Concerning AI Deals, A Misleading 2025 Trade Deficit, Why Automobile Insurance Is So High, The Goal of Tax Planning & More

These massive AI deals look concerning

The numbers are exciting when companies like Meta or OpenAI announce they'll be purchasing billions of dollars in chips or compute power from companies like Nvidia or AMD, but there always seems to be a catch. Most recently, Meta announced it entered a multiyear deal with AMD to deploy up to 6 gigawatts of the company’s graphics processing units for artificial intelligence data centers and includes use of AI-optimized central processing units, or CPUs. This deal comes a week after Meta committed to using millions of Nvidia's processors to power its AI expansion. While I have my concerns with all the money Meta is spending, my bigger concern with this new AMD deal is the use of stock warrants. Full details for the deal weren't announced, but we did see the deal includes a performance-based warrant for Meta to acquire 160 million AMD shares, about 10% of the company. The first tranche vests when the first 1GW of Instinct GPUs are shipped. Other tranches vest as Meta, makes purchases to 6GW. Vesting is also tied to stock price thresholds for AMD and technical and commercial milestones for Meta. AMD also struck a similar deal with OpenAI where they received warrants to acquire 160 million shares of AMD and it was tied to deployment and stock price benchmarks. The reason this is concerning is because of the potential dilution and again the circular nature of these deals. Essentially these companies are saying they will spend $30 B buying our products and we will give you $30 B in stock warrants back. Stock warrants give holders the right but not the obligation to buy or sell shares at specific strike price before an expiration date. If they are exercised, it creates new stock, which would dilute current shareholders. Based on what I have seen, the exercise price for these warrants is $0.01. Ultimately, I just don't believe this will end well for all players in this space, and I think there is a lot of money that will be lost by investors. 

2025 trade deficit looks deceiving

Some people are saying that the tariffs didn't work because the trade deficit in 2025 only fell to about $901.5 B from just over $903 B in 2024. However, if you break down the numbers quarter by a quarter, it tells a different story. The first three months of the year, there was a $400 billion trade deficit, but each quarter after that it began to decline. In the second quarter, it fell drastically to $180 billion. There wasn't much of a change in the third quarter with a slight drop to $175 billion and then in the fourth quarter there was a drop to $145 billion. We try to explain to people that the US economy at $31.5 trillion is like a big ship in the ocean; it cannot turn quickly. If people would be patient, I think they would see by the end of 2026 there would be further progress and I believe it's possible the trade deficit could see a decline to somewhere around $600-$700 billion based on the fourth quarter of 2025. I know there’s a snafu with the Supreme Court ruling that the International Emergency Economic Powers Act, which was used in the first quarter last year to implement many of the tariffs, was ruled illegal. But there are other ways to impose tariffs such as section 122 of the Trade Act of 1974 or section 301 of the Trade Act that the president used in his first term. Also available is section 232 of the Trade Expansion Act of 1962. I don't believe the Supreme Court ruling will lead to an end of tariffs as the Administration will look at these other avenues. One major positive from these tariffs has been the announcements of various trade deals that have resulted in trillions of dollars promised by other countries to build manufacturing and other things in our economy.

Why is automobile insurance so high?

Your first thought may be the insurance companies are gouging their customers just to make big profits. First off, insurance companies are generally public companies that have shareholders who would not be investing in their company if it was losing money and not paying dividends. The high cost of premiums is not the insurance companies' fault as in recent years things have really changed. Over the past five years, physical damage costs have increased by 47%. This is because of the higher price of cars and all the extra bells and whistles that add up when there’s damage to a vehicle. Bodily injury claims are up 52% over the last five years because of the vast amount of new personal injury lawyers who have come on the scene and are pushing for higher settlements, even on small fender benders. Around 95% of these cases are settled and do not go to court. Many of your less reputable attorneys know this and hold the insurance companies’ hostage. Either settle up with us now or go to court and spend a lot more money and time. Unfortunately, if you’re a responsible driver that makes your premium payments, you are helping absorb the cost of uninsured and underinsured motorists which is up 72%. I’m not a big person for government regulation, but I do believe governments need to step in and verify that all people on the road have auto insurance and a reasonable amount. There’s a trend starting in Florida, which is tort reform that has reduced litigation, and the top five insurance companies in the state have requested rate reductions of 5.9%. There is something in the auto insurance industry called fender bender litigation and this tort reform would help states like New York, California and other states to prevent insurance companies from having to pay ridiculous settlements for little dings and dents and fake injuries. Wouldn’t it be nice if the state of California passed laws to help consumers to pay less for auto insurance?

Financial Planning: What Is the Goal of Tax Planning?

Most people would assume the goal of tax planning is simply to reduce taxes, or even to reduce lifetime taxes, but that should not be the focus.  The true purpose of tax planning is to increase the level of after-tax income by intentionally managing assets and income sources. If the objective were merely to pay less in taxes, the solution would be simple: stop earning money. But earning less would also leave you with fewer resources and less freedom. What people ultimately want is more net income, more access to money, because that provides flexibility, security, and the ability to live life on their terms. Effective tax planning achieves this by building assets and income streams and structuring them in a way that allows you to access them efficiently. This means investing in the right types of assets, placing them in the right types of accounts, adjusting the strategy over time as income and tax laws change, and withdrawing funds at the right time and in the right manner. When you understand that the true purpose of tax planning is to maximize after-tax access to wealth, not merely minimize taxes, you make better decisions that actually improve your financial life.

OpenAI announces huge cuts to infrastructure commitments

This was announced last Friday after the market closed, and I was surprised to see there wasn't much response come Monday morning considering it was a massive change. OpenAI is now telling investors it is expecting roughly $600 billion in total computed spend by 2030, which compares to the previous target of $1.4 trillion. I would have to imagine this would hurt future demand for chipmakers like Nvidia or a company like Microsoft that has over 40% of its commercial cloud backlog tied to OpenAI. This may sound crazy, but even with the huge cut in expected outlays, I still wonder if OpenAI will be able to achieve that target. The company has an ambitious goal of $280 B in revenue in 2030 and if that is not tracking appropriately over the next couple of years, they could announce further cuts to their spending commitments. I say this is an ambitious revenue target because the company had just $13.1 B in revenue last year, and there are still major questions around monetization. We also can't forget that 2030 is now just four years away! OpenAI has been able to raise massive amounts of money considering the fact it is finalizing a funding round that could total more than $100 B, but it continues to burn through cash as last year it burned through $8 B. Another concern with the funding is whether or not is circular. Nvidia is reportedly in discussions to invest up to $30 B as part of the round that could value the company at $730 B. I continue to say that AI is here to stay, but there remain major questions around who the winners will be and how much of the money being invested today will ultimately be wasted capital. 

The Seattle Seahawks won the Super Bowl, now they’re for sale

The Seattle Seahawks were purchased back in 1997 by the late Paul Allen for $194 million. Paul Allen passed away in 2018, and the Seattle Seahawks franchise was placed into a trust that was run by his sister Jody Allen. In the trust there’s a directive to her to sell off the sports assets, including the Seattle Seahawks, and the proceeds are to go to charity. Since 2018, the ownership by the trust has been out of compliance with NFL rules, which require that an individual control and own the franchise rather than an entity, such as a trust. But now the league commissioner, Roger Goodell, is saying the time has come to sell the team and get back into compliance. What will the two-time Super Bowl winning team sell for? Apparently anywhere between $6 billion to as high as $10 billion. That is based on two things. First, in 2023 the Washington Commanders sold for $6.05 billion, an all-time record. Also, in the last few years, there have been few sales of minority stakes in NFL teams that have valued them around $10 billion. Besides the recent Super Bowl win helping the value of the team, the Seattle Seahawks have a young coach, Mike Macdonald, who is just 38 years old. They also have Sam Darnold, a 28-year-old quarterback, and the NFL's number one defense. It is estimated that the Seattle Seahawks are worth somewhere between $6.5 billion to $6.9 billion, but it could go for more than that because it is not very often that an NFL franchise is up for sale. Perhaps we will see a bidding war like we saw for Warner Brothers, where Paramount and Netflix have driven up the price of the company. If you’re wondering what the return on investment was for Paul Allan, if it sells on the low side of $6.5 billion, the 18-year return would be just over 3300%. Not a bad return if you had $194 million laying around back in 1997.

Walmart is no longer the top US company when it comes to sales

Nobody or no company stays on top forever and for Walmart it was the top company based on revenue in the United States for nearly 20 years. They claimed the top spot in 2001 when they overtook Exxon Mobil. For the next eight years, the title went back-and-forth, probably partly due to the up-and-down movements in the price of oil. But since 2009, Walmart has held that spot and bragged about it even using it when hiring employees and negotiating deals. The title of the top revenue generator in the United States now goes to you guessed it, Amazon. Amazon has been gaining ground for years now with higher sales growth than Walmart and has now taken the number one spot with $716.9 billion in sales for the most recent full year. This was just above Walmart’s $713.2 billion in sales. Even though 72% of US households reported purchasing groceries at Walmart, the giant retailer only grew sales at 4.7% compared with Amazon's growth of 12.4%. Going forward, I don’t believe Walmart will be able to take that top spot back from Amazon. Even though Walmart has done extremely well lately with their online sales, they just can’t compete with the vast amount of sales that Amazon does from virtually every product you can think of including cars and obviously streaming on prime. Amazon also has its massive cloud business that Walmart does not compete with. It is possible in the next few years that we could see Amazon become the first company to hit $1 trillion a year in sales.

The bull case for gold

After gold surged over 60% in 2025 and is now up around another 20% in 2026, investors continue to wonder if they should chase the rally higher. There are some potential bullish positions that could allow for gold to run further. First, is central bank buying. At the end of 2025, it is expected that gold accounted for 25% of central bank reserves, which compared to just 10% in 2017. This comes as countries like China have shifted focus away from US dollars and more towards the shiny metal. It appears that rather than selling US Treasuries en masse, central banks across the globe are letting their bond holdings mature and then purchasing gold with those proceeds. For comparison purposes, the U.S. dollar now accounts for about 57% of central bank reserves, versus 64%back in 2017. As Beijing reprioritizes making the yuan a global reserve currency, which as a side note I don’t think is likely, they are reportedly telling state-owned banks to pivot more away from U.S. Treasuries towards gold. The second point that could push gold higher is geopolitical risks that include continued problems with Iran, Russia and Ukraine, and trade tensions. Finally, some hedge fund managers like Ray Dalio have expressed a belief that individuals should hold a portion of their assets in gold with Dalio recommending a 5% to15% allocation. According to J.P. Morgan an increase from the current allocation of 3% to 3.5% would push gold prices to $6,000. An increase to 4.6% could push prices to $8,500. Ultimately, this all sounds nice, but my concern again is that this is just a piece of metal that is only worth what the next person is willing to pay for it. There is no cash flow, earnings, or sales to justify an intrinsic value. While central banks have bought gold over the past few years, that does not mean they will continue to push their allocations higher and with the run-up, I wonder if some of them would explore locking in profits and turning into net sellers. For individuals the same could hold true as people may also look to lock in profits after the big run higher. Many people view gold as a safe asset, but don’t forget there can be massive declines as well. From 1980 to 1982, gold fell about 57%; from 2011-2015, gold fell about 45%, and during the financial crisis in 2008, gold fell 25%. Ultimately, just because an asset has performed well in recent years does not mean that it will continue. Personally, I don’t hold any gold, and I would recommend being cautious after such a large increase. 

Should Tesla car owners be worried?

Elon Musk seems to be focusing his attention on the next thing for the company, which is robots. The robot from Tesla is named Optimus and it is 5'8" tall and weighs 125 pounds. It can carry 45 pounds and has a top walking speed of 5 mph. I worry because usually very smart people that are innovators like himself get bored with what they have built and they’re always looking for the next new exciting thing. This happens a lot with entrepreneurs who create something, but don’t like to run a normal business. It is concerning in this case because the cars are currently the earnings and cash flow driver and if they lose interest in that business, it could cause problems for Tesla stock. We also know the tax credit for electric vehicles is gone, and the car sales have been declining for Tesla. However, you may not be aware that in early 2026 they will be stopping the production of the Model S and Model X SUV. The reason for that is they want to use the factory for robotic production. I also noticed that currently around the country there are still only 77,000 charging stations, which doesn’t sound like a lot to me. By the end of 2026 they’re only expected to increase to 85,000 to 90,000. Time will tell, but I would not be surprised if Tesla's car business became the orphan child as Elon Musk focuses more on his other exciting businesses like SpaceX and robotics.

Looks like CEOs jobs are not as safe as they once were

Being a Chief Executive Officer of a large company was a pretty secure job unless you really lost the company a lot of money or did something really out of line. According to a Harvard business study, they say the average CEO of a large corporation works roughly 63 hours a week. But that doesn’t seem to be enough any longer because the turnover rate for CEOs is now the highest it’s been in over 10 years. Looking at the 1500 largest publicly traded companies in the United States, approximately one in nine CEOs were replaced by someone else. I do worry because they’re not being replaced with people with more experience and instead it appears the opposite holds true. It was found that incoming CEOs' average age is now 54 years old, which is down from 56 years old one year ago. It was also surprising that it was the first time being a CEO for roughly 80% of the previous year’s 168 new CEOs. Roughly 66% of them had never served on a corporate board and had no prior experience running a public company. It was also pointed out that 9% of the new appointments went to women which was a decline from 15% the previous year. Sometimes new blood is good because it can bring in different ideas, but also in the future it can cause problems because the lack of experience can cause a CEO to take risks that they did not understand.