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.

Companies Discussed: Zillow Group, Inc (Z), Workday, Inc. (WDAY), Lyft, Inc. (LYFT) & Synopsys, Inc. (SNPS)