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THE DEATH OF A RETAIL SALESMAN…

Question…are we witnessing the death of retail as we know it? And is the consumer finally at its breaking point?

All across the country retailers are shutting their doors. According to Coresight, 7,327 retail stores closed in 2024— 58.7% more than 2023. Discount, drugstore, and office supply chain stores made up the majority of closures.

After 40 years, Party City shut down and left their entire workforce without severance pay; if that’s not a rug pull, what is?

The combination of high interest rates, a spent consumer, and a failure to adapt to the current e-commerce landscape brought retailers to their knees. Huge retailers, such as Big Lots, Ted Baker, The Vitamin Shoppe, TGI Fridays, Express, and Red Lobster, have all filed for Chapter 11 bankruptcy.

Spirit Airlines filed for bankruptcy on November 18, 2024, and based on their service a blind man could have seen this coming. I recently booked a flight on Spirit and the flight was not only delayed, but took over an hour to get my bags after the plane landed.

This was two weeks before they filed for bankruptcy.

Now, it’s important to understand that a Chapter 11 bankruptcy is known as a restructuring bankruptcy. Companies like Spirit use Chapter 11 to renegotiate their debt with creditors, liquidate assets, and streamline the organization (fancy words for, you’re fired), while they find a way to compete with major airlines.

Apparently, having 61% cheaper flights than most airlines couldn’t account for failed leadership and mounting debt. In Spirit’s case, they may emerge from Chapter 11, unlike their failed 3.8 billion dollar merger attempt with JetBlue, which was blocked back in January 2024; perhaps under Donald Trump, a merger will be approved.

Unfortunately, many retail companies will not make it out, as they are forced to hold going out of business sales and liquidate assets while praying for a white knight to save them, as they attempt to reorganize their businesses and trim the fat. But what about the consumer?

And what does this recent year filled with bankruptcies mean for the economy? Could we be in an anything-but-tech recession?

Manufacturing, with the exception of April 1, 2024, has been in contraction since December 2022. The latest ISM non-manufacturing prices came in at 64.4, which means not only are prices in expansion but manufacturers are experiencing higher costs of goods and services, which is inflationary in of itself.

We also received the JOLTS Report and this also came in HOT with 8.096 million job openings versus the expected 7.730 million job openings.

The JOLTS Report is highly watched by the Feds for signs of future or easing inflation. If there are more jobs than expected this means, there could be an increase in wages and this can be seen as potentially inflationary as more dollars are chasing fewer goods.

Since there are plenty of jobs to choose from, employers may have to increase wages to attract talent. This is what I call an employee’s market, as highly skilled workers have wage-leveraging power.

The higher cost for manufacturers means that the end user—the consumer, may have to bear the brunt of the cost, as manufacturers are forced to pass on cost increases to protect already thin margins, i.e. again inflation.

Next, I would look at the unemployment number, which as of December is at 4.1%; if we see this number moving up towards 5.2%, along with a decrease in business activity, we can suspect we are headed into recession.

Historically, we have never seen a recession with an unemployment number of less than 5.2% and while there is always a first, anything can happen.

Not to mention, the yield curve inverted on July 5, 2022, which predicts a recession 100% of the time— but the rub is that we have never had a recession while the yield curve was inverted.

A recession typically happens after the yield curve returns to normal or un-inverts, which is where we stand today.

A weakening consumer can be the straw that breaks the manufacturer’s and retailers’ back or any disruption in the supply chain because of tariffs. So, instead of looking for strength in the year of the Donald, I would be cautiously optimistic letting the data lead the way.

BITCOIN THE NEW MILLENNIAL GOLD

Bitcoin is more than just millennial gold, it’s a rebellious ideal that embodies a deep disconnect from any form of fiat currency. Yet, Bitcoin isn’t backed by anything but a digital code.

If you listen to crypto enthusiasts, their ongoing sales pitch is the fact that scarcity makes Bitcoin valuable as there are only 21 million coins available of which $19.9 million have been retrieved

And while the blockchain is a magnificent form of anonymity, the only justification for Bitcoin’s rise is a common belief that the dollar will fail and that on any given day you have more buyers than sellers.

Meanwhile, Bitcoin has seen widespread adoption by the street and the likes of BlackRock, Fidelity, and its first pro-crypto president. Believing that the dollar will collapse is sort of like inviting Armageddon over to your house for dinner and watching a movie while the house is on fire.

If the dollar were to collapse, not only would we experience severe hyperinflation, but prices would also skyrocket, investments and savings would lose their value, and people would lose faith in the financial system.

Pandemonium would spread across America as people began to hoard goods, the stock market would also collapse, and a global crisis would gather speed as countries look for an alternative currency to facilitate transactions since the dollar would no longer be the world’s reserve currency.

Now as far-fetched as this sounds, what’s even more scary is that there is a community of financially delusional people who believe this could happen.

These are the same folks that believe that the BRIC nations will defeat the dollar, but they underestimate the full force and power and if nothing else, American greed, that would soon enough create a war before they let the United States lose reserve currency status. Now, at this point I don’t dispute bitcoins utility, and I admire its flexibility as a digital currency.

In fact, I suspect with Trump in office and Wall Street’s full acceptance, there is no doubt in my mind it will head higher over time, but there are two factors that need to be addressed for my comfort.

The safety of the asset as crypto as it isn’t 100% safe and the regulation of the entire cryptocurrency market in general. I’m not a fan of big government but investing in the stock market would be totally different without the Security Exchange Commission.

Plus, add to the fact that there is no fundamental basis for the bull case besides a store of value and scarcity and that’s not an acceptable investment thesis for a prudent decision on my family’s behalf.

Now, I am quite sure I will be attacked for my point of view. But when it comes to securities as an asset, I know why stocks go up and why they go down. The same cannot be said for Bitcoin or any cryptocurrency for that matter besides more buying than selling or more selling than buying.

While Bitcoin may hit 200 thousand, in reality, it’s approximately a 100% increase.

As a stock picker, I believe I can beat that return with the data that supports it without the volatility. A simple investment percentage gain of 15% compounded over five years accomplishes the same move. Now, if crypto is your jam don’t let me stop you, just don’t invite me to the party.

HELP PLEASE!!! THE FOOD IS TRYING TO KILL ME…

What good is money if your health is in a free fall? And how do we exist in a for-profit country that values profit over the health of its populace? This seems to be counterproductive to GDP.

Dr. Casey, a Stanford Medical School-educated doctor, spills the tea on the food industry.

She said, “It’s not an overstatement to say that I learned virtually nothing at Stanford Medical School—about the tens of thousands of scientific papers that elucidate the root cause of why American health is plummeting and how environmental factors are causing it.”

She basically said that companies that make ultra-processed foods are literally killing us, stating that with each additional serving of ultra-processed foods we eat, it increases the chance of early mortality by 18%.

And just like the American people learn very little or nothing about finances in school, she said shockingly that she took zero nutritional courses in medical school, which speaks to the fact that the medical profit center comes from managing diseases or conditions with expensive procedures and medication versus eradicating the disease with the cure.

This explains why the food industry and the health care industry make such great bedfellows.

Dr. Casey stated that 82% of independently funded studies showed harm from processed food, while 93% of industry-sponsored studies found no harm.

Could this be a form of industry pay-for-play where both big pharmaceutical companies and food companies sponsor these studies?—or could it be that 95% of the people who created the USDA food guidelines for America have conflicts of interest with the food industry?

There are 1 billion pounds of synthetic pesticides that are being sprayed on our food on an annual basis. Synthetic pesticides and fertilizers significantly increase crop yield and reduce losses due to pests and disease.

Synthetic pesticides can cause serious harm and are invisible and tasteless.
They have been linked to various health issues such as cancer, autism, diabetes, ADHD, sexual hormone disruptions, liver dysfunction, sperm dysfunction, Alzheimer’s, and dementia— all by hurting our metabolic health.

And there is no incentive for them to curtail the use of these harmful chemicals because they are stretching, protecting, and preserving their corporate profits.

These chemicals are not only destroying the soil but entering our air and water supply, affecting wildlife, and our entire ecosystem. This would explain the numerous incidents of birds falling from the sky and fish washing ashore.

We have also seen an increase in autism. In 1990,1 out of every 150 children had autism spectrum disorder (ASD). In 2006, it increased to 1 in 110. By 2018, it increased to 1 in 59, and in 2020 1 in 44.

If this is not evidence that something must be changed, then what is?

And to compound this fracture, there is an increasing amount of plastic found in our water supply. Research estimates that a billion microplastic particles can be found in one cubic meter of water in a polluted area.

Americans are eating waste as well as waste products and the sad part is the economics of most Americans will not allow them to escape the ultra-processed foods.

Inflation has made it so it has deadbolted the middle and lower classes in the same food category, which brings new meaning to the saying, health is wealth, because not only is your health more important than money but you have to have money to afford your health.

DON’T BE THE GREATER FOOL

Both bitcoin and quantum computing stocks have seen their fair share of frenzy. And ironically, the two have the same characteristics in common. 

Neither one of them has fundamental legs to stand on, yet they rise because of the hysterical hype machine circulated by the retail investor. 

This is no ordinary retail investor.

This is the ultra rebellious and overly entitled Gen Z, the disenfranchised, as well as disenchanted millennial, looking for the get-rich plan, trying to catch lightning in a bottle, while simultaneously avoiding the research and the work ethic it takes to not only achieve wealth but keep it.

Anyone expecting something for nothing can get lucky and hit a lick, but it takes a superior money IQ and experience to come to the realization that perhaps, maybe I should skate with my winnings and leave the casino. 

For those who enjoy a low Money IQ, greed usually overtakes them, and they’re more likely to overstay their welcome by subscribing to the Greater Fool Theory.

The Greater Fool Theory is the concept that the price of an asset is not determined by the intrinsic value of the stock, but rather by the ability of an investor to sell it to another investor at a higher price. 

The theory suggests that it is possible to make money on overvalued assets as long as there is someone to take it off your hands.

People with low money IQ scoff at the idea of doing research or believing that a balance sheet is actually important. They would sooner subscribe to the cult-like behavior of the FOMO wave before they enjoyed the pragmatic common sense of a successful investor. 

On January 8th, the bubble popped transforming quantum computing stocks into quantum computing rocks—falling from the sky between 36% to 45% in one day, after NVDA’s Jensen Huang made the statement that quantum computing on a commercial level is at least 20 years away.

• D-Wave Quantum Inc. down 36.13%

• Quantum Computing Inc. down 43.34%

• Rigetti Computing Inc. down 45.41% 

• IonQ Inc. down 39%

Of course, every young retail investor with some skin in the game took high offense—like, how dare you, what do you know? He is only one of the most talented, brilliant, and clairvoyant CEO’s of all time telling you what you don’t want to hear. 

The reality is, never get married to a stock that treats you like you’re an ex. And if you are lucky enough to have made money, the important thing is to know your level. It’s crucial to know the difference between found money and earned money.

Found money has no coordinates but earned money has a GPS.

For example, let’s say you were gifted a million-dollar inheritance. If you lose it all, without knowing how the million was generated, the chances of making it back would be slim to none. 

On the flip side, if you made a million dollars from the first to the last dollar, you would know every inch of what it takes to reconstruct the steps to make it back or more.

But if it was luck, like making six figures on a quantum stock, not only do you lack the experience to run that type of money, but the dopamine boost damn near guarantees that Risky Randy is making all the trades from here on out.

At this early stage, quantum computing is nothing more than a trade. And while the future may be bright for quantum, it’s the distant future until there is substantial revenue generation and widespread adoption—this will be candy for those who like cavities. 

FIRE YOUR FINANCIAL ADVISOR

Question…are financial advisors ever expected to beat the market? And if so, did your financial advisor beat the market last year?

According to Vanguard, the average financial advisor increases a portfolio rate of return by 3% and the annual fee they charge is 1%. So, without being a rocket scientist, if you only make 3%, that’s 2% after fees.

Now, I am fully aware of the benefits of estate planning, tax strategies, and retirement planning, as well as someone to manage risk and keep their eyes on the road so you don’t have to, but for 1%—I’m not sure if that’s peace of mind or a piece of mine.

Let’s say, you averaged 6% for an underperforming 5% less fees; isn’t it more prudent to fire your money’s babysitter and hire an estate attorney, a tax strategist, and a financial consultant, separately, and pay them their one-time fee, rather than miss out on historical gains?

There’s absolutely no way you can explain away or justify a Monte Carlo strategy when the market is wiping up the floor with your returns. And for those who are unaware of a Monte Carlo portfolio simulation, this is where the simulator estimates future returns based on a variety of asset allocations in different market environments, such as bull and bear markets.

A value of risk is used to estimate the maximum potential loss over a specified time period. This is supposed to give the client an optimized view or strategy as well as the confidence of having a plan in place.

But what plan can explain a 1% fee or $10,000 on a million-dollar portfolio when you are only making 3% or $30,000?... especially when 25.01% was left on the table in 2024 and 26.29% in 2023, by not owning the S&P index.

Even with the market’s volatility over the last 10 years—with dividends, the index averaged 13.3%. So, how is it not common sense to plow into an index even if you are lazy-minded and not willing to do research? You would average a handsome gain in the long term.

Even Warren Buffet said to his wife Astrid, upon his death, to invest a significant portion of his net worth into the S&P 500 as he believes it’s a prudent investment.

I subscribe to the same theory; besides, you don’t hire a so-called financial expert to increase your portfolio by 3%— you pay an expert that has the track record of meeting or beating the averages over the long term…anything other than that is stealing in my book.

Let’s not forget the goal for the advisor or any asset manager is to grow their book of business, but that doesn’t mean that his assets under management should be the only thing growing.

Quick Links….

Will this be the last week of TikTok…

Fires don’t care if you’re rich or poor….

Inflation may be an unwelcome guest…

 Book of the week is by yours truly…

Who’s Your Daddy? What Every Son Needs To Know, is a book of wisdom, financial guidance, and the story of my life. It was meant to leave more than helpful tips, but the reality of what it takes to succeed no matter the odds, without making a single excuse. The most important purpose was for my son to know his father in case I didn’t make it to his 18th birthday as written in my voice. So, enjoy it in advance.

Thank you for reading; we appreciate your feedback—sharing is caring.

Kevin Davis Founder of Investment Dojo and Author of The C.R.E.A.M. Report

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