01 Sep 1st September 2025
Index Movement Last Week
| S&P500 | -0.0% |
| Nasdaq | -0.4% |
| Aussie ASX200 | +0.0% |
It seems not a day goes by without some kind of action from President Trump. Last week it was his fight with Fed member Lisa Cook. He alleges she lied on a mortgage application before she become a Fed member and that means she should be fired and replaced by someone who is more likely to do what Trump wants.
And that is to lower interest rates because he thinks that will increase property prices and that is what his voters want. I’m not so sure. Mortgages depend on long term bond yields far more than the overnight cash rate and bond yields are not reacting to this story so I suspect it is all short term headlines with no substance.
Lisa Cook has filed a lawsuit challenging Trumps attempts to have her fired so this is all getting amusing.
Almost as amusing as Elon Musk saying he will start a company called Macrohard under his AI company xAI as he thinks everything that is done by Microsoft (see where he got his name from) can be done by AI.
Musk is always forming companies with fun names so I doubt this is serious. But I do believe he is on the right track.
I’m becoming increasingly convinced AI will change everything we know about computers. I suspect the days of the desktop computer are gone. In the not too distant future we will just have a small box connected to a screen. All the compute power will occur in the cloud and we will interact by voice with the box telling it what we want and AI will do the rest.
This is why everyone is so excited about AI and the future of profits. Right now the vast majority of those profits are going the way of NVidia.
In its earnings release nVidia said revenue was up 56% on last year and somehow it was up 6% on just last quarter. The growth is still happening.
But we also learnt 39% of revenue comes from just two customers. That is somewhat of a concern.
But maybe not as concerning for Trump as hearing the appeals court has upheld the decision that said his tariffs are illegal. This battle will now head to the Supreme Court in October for a final decision. It could go either way but Trump has been stacking the Supreme Court with supporters so I suspect they will give a different verdict.
Mind you, it does not matter to stock prices which made another new all-time high last week. Economic data last week showed a growing economy, earnings season was exceptionally strong and the Fed is signaling lower rates to come. It is all very supportive of higher prices
August has a reputation for selling. It did not occur this year, but we did see rotation out of winners and into losers and small caps. Our Top 30 Strategy (small-cap focus) made almost 13% last month and benefitted from this rotation. Diversity of purchases is a sign of a healthy Bull market.
Lastly this week is a different idea for income oriented investors
Advanced Flower Capital Group (AFCG)
AFCG is a cannabis REIT. It makes loans to companies in the canabis industry. But it has fallen on hard times, primarily because the companies it lends to are having trouble paying them back.
It has put 14% of its loan book on the reserve of possible losses and the share price has been falling for quite some time
That’s the bad news. Now the good news
It is now trading at less than book value and holds a 12% trailing dividend yield. The market is pricing this stock expecting more bad news to come.
What caught my eye was a Director making on market purchases recently. He bought $1.6million of stock earlier in the month and backed that up with another $2.2million last week. He clearly sees things differently to the market.
There is a potential catalyst in the wings too. Cannabis is currently a level 1 drug which means companies cannot deduct operating expenses from revenue. That makes profits hard and also makes it hard to find the cash to repay the loans.
But Trump has said he wants to rerate Cannabis as level 3. That would instantly change the cash flow of all of AFCG customers and then they will have extra cash to repay these loans. In turn it reverses the bad debt provisions and increases cash flow to AFCG.
A director making these purchaes now says to me that he knows something is coming.
It makes AFCG an attractive income play with a potential catalyst to double the stock price.
But, it isn’t without risk. If you do go for it then you need to be patient and it is possible the dividend is reduced a bit if no rescheduling of Cannabis to level 3 is forthcoming.
Warning
Stock values can go down as well as up. It is possible to lose 100% of your investment in a stock. Any advice given by Capital 19 is general advice only and does not take your personal circumstances into account and might not be suitable for you.