July 17, 2026, Issue 30

A Shallow Dive into Politics

One thing I didn’t want to get into in this space has always been politics. I can remember back about 50 years ago listening to my father and grandfather arguing about the subject. I had no clue what the fight was about, or who was on which side, but I knew it got loud and unpleasant. Little did I know at that time how much of a tiny precursor those small disagreements would be to where we stand today. As I dip a toe into the discussion, let me be crystal clear on a few things.
My views on politics can best be described as center right. Capitalism is not a perfect system, but history has shown time and again that it is the best one out there. I also have the advantage of having spent 52 years in Canada, which has moved slowly over the years to a socialist society, and the last 8 years in the USA, largely capitalist with light winds blowing towards socialism.
The Democrat Socialists, led by Bernie, Zohran, and AOC peddle their beliefs with the wonderful sound of “free”. Free healthcare, frozen and lower rents, government run grocery stores. I think what irks me the most about this movement is that they call themselves “progressives”. Never has the word been so misunderstood as they aim to take us back decades into the past failures of socialism.
Let’s look at these fantastic sounding ideas. Free healthcare in Canada is anything but free. It is pre-paid, as money comes off of every paycheck to pay for it, whether you use it or not. Because the system thus lands up being woefully underfunded, you land up potentially waiting 9 months to fix a torn ACL (personal experience), you wait 20 hours in an emergency room for a simple infection diagnosis, and you get extremely underpaid, overworked physicians leaving the country for higher pay and better working conditions, thereby exacerbating the problem.
Now, I must tell you that the system down here is not the answer either. Here’s the good side: When I needed my torn rotator cuff fixed, I was offered an MRI on the same day, and the surgery the following week. I needed some time to digest, so I put it off for a couple of weeks! However, if you don’t have health insurance here, you can definitely go bankrupt if you require surgery or get bitten by a venomous snake. Or as you age, you may be forced to choose between meds and food if you do not have the proper insurance coverage. So definitely not perfect, and the real answer likely lies somewhere between the two systems.
Lowering or freezing rents has been tried before. The outcome is rarely positive. Building owners stop or slow the upkeep and are reluctant to purchase properties. This leads to poor quality rentals, further increasing the gap between the haves and the have nots.
Grocery stores run by the government are also problematic. The pilot program in NYC for 5 stores will require tens of millions of dollars of subsidies and this will be ongoing. Again, where will this come from? The answer is everyone’s paycheck. Without a profit motive, stores will likely be poorly run and not have proper goods on the shelf (see Poland circa 1990s). Furthermore, the no profit stores will likely undercut independent businesses, forcing them to close, and again make the problem worse.
When Canada went to universal $7 per day daycare, I was absolutely against it. I had kids that were the right age for me to benefit from the program, but I didn’t want to pay for everybody else’s child long after mine were out of the system. This is socialism. It was advantageous for me for a couple of years, and then I keep paying for everyone else through higher taxes forever.
The top marginal tax rates in Ontario and Quebec (the most populous provinces in the country) sit at around 54%. Let’s understand that at a certain level of income that means you are taking in 46 cents out of every extra dollar you earn. While these rates are close to New York state and California (around 51%), it’s worth noting that the Canadian top rates kick in at about $260,000 of earnings, while the two states hit the highest at $1M of earnings.
Both the far left and the far right have become far too vocal and steal the headlines. I still firmly believe that the vast majority of both the US and Canada live in the middle ground with leanings to either the right or the left. Current leadership only worsens the divide. We need to collectively take back the middle ground and recognize that what most people want still goes back to my July 4th letter: Life, Liberty, and the Pursuit of Happiness!

As always, I would relish your thoughts on today’s political landscape. Please keep any comments respectful.

Stock Rotation is Alive and Well

It has been an interesting couple of weeks in the stock market. While the Nasdaq, with its concentration of technology stocks has fallen a little over 5% as I write this, the broader S&P 500 is pretty much flat. Stock market darlings like Micron have fallen 30% from their recent highs. The Magnificent 7 are either treading water or down, with the exception of Apple. Sidenote: Interesting to note that the market believes that Apple will win the AI race without even running. They will leverage Google’s Gemini AI and know that they own the devices most used to access it.
Here are the worries: Will companies keep spending on AI infrastructure like drunken sailors? If so, for how much longer? Will all of the AI spending lead to profits at some point? If so, when, and how much? Beyond these concerns, the war in Iran continues, driving up the price of oil, and creating uncertainty. Interest rates remain elevated, and with companies beginning to borrow more to finance the AI buildout, this could begin to eat into profits. Finally, the consumer seems to be getting stretched a little thin with food and gas prices eating into budgets. So where do we go?

It’s Always About Profits

The answer is always about profits. As we enter the second quarter reporting season and get a look into the third and fourth quarters in companies’ reports, I believe that most will report exploding profits. I mentioned Micron above as being down 30% from its highs. It is trading at a PE multiple of 19, and a forward PE of 6. Paying 6 times forward earnings for a company growing its earnings by 3x-5x is a bargain. They have stated that they are oversold for the next 12 to 18 months, and they have raised prices to the point where they are at an 80% profit margin. This has caused Apple to raise the prices of their computers and iPads. Can things change? Can contracts be cancelled? Can companies decide to slow their spend? Absolutely, all of these things are possible. But as an investor, I believe that the trends in place will continue. I mentioned MU as a buy a couple of weeks back and made a purchase at $1,048. I have continued to purchase as recently as yesterday at $848. The average analyst target price is currently $1,569, with the most optimistic of them up at $,200. This is where I believe we will be in a year from now.
I believe the selloff in tech and AI related stocks is overdone. A lot of these names are on sale. Now is the time to get in if you’ve missed out in the past.

Don’t hesitate to ask about a stock I have not mentioned….

PTON and NKE updates

Peloton hit $6.40 this week, moving up about 20% over the last month. Today it is giving back some gains with the market slumping. I think we will see a good earnings report, and more importantly that we will get some kind of major announcement about gym and hotel equipment before the year is over. While we finally have had our patience rewarded by moving into the green with PTON, I will hold a bit longer to see the next 2 quarters or so.
Nike had what I believe was a decent earnings report last month. While the ship is large and extremely slow to turn around, I do believe that turn has begun. The share price has moved up about 5% since the report. While we remain underwater here, I will say that we will give Nike another 2-3 quarters to see if the turn accelerates. I love the Vomeros, and I think the company is headed in the right direction. Having said that, patience is waning as perhaps that money could be better deployed elsewhere. We wait and see a bit longer.

The Topic You’ve Been Waiting For

Well, everyone wanted into the SpaceX IPO, didn’t they? I actually had people jealous of the 14 shares that I was allocated. The stock quickly shot up (!) to over $200. Well guess what? Today, you can buy it at a big discount to what I got in at. Yup, SPCX is trading below its IPO price. While this is a bit surprising, I would not say it is shocking. The valuation was always suspect for what the sales and earnings currently are. The investment here is completely a belief in Elon Musk. The company could land up owning Tesla, but that is irrelevant. Will data centers land in space? Will there be an AI device? Will Mars be explored at some point in the future? The answer to all of the above is who knows? I’m taking my 14 shares and not looking at them for the 3 years. Let’s what happens. The stock will either go to the moon or touch down in the sea….

Thought of the Day

Netflix reported numbers that were quite good, but not good enough for the market. They still generate a ton of cash, have money increased subscribers, and raised prices. I think this is a great buy right now. But that is not my thought today. I miss the days of linear cable TV. I grew up with a grand total of 2 channels, which we called 6 and 12. Once a week hockey games on Saturday nights. Then came US channels like CBS, NBC, ABC, and later on FOX.
Today we love our shows like The Bear, Dutton Ranch, and House of the Dragon, amongst many others. The problem? Where are they? What do we need to watch? Netflix, HBO, Paramount+, Hulu. It is unbelievable how many services are now out there. What do you pay for? What do you think you need? What could you not live without?
I want to go back to 6 and 12. Simpler times….