The Dividend Cafe - Tuesday - October 21, 2025

Episode Date: October 21, 2025

Market Insights and AI Speculations: October 21st Update In this episode of Dividend Cafe, Brian Szytel from West Palm Beach offers a market recap for October 21st, noting a mixed day with the DOW closing at a record high. He delves into the performance of various indices, and discusses significant movements in gold and crypto prices, highlighting a notable 6% drop in gold. Seitel also shares insights on artificial intelligence, echoing caution by comparing current AI investment exuberance to the 1990s internet bubble. Additionally, he critiques optimistic revenue projections for OpenAI and their dependencies on capital markets for funding. Concluding with commentary on the Federal Reserve's interest rate policies, Szytel emphasizes the importance of market-adjusted rates over static ones. He encourages listeners to reach out with questions and stay informed with future updates from Dividend Cafe. 00:00 Introduction and Market Overview 00:44 Gold and Crypto Market Insights 01:18 Artificial Intelligence: Expectations vs. Reality 02:48 OpenAI's Lofty Promises and Financial Realities 04:53 Investment Strategies and Market Perspectives 05:53 The Fed and Interest Rate Discussion 06:52 Conclusion and Viewer Engagement Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Welcome to the Dividing Cafe, weekly market commentary focused on dividends in your portfolio and dividends in your understanding of economic life. Good evening and thanks for joining Dividend Cafe. This is Tuesday, October the 21st. And Brian Sightel with you here from our West Palm Beach, Florida office here on a beautifully sunny day. And a little bit of a mixed day overall in markets. actually did cap off its record close here. We closed up 218 points. So that's a record closing high. S&P was flat and NASDAQ was down just marginally about 30 points. So benign day overall in stocks with value outperforming and yields one 10 year were down a couple of basis points. So we closed down two basis points at 3.96. So we're now consistently closing below that 4% level

as interest rates have come down here a little bit. The interesting thing just because it's been on such a kind of a one-way street here was the price of gold was down about 6%. That's the worst single session since 2013. What that means to you is that gold goes up and down every day. So I wouldn't read in that a whole lot. Interestingly, the crypto universe was actually up slightly. So if there was a consideration of some sort of fiat currency issue between the two, they've decoupled in that regard. But a day doesn't make a trend. But nonetheless, when it's the biggest down day in 12 years. I figured I'd mention it. So there you have it. A couple of comments today I think are more important on artificial intelligence. We've written about this a good amount.

David did a lovely job in Dividend Cafe on the Friday, a longer form version that you should read through if you haven't already. On the way we're looking at it, it isn't that we're out to get it, and it isn't that we aren't excited about the technology. So that couldn't be further from the truth. But what we are saying is there's some realistic expectations that need to come out of this thing. And yes, it does remind me very much of the late 90s, with the internet bubble because there was a infinity sign of duration when earnings were going to start to pay for the investment that was going to the space back then. Everyone knew that the internet was going to be world changing. And of course, it ended up that way. But the frothiness

that got baked in with extended valuations that ended up turning out very bad for a lot of companies. And even for the big guys, think about the largest, what is now known as Mag 7, And it took them 15 years to grow into those valuations, 15. So that's how expensive it was. And so this era reminds us of that. But that doesn't mean that stocks can't go higher for a considerable period more years. And that happened in the 90s. He basically had every year except for 1990 positive.

That was a huge bull market. And now you've gotten after the 2022 reset of just about a bare market or pretty close of 20% decline. You've now had three really positive years in a row. row, including what this year so far has given us. So all that to say, keep things in perspective here. Is it not a time to chase that performance? So there was a report out from city, actually, believe it or not back in the day. I used to work at this company. But this report was about open AI and the trillion dollars at its promised in computing power over the next five years. That's trillion with a T. And so to put that in perspective, that's 250 gigawatts. And that's needed to power that

by 2033. That would equal about $12.5 trillion. Okay, to just understand that's 40% of the size of our entire economy. So it's pretty far out there. And if you think about the total amount of expenditures that Open AI has promised of about a trillion, they're only expecting about $163 billion of revenue, and that's wet and wear and boots by 2030, meaning that's a very lofty expectation. So if you subtract those two numbers, assuming that Open AI can run with zero employees, and zero offices and zero costs, which, of course, they can't, then they're still short by committing to that trillion dollar of expenditure by $837 billion. So it's silly.

The way that this works is the expectation is the capital markets will be the gift that keeps on giving, that you'll still have investors, you'll still have liquidity through lending, you'll still have actors want to invest in the thesis, and that's where the money will come from. That works fine until it does not work. and it's the same thing that you saw in the run-up of the dot-com era where there wasn't revenues yet associated with it. AI definitely does have revenues, but just the multiple of what is expected to be returned

by those revenues is extremely expensive as our point. And nonetheless, if the strategy is with Open AI to fake it to you make it, which is what one analyst said, I guess that's fair. If you build it, they will come. I guess would be another one that I'll throw out there for this field of dreams fans. But another analyst said something like, if you owe bank a million dollars, that's your problem. You took a loan, okay? If you owe Broadcom 500 billion dollars, that's really their problem.

And we would go so far as to say if the entire system, meaning every technology company you've ever heard of, is all saying the same thing, then that's a lot of people's problem. So for perspective, be aware that dividend growth is a more steady investment paradigm, and also well aware it's more rooted in actual cash flows and earnings. And so times of froth, it may feel a little. less sexy. And most of the other times, it'll be the tortoise where things are the hair, it'll be less volatile. And that's just what we're about. Okay, so the run-up here is fun and neat to see. And again, I'm not out to get it. I sure hope markets don't sell off.

Inevitably, they will. But our point is more just, can you really base an entire investable thesis around the paradigm that I just described? 250 gigawatts needed for a trillion dollar of expenditure that cost $12.5 trillion in electricity cost, where $160 billion of revenue is associated with it. I'm fine if that touches parts of a portfolio, but to say that people are now putting all of their retirement nest egg in this sort of phase of AI is pretty scary to me, in my opinion. So that's my take. Good question in there today was about the Fed and just some frustration with it. Why don't they just pick a rate and set it there? And then the world will oscillate around that. I think that the only thing worse than having an arbitrary rate set by a

committee based on human decisions would be to set a rate that was not able to adjust at all. If you just set the rate at, say, 3% or something and let it be, then that would be even worse. You need to have an open market that fluctuates with changing in paradigms of liquidity, of money supply, of supply, of demand, of goods and services. I'll take an arbitrary setting of it based on some smart people in a room versus just a static rate otherwise. But I know where the question comes from and I actually appreciate it. And it's not rooted without logic. Markets would oscillate around a set rate. But the only problem is the discovery of where the rate should be between buyers and sellers and economic actors in the economy wouldn't be pure if the rate was

just set at a number. So that's our take on it. But with that, I will let you go. I know that was a lot to come at you with here on Tuesday. But I'll be back with you Wednesday. tomorrow on Dividend Cafe and encourage you to reach out with questions. I've got a half a dozen of them here in my inbox. I need to answer. So they're always good and keep them coming. But have a good evening. Thank you again. Bye. Bye. The Bonson Group is a group of investment professionals registered with Hightower Securities LLC, member Finra and SIPC, and with Hightower Advisors, LLC, a registered investment advisor with the SEC. Securities are offered through Hightower Securities LLC. Advisory services are offered through Hightower Advisors LLC. This is not an offer to buy or sell security.

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