AI Credit Card Spending, Office Real Estate Opportunities, The Fed’s Tough Decision, Huawei Challenges Nvidia, Nasdaq’s Hidden Market Weakness, Municipal Bonds Aren’t Tax-Free & More

Would you let your credit card do your spending for you?

That sounds like a very silly question, but the reality is that credit card companies like Mastercard now have AI bots that can shop for you.

This is crazy to me. People already have enough trouble controlling their spending on credit cards, and now credit card companies are rolling out programs that can do even more shopping for you.

Mastercard has teamed up with a startup called Alchemy, allowing AI to make purchases on your behalf. The credit card companies try to make this sound safe by emphasizing that you can set restrictions, such as how much the AI can spend and what types of products it can purchase. But the bot can still make purchases on its own without consulting you every time.

I suppose there could be some positives. Maybe the AI can find better prices on goods and services or save you time by handling routine purchases. But I still believe there is potentially more harm than good.

There is also a major legal question: If an AI bot makes an inappropriate or unauthorized purchase, who is responsible?

Right now, if you find fraudulent charges on your credit card, you can contact the credit card company. In many cases, the company will investigate the transaction, cancel the card, issue you a new one, and you generally aren't responsible for unauthorized charges.

But what happens when you have authorized the credit card company to let an AI bot make purchases for you? If the bot makes a purchase you don't want, it could become much more difficult to determine whether that transaction was fraudulent or whether you simply gave the AI too much authority.

With billions and even trillions of dollars being invested into artificial intelligence, it appears that many companies are trying to find ways to turn those enormous investments into profits. As the AI revolution continues, we're entering some pretty unknown waters, and I think we need to be careful about giving AI systems the authority to spend our money for us.

Could now be the time to start looking at office real estate?

For years, office real estate has been one of the most unpopular areas of the market. Remote work, rising interest rates, concerns about vacancies and, more recently, AI have all weighed heavily on office properties.

But I think there are some signs that the story may be starting to change. Office usage in 10 major cities, according to the Kastle index, has reached a post-pandemic high of roughly 67%. On busy days, badge swipes at prime office buildings are regularly within 10% of pre-pandemic levels.

At the same time, the amount of office space available is shrinking. Older buildings are being demolished or converted into housing and other uses, while tenants are leasing more space. It’s currently estimated that there is only 19.7 million square feet of office space under construction nationally, close to the lowest level on record. This comes as Cushman & Wakefield say tenant are chomping up the most space since 2020.

And despite concerns that AI will eliminate the need for office workers, some of the biggest AI companies are actually taking significant amounts of office space. Anthropic, the company behind Claude, recently signed a long-term lease for a 16-story Manhattan building with space for approximately 1,700 desks. This is more than triple Anthropic’s New York based employees at the beginning of the year.

Manhattan is particularly interesting. Prime office space is leasing for roughly $95 per square foot, about 6% above pre-pandemic levels, while some premier locations can command more than $300 per square foot. More than 80% of the 7.7 million square feet of prime office space currently under construction is already leased.

The interesting part for investors is that office REITs still appear to be priced for a very different future.

SL Green & BXP are trading about 50% below pre Covid levels, while Hudson Pacific Properties is down about 95%. Based on expected 2026 funds from operations, all three are also trading at lower valuation multiples than they did before the pandemic.

That doesn’t mean office real estate is suddenly without risk. A recession could hurt demand, and higher interest rates could make refinancing existing debt much more expensive. AI could also eventually have a meaningful impact on the number of office workers. But this is exactly why I think it is worth starting to look.

When an industry has been beaten down for years, you don't necessarily need everything to return to the way it was before. You just need the fundamentals to improve enough that the current valuation no longer makes sense. For us, I would not be interested in buying physical office buildings or taking on the risks of individual properties. If we were going to invest in this area, we would only look at publicly traded REITs with strong balance sheets, manageable debt, quality properties and attractive valuations.

Sometimes the best opportunities are found in areas that investors have spent years avoiding.

The Fed Has a Tough Decision Ahead

Inflation is still sticky, and I think the Federal Reserve has a difficult road ahead.

The good news is that inflation came in lighter than expected in August. The Fed’s preferred inflation gauge, the Personal Consumption Expenditures index, rose 3.4% over the last year, while core PCE, which excludes food and energy, rose 3.0%. That was below economists’ expectations of 3.7% and 3.3%, respectively.

But 3.0% core inflation is still well above the Fed’s 2% target. And there is another problem that could make inflation more difficult to control: energy.

We are starting to see oil shipments improve as more crude makes its way through alternative routes and the Strait of Hormuz becomes more navigable. In fact, crude shipments through the Strait of Hormuz reached a seven-day average of 13.5 million barrels per day as of Monday, matching the prewar baseline. More broadly, crude oil shipments from the Middle East, which includes the Persian Gulf and Red Sea, have at times exceeded prewar levels. As of Monday, the region’s seven-day average reached 19.5 million barrels per day, well above the prewar baseline of roughly 17 million barrels per day.

That sounds like great news, but there is a major distinction between getting crude oil moving again and getting refined products to the market. Refined product shipments through the Strait of Hormuz are averaging just 677,000 barrels per day over the past seven days as of Monday, compared with 3.6 million barrels per day before the war

Diesel, gasoline and other refined products remain extremely tight. Refining capacity has been damaged, inventories are low and refiners around the world are already operating under significant pressure. That means even if the price of crude oil comes down, consumers may not see the same relief at the pump because the bigger problem is increasingly what happens after the crude reaches the refinery.

This is particularly concerning because diesel touches almost everything in the economy. Trucks, agriculture, construction and manufacturing all depend heavily on diesel. Higher diesel prices eventually work their way through transportation and production costs and can ultimately show up in the prices consumers pay.

And the Fed isn't dealing with a weak economy that gives it an obvious reason to cut rates aggressively. Second-quarter GDP was revised up from 1.5% to 2.2%, and ADP reported that private employers added 90,000 jobs in September, above expectations.

So here is the Fed’s problem: inflation is still above target, the economy is growing, the labor market is still producing jobs, and there are elevated inflation concerns coming from the refined fuel crisis.

The latest inflation report is certainly encouraging, but I don't think we can declare victory. If crude shipments continue to improve, that will help. But until refined products become more readily available and fuel prices start coming down, inflation could remain stubbornly above the Fed’s 2% target.

For now, I think the biggest thing to watch isn't just the price of crude oil. Watch what is happening with diesel, gasoline and refining capacity. That may tell us much more about where inflation is headed next.

Will Chinese Company Huawei Take Business From Nvidia?

I’m still concerned about the price of Nvidia’s stock and its valuation, but I do not want to see the company lose business to a Chinese competitor called Huawei.

If you go back to the Biden administration, you may remember that China was restricted from buying Nvidia’s most advanced AI chips. Chinese companies, including Huawei, were also restricted from accessing the advanced equipment needed to manufacture more sophisticated chips.

Huawei has not given up. In fact, the company plans to introduce two new AI chips next year, with additional products reportedly planned for 2028 and 2029.

The chipmaking technology Huawei is using today is still behind Nvidia’s, but the company is moving aggressively to close that gap. Huawei also has the support of Beijing and other Chinese technology companies, which could give it additional resources to develop a domestic AI chip ecosystem.

For Nvidia, the question is how quickly Huawei can catch up and whether restrictions on China ultimately create a long-term competitor rather than simply limiting China’s access to Nvidia’s technology.

The Nasdaq climbed in September, but the market underneath it is becoming concerning

The Nasdaq Composite gained about 2% in September, continuing to outperform much of the broader market. The problem is that when you look beneath the headline numbers, the market is telling a very different story.

On Wednesday, for example, the Nasdaq was up while new 52-week lows were overwhelming new highs. On the Nasdaq, 294 stocks were hitting new 52-week lows compared with only 84 making new highs. That is a pretty significant divergence when the index itself is moving higher.

We also saw an incredible gap between the cap-weighted S&P 500 and the equal-weighted S&P 500 during September. According to Bespoke Investment Group, the equal-weighted index underperformed the traditional S&P 500 by 4.6 percentage points during the month. Looking back to 2003, when both ETFs began trading, there have been only two other months when the equal-weighted index underperformed by a wider margin. That means the largest companies were doing much better than the average company in the index.

This is where I think we need to pay attention to what happened during the dot-com bubble. Back in 2000, the S&P 500 reached its peak while only a very small number of stocks were actually making new highs. In May of this year, we saw a remarkably similar situation. The S&P 500 hit a record, but only 20 companies in the index were also hitting their own all-time highs. Michael Hartnett of Bank of America pointed out that 20 stocks hitting new highs was also what occurred at the top of the internet bubble in March 2000.

The big concern that keeps coming up is the growing concentration in the major indexes. Look at the S&P 500: roughly 40% of the index is represented by its 10 largest companies. Nvidia alone accounts for around 8%, Apple around 7%, and Microsoft about 5.5%. What’s even more interesting is that nearly all of the remaining companies in the top 10 are tied in some way to the AI theme. They include Amazon, Alphabet, Meta, Broadcom, Tesla and Micron, with Berkshire Hathaway being the only major exception. AMD is also knocking on the door of the top 10. With a market cap around $1.01 trillion, AMD is now getting close to Berkshire Hathaway’s roughly $1.07 trillion market cap.

The Nasdaq Composite is even more concentrated. Using the Fidelity Nasdaq Composite ETF as a proxy for the index, the 10 largest positions represented close to 60% of the portfolio. Nvidia was 11.7%, Apple 10.3%, Microsoft 8.1%, Amazon 5.7%, and Alphabet's two share classes together represented another 8.3%. Rounding out the top 10 was Broadcom, Meta, Tesla, SpaceX, and Micron.

So, when Nvidia, Apple, Microsoft, Amazon, Alphabet and the other mega-cap technology companies are performing well, they can make the overall market look much healthier than the average stock actually is.

That is exactly why I think investors need to look beyond the Nasdaq and S&P 500 headlines. An index can continue climbing because an increasingly small group of very large companies is carrying more and more of the weight. The issue for many index investors is the opposite can be true as well. The market cap weighted indexes could fall even as the average stock does well.

We've seen this movie before. The circumstances are different, the companies are different and the underlying businesses are much stronger today, but the market concentration and deteriorating breadth are similarities that deserve attention.

Financial Planning: Municipal Bonds Aren’t Entirely Tax-Free

Municipal bonds are often called “tax-free,” but that can be misleading. The interest you receive is generally tax-free, but the entire return on the bond is not necessarily tax-free. For example, when interest rates rise, older municipal bonds with lower interest payments can be purchased for less than their $100 face value. If you buy a bond for $90 and eventually receive $100 when it matures, you may have taxable income on that $10 increase, even though the interest payments along the way are tax-free. The other important consideration is cash flow. A bond purchased at a discount may have a relatively low interest payment, so the amount of cash you receive each year can be much lower than the current interest rates you see advertised. Part of your expected return may instead come from the bond increasing back toward its $100 face value. For investors who need income, it is therefore important to look at how much cash the bond actually pays you each year, not just its stated yield or the fact that the interest is tax-free.

The SEC sets path for tokenized stocks

I’m going to say right off the bat: I think this is a terrible idea, and I’m very disappointed with SEC Chairman Paul Atkins, who appears to do whatever the President wants him to do.

First off, look up the definition of a token. A token is a physical object, digital code, or symbol that represents something else. So, what in the world do we need tokens for to represent stocks that already have their own trading symbols?

The only reason I can come up with is that it creates another avenue for speculation, moving us further away from the basic idea of investing in stocks, which should be owning a small piece of a large company.

The SEC’s new “Innovation Exemption” does put some guardrails around this. Third-party tokenized stocks are subject to an issuer objection process, and companies must have an opportunity to prevent their securities from trading on these tokenized venues. There is also some confusion as some people are saying SEC approved tokens will provide holders with the same rights and privileges as traditional securities, including dividends and voting rights. Personally, I don’t see how that is possible.

But that raises an even bigger question: Why would a public company want to participate in this at all? If investors can simply buy the actual stock, why create another instrument representing that stock? And even if the SEC requires tokenized shares to carry equivalent rights, I still question what problem this is solving for the average investor.

To me, this looks like another step toward turning investing into trading and speculation. We already have plenty of ways to buy stocks. Why do we need a digital token sitting between the investor and the actual ownership of the company?

My bigger concern is that financial guardrails throughout our financial system appear to be disappearing. Financial innovation can certainly have benefits, but when new products become more complicated and harder for ordinary investors to understand, the potential for fraud, confusion and significant losses increases.

I believe investors should understand exactly what they own, what rights they have and who is ultimately responsible for the asset. When you can simply buy the stock itself, I have a hard time understanding why we need a token to represent it.

Paper bottles replacing aluminum are looking more like a reality

With the Iran war and tariffs currently in place, aluminum prices have gone through the roof, and for beer and soft drink makers, this is reducing profit margins. Unfortunately, there appears to be no end in sight for these companies.

Paper containers have tried to replace aluminum and glass bottles before, but the coating inside the containers made them difficult to recycle. To the rescue comes a company called Pulpex. The company has created a paper container with a spray-on liner that holds the fluid but does not contain plastic, allowing the container to be recycled as is.

This is a huge market, with the world using roughly 2 trillion bottles and cans every year. Not only could this reduce costs for beverage manufacturers, but because these containers are lighter, they could also reduce shipping costs.

The one downside is that the containers reportedly have a shelf life of only about two years.

The United States has approximately 800 million acres of forest, of which about 36% goes toward paper production. It was interesting to learn that roughly 39% of paper comes from recycled paper. Over the years, the amount of paper we use has dropped dramatically as electronics have eliminated many traditional uses for paper, such as daily newspapers, which I still receive because I enjoy reading the newspaper rather than reading it electronically.

One company that looks interesting in the packaging space is International Paper, which trades under the symbol IP.

The stock currently trades around $34 a share, and over the last 10 years, the stock is down about 25%. The company does pay a $1.85 annual dividend, which gives it a current yield of approximately 5.4%.

Investing in this company probably would not be about a quick gain. Instead, it could be a long-term investment that provides a nice dividend yield while you wait for the stock to potentially increase in value.

Shortage of oil tankers is also driving up oil prices

The shortage of oil has driven the price of crude oil to around $90–$100 a barrel, but part of that increase is also coming from the cost of transporting the oil. Oil tankers are in short supply, and because much of the global tanker fleet is already being utilized, daily tanker rates are hitting record highs.

The cost of using an oil tanker in the Persian Gulf and through the Strait of Hormuz is now exceeding $1 million a day. Adding to the problem, some tankers are choosing to avoid the Strait of Hormuz and travel around the Cape of Good Hope in South Africa. That route can cost roughly $1 million more per trip per ship, while also keeping the vessels tied up for about two additional weeks.

As long as the war with Iran continues, we likely won’t see much relief in the cost of transporting oil. Tanker operators are either taking on higher-risk routes through the region or much longer routes around Africa, and both options come with significantly higher costs.

Jobs Report Gives the Fed a Reason to Hold Rates

The headline number was weak, with the U.S. economy adding just 29,000 jobs in September compared with expectations for roughly 84,000. In addition to the weakness in September, previous months were revised lower. August payroll growth was revised down to 133,000 jobs, while July was revised from a gain to a loss of 10,000 jobs. In total, the revisions reduced previously reported payroll growth by 60,000 jobs.

The unemployment rate also ticked up to 4.2% from 4.1%. On the surface, that would suggest the labor market is weakening. However, when you look underneath the headline, the report still had some positives.

There are still several areas of the economy showing strength. Health care added 17,000 jobs, construction added 11,000, and manufacturing added another 9,000. Manufacturing employment is now up 72,000 since its recent low in December 2025. Construction has also continued to add jobs and over the last 12 months the sector has an added an average of 10k jobs per month. Private-sector employment increased by 46,000 jobs, while government employment declined by 17,000.

The unemployment rate at 4.2% is also not particularly alarming by historical standards, especially considering it has remained between 4.1% and 4.3% since March. The labor force participation rate actually increased to 61.8%, meaning some of the increase in unemployment came from more people entering the labor force rather than a major wave of layoffs.

The area I am watching more closely is wages. Average hourly earnings increased just 0.1% in September, and over the past year, wages are up just 3.0%. That is down from 3.1% in August and the lowest level since May 2021. The other major problem with this number is that it is below the most recent CPI report from August that showed inflation was 3.4%. If CPI remains around this level in September, it will mean real wages would be negative for the second month in a row.

Put it all together, and I think this report gives the Fed a good reason to hold rates steady. The labor market is clearly cooling, but it is not collapsing. Cutting rates aggressively when the economy is still producing jobs, unemployment is only 4.2%, and wages are growing 3% would risk reigniting some of the inflation pressures the Fed has been trying to eliminate. On the other side hiking too aggressively could jeopardize the labor market and economic growth. After the report was released, market-implied odds that the Fed will hold rates steady at its Oct. 27-28 meeting jumped to 82.8%