to believe it is just way too early to invest in this space and there could be other future competition that comes in that we don’t even know of yet. I do also believe this points to how fickle the market can be and with a news story like this being able to take down some of the most beloved winners from 2024, the extremely high valuations for the market should concern investors in the broad-based S&P 500 or Nasdaq. I am still looking for value stocks to do well in 2025, but could this be the beginning of a decline for these overpriced tech names? Custodians are not Fiduciaries, why that’s important to you? Your financial advisor may be a fiduciary, but their custodian might not be and it could cost you money. Being a fiduciary registered with the SEC for around 20 years now, we take seriously our obligation to always do what’s best for our clients…

Smart Investing with Brent & Chase Wilsey

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January 25th, 2025 | Reduced Regulations for Businesses, Tariffs, Liquor Sales, Mortgages, Costco Wholesale Corporation (COST), Oracle Corporation (ORCL), The Walt Disney Company (DIS) & (GD) 55:40

10 weeks тому55:40

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Businesses should do well with reduced regulations going forward Reducing regulations saves companies both time and money and time is always money. Starting in 2025, it is expected that for every new regulation that goes on the books, 10 regulations must be eliminated. I was unaware of what is known as the congressional review where a new President along with Congress can undo certain rules that the previous administration put on the books in the last few months. At this time, we’re not sure which ones will be eligible for elimination, but you will likely see some rules that perhaps made no sense to many people could be reversed in 2025. There could be a fight brewing between California and the federal government over some of these changes in regulations and California could lose their waiver and authority to ban the sale of new gasoline powered cars by 2035. The federal government wants control back over the auto industry, and does not want to allow states to come up with separate rules. That could ease pressure on both the auto companies and consumers as well. One that I’m not sure on is eliminating bank watchdogs like the FDIC. I like the idea of pulling back on the regulations, but maybe this is one that should be controlled not eliminated? Be prepared in 2025 for many changes in business, I believe most will be helpful. History has proven in the recent past that tariffs can cause problems in the economy and the markets as well. We have talked for the past month or so that we have been lightening up on our investments, which does not mean we went to 100% cash but a more reasonable level of around 20% in cash and 80% invested. A big reason for this is I believe currently the markets are incorrectly ignoring what the potential tariffs will do in the short term. It was only about six years ago when we had tariffs and that caused disruption in supply chains and rising manufacturing costs along with declining profits for some corporations. Our trading partners did not simply give in to the demands. Looking at China in particular, in September 2019, an additional $113 billion of tariffs were imposed on top of roughly $50 billion of tariffs that were already in effect. Each time the tariffs were raised, there was retaliation from China. This began to cause wild swings in the stock and bond markets. It is important as well for investors to understand when tariffs were imposed in 2018, the economy was doing well. That was because of recent tax cuts that reduced the corporate income tax from 35% down to 21%, which was a 40% decline. Now in 2025 there are no big tax cuts that the economy and businesses are benefitting from, which could hurt corporate profits in the short term. There is a potential tax relief bill that must go through Congress, but that would not be felt by anyone until the summer or late fall of this year. No one knows for certain how long it takes tariffs to benefit the economy because last time the world and trade fell apart as Covid changed everything. So for now, we will just have to wait and see how long it will take before the United States sees a benefit to tariffs, which I do believe long-term they are a good thing. With some potential short-term headwinds from these trade conversations, I think it’s important to not be overly aggressive with your portfolio and to make sure you’re holding strong businesses with low valuations that do not rely heavily on overseas trade. Liquor sales are declining and the bourbon boom seems to have passed It used to be investing in alcohol companies like Brown-Forman, who is famous for Jack Daniels, and other alcohol companies was a relatively safe investment over the long-term. But it appears that peoples liquor cabinets are still full from the Covid years when they over bought many types of booze for drinking at home and they still have a good amount of that alcohol left. No help to the industry is the anti- obesity drugs, the legal use of cannabis and some p…

Smart Investing with Brent & Chase Wilsey

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January 18th, 2025 | Millennials and Home Buying, Inflation, TikTok, Capital Gains and IRMAA, Moderna, Inc. (MRNA), Signet Jewelers Limited (SIG), Teladoc Health, Inc. (TDOC) & Qorvo, Inc.(QRVO) 55:40

11 weeks тому55:40

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Millennials are a little gun shy on buying a home, but they have good reason to be concerned Looking back 30 to 40 years ago when families purchased a home, they did it as a place to raise a family and they weren’t so focused on how much money the house would be worth in the short term. Millennials who were born between 1981 to 1996 and are now between the ages of 29 and 44 years old are old enough to remember the 2008 Great Recession. In 2008 there were 2,330,483 foreclosures, roughly 3 times 2006 when it was 717,522. If at the time the young millennials who were between the ages of 12 and 27 were not affected personally by a foreclosure, it was likely they knew somebody who was. Fast forward 12 to 13 years and millennials have experienced a rapid increase in housing prices that is essentially unprecedented. Experiencing such a wide swing in boom-and-bust cycles is etched in some of these millennial’s minds. By the time baby boomers hit age 30 52% were homeowners versus 30-year-olds today at only 43%. Surveys show almost 50% of millennials have stated that owning a home is more trouble than it’s worth, which is nearly double the feelings of Gen X and baby boomers on homeownership. If millennial home ownership continues to decline, we could see an oversupply in future years, which would probably mean a fall in housing prices. Better than expected inflation fuels the market higher The Consumer Price Index, also known as CPI showed inflation was up 2.9% compared to last year. While this was in line with expectations, it was the core CPI annual rate of 3.2% that beat the expectation of 3.3% and likely excited the market. This report followed the Producer Price Index which was largely in line to slightly better than expectations. The annual rate for both headline and core PPI rose 3.3%. Looking closer at the CPI, shelter continued to be a heavyweight considering it makes up about one-third of the CPI. While it registered the smallest one-year gain since January 2022, it was still at a high rate of 4.6%. It’s important to point out that if shelter was excluded from the core CPI, the annual inflation rate was 2.1%, which is right in line with the Fed’s 2% target. I believe there will be a lot of movement in various price groups this year, especially with new government policies in place. With that said, I do believe it is much more likely we continue to move towards the 2% target rather than seeing a sustained reacceleration in inflation. This leads me to believe we will not see the Fed hike rates this year and I think it is still possible to see a couple rate cuts come December 31st, 2025. The Supreme Court ruled against TikTok, why you should agree with them! TikTok is very popular in America with 170 million people in the United States using the app. Many people love TikTok, but they don’t understand what the Supreme Court is seeing and why it unanimously confirmed the blocking of the app. It's important to understand the communist party of China ultimately has control of TikTok and that could be very dangerous as it believes in what was driven by Marxist Leninist ideology. The party believes that the CCP should silence dissent and restrict the rights and freedoms of Chinese citizens. This includes population control, arbitrary detention, censorship, forced labor, and very important pervasive media and Internet censorship. Do you really believe that China is our friend and they should be able to obtain data which they do on all the people using TikTok in the United States? Keep in mind that China does not allow Facebook or Instagram in their country. We would not let China own any of our major broadcasters because of the influence media can play and now social media also has that power. Think about this, China on a very low level begins to convince people in the US that it would be a good thing for China to take over Taiwan. Then, when they invade Taiwan, there’d be a backlash in the US of people who are siding wi…

Smart Investing with Brent & Chase Wilsey

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January 11th, 2025 | JOLTs , Apple Intelligence, Tariffs, Catch-Up Contributions, Expand Energy Corporation (EXE), Paychex, Inc. (PAYX), Cintas Corporation (CTAS) & United States Steel Corporation (X) 55:40

12 weeks тому55:40

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The job report was good, but why is that bad? Before we go into why the good report was bad, let’s talk about some of the data. The expected number of payrolls was 155,000, which came in well above that at 256,000 jobs for the month of December and also increased from November when it was 212,000 jobs. This high increase in payrolls caused unemployment to drop to 4.1% and came along with an increase in average hourly earnings of 0.3% for December. Over the last 12 months average hourly earnings have increased 3.9%, which is a decent number, but just under the expected growth in average hourly earnings. Job Growth was seen in healthcare with an increase of 46,0000 jobs. That was followed by leisure and hospitality which saw an increase of 43,000 jobs and government jobs, which includes Federal, state and local jobs were up 33,000. Because it was a holiday season there was an increase in retail jobs of 43,000 after the loss of 29,000 jobs in November. There are always revisions to the previous two months, but there was not much change here as October saw an increase of 7000 jobs and the November report was actually cut by 15,000 jobs which produced a total decline of only 8000 jobs for the past two months. Because the job report was so good compared to expectations, this put fear in the stock market and bond market that there may not be any interest rate cuts until the fall of this year. This also led to concerns that we could maybe see more inflation going forward. Maybe that makes sense for traders to sell, but investors should want a strong economy. That means your businesses will sell more goods and services and increase their profits. Interest sensitive equities like real estate were hit pretty hard with a good job report and banks also had a little trouble digesting the good report and declined as well. For investors I think this is a good report because it shows strength in the economy and based on the recent job openings from the JOLTS report, I think 2025 will be a good investment year for investors in fairly valued equities, but you will see a lot of scary volatility, which smart investors should use as a buying opportunity. Job openings report sends the market lower! The JOLTs report, which stands for Job Openings and Labor Turnover Survey showed an impressive increase in job openings in the month of November to 8.096 million. This easily topped the estimate of 7.65 million and October’s reading of 7.839 million, which was revised upward from the initial number of 7.744 million. While this points to a labor market that has continued to remain strong, there were some indications of softening. On a year-over-year basis, job openings fell by 833,000 and the quits rate moved from 2.1% in October to 1.9% in November. This indicates workers are less confident in finding another job if they quit their current one, which should put less pressure on wage inflation. The resiliency in the labor market is concerning for those that are looking for more rate cuts as a strong labor market allows the Fed to be patient and wait for inflation to cool further. The news paired with a December US services sector report that showed faster-than-expected growth and higher prices paid caused the ten-year Treasury to climb to around 4.7%. This spooked many speculative areas of the market including technology and cryptocurrencies. Apple Intelligence, maybe not so intelligent? Apple’s AI system, also known as Apple Intelligence, has been having some issues and has been spreading fake news. One of the AI features for iPhones summarizes users’ notifications, but some of the news stories it has been summarizing has been completely inaccurate. It recently attempted to summarize a BBC News notification that falsely claimed British darts player Luke Littler had won the championship. Unfortunately, this came a day before the actual tournament’s final, which Littler did end up winning. Maybe Apple Intelligence is so good it can predict t…

Smart Investing with Brent & Chase Wilsey

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January 4th, 2025 | Fraud, Airline Stocks, Private Prison Boom, Social Security Changes, Tidewater Inc (TDW), Constellation Brands, Inc. (STZ), Carvana Co. (CVNA) & VeriSign, Inc. (VRSN) 55:40

13 weeks тому55:40

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Watch out for record fraud when shopping. With technology, shopping has become so easy and set records in 2024 of around $5.3 trillion. While this by itself is a problem as some people are over shopping, it has also invited more fraud than ever before and for the first three quarters of 2024 there was an increase of 14.5% to $8.7 billion of shoppers who lost money to fraud. Two things are happening here. First, consumers may be too emotionally excited about the purchase and they forget to look for scams that could be happening to them. The second item is the scammers are becoming smarter about how to scam people and they are making it more difficult to detect. To avoid being scammed, it is always wise to deal with a company that you know. However, even that may not guarantee your safety. Scammers can now use names that look very similar to the names you know. They can do this by simply adding or deleting a period or a letter somewhere in the title. So before you make that purchase, be sure it is the correct site that you want to be at and you’re not sending your money to some scammer from across the world! Should you be investing in airline stocks with the record year they’ve had? It has been quite the year for airline stocks and there have been huge one-year gains for United Airlines at 138% and Delta Airlines at 49%. While it was a laggard compared with its peers, American Airlines still posted a strong return of 29%. It is forecasted for holiday travel between December 19th and January 6th, there will be a record number of travelers at 54 million. Since our economy was reopened after Covid, consumers continue to enjoy traveling, which has benefited the airlines. Even with the record number of travelers and the large gains for the airline stocks, they still trade at reasonable price to earnings ratios of 9.7 for United Airlines, 10.1 for Delta and 10.5 for American Airlines. My concern is could this be a value trap going forward? The low price to earnings ratio might suck you in only to see a slowdown in travelers in 2025. We could also see a little bit higher oil prices based on production not coming online quick enough to keep up with demand, which would hurt the profit margins for these companies. While they might look enticing, I wouldn’t be interested in adding these positions to my portfolio at this time. Could you benefit from the private prison boom that may happen in 2025? In 2025 there could be a huge demand for detention centers and investors may benefit from investing in the private detention center called CoreCivic Inc, trading under the symbol CXW. CoreCivic has a market cap of about $2.4 billion and a FFO on a forward basis of $1.79. The company could benefit from recent statements from ICE saying it will need enough beds to detain a minimum of 100,000 migrants. The agency already has funding for 41,500 beds. Their competitor GEO has a head start already housing about 40% of ICE detainees. It should be noted that CoreCivic was at $14 the day before the election and it climbed to $22 the day after. There was concern that some banks would withdraw funding from companies who participated in the immigrant detentions, however it appears that CoreCivic does not need any new capital to bring on new facilities or bring back idle facilities. The high estimate for deportation would be 1 million people in one year at a cost of $88 billion. It is estimated that there were 11 million undocumented migrants in the US as of 2022. These higher dollars could benefit the private prisons as a quick alternative if there is no room in the county jails. I was disappointed that the company does not pay a dividend, but it has pulled back from a recent high of $24.99 a share to under $22 a share. At the price the stock would trade at a reasonable 12.29x the estimated FFO for 2025. An executive from the private company GEO group spoke about an unprecedented opportunity for their company, it could be a good investment op…

Smart Investing with Brent & Chase Wilsey

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December 28th, 2024 | Oil Demand, Understanding Compounding, AI Stocks, Double and Triple Taxation, Macy's, Inc (M), Xerox Holdings Corporation (XRX), PepsiCo, Inc (PEP) &Mastercard Incorporated (MA) 55:40

14 weeks тому55:40

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We could see a huge increase in oil demand in 2025! With oil trading under $70 a barrel, gas prices have continued to fall. But unless the world starts producing more oil in 2025, we could see a big reversal in the price of oil. I base that on an estimate from the International Energy Agency as they expect a huge increase in the demand of oil. They are estimating oil consumption of 1.1 million barrels per day, which would be a 31% increase from the 840,000 barrels in 2024. I know from recent reports that there is concern that if we pump more oil, the price could drop dramatically causing difficulties and lower profits for oil companies. However, if the International Energy Agency is correct on their 31% increase in oil demand, that could actually cause shortages at certain times throughout the year. Also, it is somewhat amazing with how long electric vehicles have been out that they still don’t seem to be having at this time much of an impact. I do know that car manufacturers are having some difficulty selling their inventory of electric vehicles. I believe part of this is because of the abundance of oil on the market and low gas prices. Is it possible that we got too aggressive trying to build and force consumers into electric vehicles? What happens if in 2025 the federal tax incentives for electric vehicles go away? Understanding compounding is why you should be cautious about the overvalued market! Investing is great when everything is going up and the emotions tell you to stay the course because that will continue to happen. For two years now the S&P 500 has posted really strong gains because of a heavy concentration in the Mag Seven. There are now investors who say the market could be up another 20% in 2025. In our portfolio we will continue to remain cautious next year as we understand that compounding can work for you, but also against you. What do we mean by that? Let’s say that for three years the S&P 500 is up 20% per year, your $100,000 investment would grow to $172,800 because of compounding. You probably would feel pretty good about that and think it will to continue to increase. While it is possible it’s like riding a roller coaster. What I mean by that is if you’ve ridden a roller coaster you know as it gets to the very top, it slows down and it feels like it’s almost going to stop, then you go over that peak and you hit that big decline. That happened in 1935 and 1936 as big gains were followed by a 39% decline in 1937. I did not want to use 2002 when the S&P 500 had lost almost 50% of its value. I thought I would use something else from history that was not the worst-case scenario. Back to the three-years of 20% gains and a portfolio value of $172,800. If we saw a 39% loss again like 1937, your account value will drop all the way down to $108,864. You might be questioning how can that be? It’s because as your account grew in value the percent decline is now on a bigger amount than the initial $100,000 you started with. So in other words after four years of investing, you’re $100,000 investment was only up 8.9%. This is why for long-term investors I can continue to stay the course on a more conservative investment style and not try to figure out what the top is for many of these expensive companies. The other problem as well is once people lost 37% of the money on their investment, they would probably leave the stock market for years missing future gains. I can tell you many people think they know where the top is and they’ll get out in time, but unfortunately many people stay at the party too long. I can tell you managing money through the tech boom and bust many people thought the party would continue in the early 2000’s and they did not foresee the major declines that we saw during the tech bust. AI stocks performed well in 2024, there are problems in 2025 that could cause a reversal It is estimated that for every dollar invested on the AI infrastructure, revenue of four dollars n…

Smart Investing with Brent & Chase Wilsey

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December 21, 2024 | Investing, Pharmacy Benefit Managers (PBM), Stock Market Fall, Funding an HSA, Netflix, Inc. (NFLX), RH (RH), Broadcom Inc. (AVGO) & Occidental Petroleum Corporation (OXY) 55:40

15 weeks тому55:40