July 6th, 2026

This report is for the second quarter ending June 30th, 2026. Stock prices rose; the Standard and Poor's was up 10% in three months. The Nasdaq composite gained 16%, and the Cloak composite returned 20%. Interest rates are steady and the yield curve is flat. Oil prices have dropped 30%, now under $70/barrel. Bitcoin and Gold prices are down 11% during the quarter. Real estate prices are falling, and the number of listings is increasing. Gross domestic product or GDP is unpredictable but seems to be normalizing at 3% growth. Inflation rates are stubborn and skewed by oil prices. Anecdotal price increases for construction and restaurants seem much higher.

The storyline is almost unmanageable. The moving parts are innumerable. A nonfiction novel with more characters added in each subsequent chapter. By most estimates AI spending represents the majority of economic growth. Information processing equipment, data centers, and related construction spending are driving the economy. Comparisons to the telecom buildout and bust at the close of the last century are becoming plausible. If you build it, will they come? Concentration of investment dollars into a relatively few mega cap names continues. Money flows into Exchange traded mutual funds are at all time highs and yet an estimated $8 trillion remains in money markets, dry powder as they say. Thousands of thirty and forty somethings have become multi-millionaires by investing in leveraged technology ETF's. Second quarter earnings are projected to grow by 25%, another sequential head turner. The semiconductor index SOXX has risen an amazing 100% this year alone.

Market breadth gap (the difference in valuation between large and small company stocks) is at a 35 year high. Ten years ago, semiconductor stocks represented 2% of the Standard and Poor's 500, today they are 18%. We are finally seeing participation and interest spreading to unheralded sections of the stock market, but it is slow moving. The majority of names remain on sale (lower) since the middle east conflict began. Given forward looking earnings projections it is hard to be nervous or pessimistic. The sheer volume of gleeful and optimistic forecasts requires caution however, as the saying goes….when you least expect it. Some profit skimming is in order. After all there are plenty of undervalued wall flower alternatives. Software, Real estate trusts, healthcare, and small caps for starters.

Hollywood in a panic! Prolific film producer India has reduced costs by 75% by using AI. There are 22 official languages, all can now be dubbed and lip synched instantly. Pandemic aid spending coffers are coming to an end. States and municipalities are being forced to face fiscal reality. The annual ritual of multiple arson started fires in California has begun. NBA viewership now 11 million versus 38 million in 1998. Almost 200 million spent on laptops and computers for California prisoners. New Mexico's congressional Truth Commission getting to the bottom of Jeffry Epstein's Zorro ranch shenanigans. I feel better. Beware Q Day! When quantum computers will be able to break encryptions codes. Patriotism uptick, military recruitment at 15 year high. Albert Bourla CEO of Pfizer says AI is transformational in drug development. Cancer will be cured! Colleges are struggling with honor codes and cheating. AI will write your paper, take your exam, and complete entire projects. Uncle Sam the stock trader…Intel Corp investment now a $30 billion profit!

During periods of portfolio prosperity, it's good to think about safety and precautions. Buy new flares for the trunk of the Buick, water and blankets are essential. A good first aid kit with beta blockers and Xanax wouldn't hurt. Because remember, public markets are subject to periods of nonsensical hysteria. Politics are nuts! A young educated red army is on the march. Where is Joe Mcarthy when you need him? The November election is around the corner and the music may stop. That inflation thing won't go away. Kevin Warsh our new Fed chair might raise interest rates, and he won't tell us ahead of time! The war in Russia has escalated and they have much bigger bombs if someone really gets mad. Don't forget the national debt, 400 million or something…. my secretary says its 40 trillion, LOL! Sorry for the buzz kill but it's important to stay balanced and spatially aware.

Risk reward, without one you don't get the other. For the disgruntled there are 8 million jobs available, go getcha one. Want to start a bank? Buy stock in Bank America. Now you own one. Something more sexy? Become a space pioneer, buy stock in Space X, we did. There is work for those who want it and every layman can be an owner of virtually any company in the country! Nothing is guaranteed and work can be a real grind, we know. The pace is accelerating. Don't underestimate the exciting changes at hand. As usual we remain invested, taking some off the table and buying more of the cheap and boring. As complexities and unpredictables increase it is becoming more difficult for anyone to have a firm grasp of the macro, the big picture, but we have lots of experience, we have our niche and it is working.