April 2nd, 2025

This report is for the first quarter ending March 31st, 2025. Stock prices declined to begin the year. The major indexes averaged an 8% decline, and the Cloak Composite lost 9.3%. Interest rates declined, the ten-year Treasury pays 4.15% versus 4.6% 3 months ago. The yield curve is especially flat at 4% across maturities. Oil has dropped single digits to 70$ per barrel. Gold is rising to record levels, an 18% gain in three months. Bitcoin retreats 11%, now at $85,000. Commercial real estate markets are improving as occupancy rates increase. GDP estimates are wait and see. Consumer confidence measures have declined almost 10%.

New administration fireworks are dominating the financial markets. Seven stocks comprise 40% of the Standard and Poor’s 500 valuation. The Russell 2000 remains 20% lower than 2021. The disparity between Large Cap growth and Value has never been greater. Volatility levels are extreme. Mutual funds are highly concentrated in a small number of stocks. There are a small number of large tech companies that are priced for perfection. A much greater percentage of stocks are trading at historically record low valuations. There are many names perceived as overvalued with PEG ratios below 1. In other words, their growth rate is higher than their P/E ratio. Many areas especially small caps have no sponsorship. Orphans in the sea of investor interest if you will. Very dynamic from our perspective. Less so from our client’s perspective. In other words, there is lot going on and there’s not.

The Deep State, a phrase oft passed around, is not unique to Washington, it thrives on Wall Street! Observing the last few months of Trading one would think every Tom , Dick and Harry decided to liquidate their 401K. It wasn’t Cloak Advisors; we aren’t doing anything. Was it you? Maybe your family or some investing club that you know of. Looking at a chart of the Nasdaq Composite is like stepping off a curb, a real back jolter! Sometime around February 18th , there must have been a backroom conference that we weren’t invited to. Lots of Hedge Fund types with big BMW’s, throw in some quantitative analysis, computers, and that AI stuff. Abra Cadabra, when you least expect it...code red liquidation. Collusion, front running and promoters are a reality. Momentum trading apps are advertised on the morning shows. There is plenty of analysis available for those who want an explanation, an understanding. Once you learn a few clichés you too can become a social media darling, start your own Blog, get rich! Do we sound jaded? Let’s move on.

The Federal Government is experiencing a forensic audit, spring-cleaning with a power washer. They happen in the private sector routinely. In the end they bring efficiency and productivity. Perhaps “closed for remodeling” is more apt. Throw in a bevy of confusing tariffs and now you can add “under new management”. Don’t forget the interstate lane widening and trillions in new capital outlays from the largest companies in the world. By golly this town is going places! Durable good orders rose 1% in February. Auto production rose 8% in one month! Capital expenditures are thru the roof. Every indication points to accelerating economic growth during the second half of 2025.

EPA administrator Lee Zeldin calls it throwing gold bars off the Titanic as tens of billions are shuffled before the inauguration. Got multi-cultural? Try talking to a truck driver at the rest stop. Mozambique, China, Indonesia, Ukraine. Many with suspect credentials. Accidents are on the rise. $60 Billion of foreign dollars has flowed into our Universities funding key research facilities. What gives? 50% of the Presidents cabinet are from Florida and they have worked together for years. Personal injury attorney’s aka ambulance chasers along with snake oil salesman continue to dominate the advertising airwaves. It’s getting old, someone needs to shame these clowns! Restrictions coming for SNAP food benefits, to many 200lb 10 year olds. Gerald Storch former Toys R Us CEO says tariff fears are over blown by a level of two. Back to work momentum has bolstered commercial real estate. Rents are rising and occupancy now at an estimated 77%. Last year 30 million square feet was taken up! Artificial Intelligence new moto...ten times faster at 1/10 the cost. Federal spending was $4.4 trillion pre-covid now it is $7.4 trillion. Baltimore’s Safe Streets program success! Felons mentoring youth has crime levels down 40%. Fifth graders learning how to build submarines in shop class as 100k tradesman will be needed over next ten years.

The sharks of Wall Street often strike fear. Like a cat playing with its dinner. When its over you realize not much has changed. Long term security comes from being an owner. The Markets have been de risked. The froth scraped off. The dissecting and over analysis will continue. The worst has likely passed, the bad man is gone. It’s a good time for the porch, consider starting smoking again. Put a pot on the stove and watch it boil. That’s it, Relax…

Cloak/abq