The Dividend Cafe - Wednesday - October 15, 2025

Episode Date: October 15, 2025

Market Recap & Insights on AI Investing - October 15 In this episode of Dividend Cafe, Brian provides a market recap for October 15, noting slight changes in major indices and highlighting strong earnings in the financial sector. A positive trend in the yield curve is discussed alongside economic updates, including a stronger-than-expected Empire State Manufacturing Index and a stable Beige Book report from The Fed. Additionally, the episode explores the political influence on private sector companies, particularly defense contractors, and differentiates between the current AI investment situation and the 2008 financial crisis. Listeners are encouraged to read the latest Dividend Cafe for deeper insights into investment strategies. 00:00 Introduction and Tax Filing Reminder 00:23 Market Recap: Daily Performance 01:22 Economic Indicators and Reports 02:24 Government and Private Sector Dynamics 03:47 Artificial Intelligence: Bubble or Not? 05:05 Investment Wisdom and Strategies 06:18 Current Market Sentiments and Conclusion Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Welcome to the Dividend Cafe, weekly market commentary focused on dividends in your portfolio and dividends in your understanding of economic life. Welcome back into Dividend Cafe this Wednesday, October the 15th. And today is the last day to file those tax returns if you've filed an extension. I know we've submitted a lot of them ourselves today, and it's nice to have that behind us in 2024 is a wrap as far as taxes go. So I hope you got yours done. In the meantime, I'll go through a market recap here and then get into some of the meat and potatoes of what I want to talk about related to Adda. On the day, was down 17 points, which essentially these days means it was flat.

S&P was up four tens of a percent. NASDAQ was up two-thirds of a percent. So slightly positive market, almost a repeat of yesterday, where you've got some strong results and earnings from some of the financials, those big money centers, those big brokerage firms are reporting very good activity, both in M&A and trading and margins, all of it, and earnings have been much better than expected in the financial sector. That's a good thing cyclically for the economy, by the way. But you had a little more outperformance on some of the growth-oriented parts of the market,

a little bit under on some of the value names in there. On interest rates, you had a slightly lower rate paradigm on the short end, so you're continuing to see the yield curve steep in just a little bit. Again, positive in financials, positive in the steep of the yield curve. Those are both a positive for the overall market and in the economy. how things are functioning. But we closed on 10-year treasuries at 4.03% on the day. In the economic calendar, you had two things out, although both of them were not necessarily big needle movers. One of them was the Empire State Manufacturing Index for the month of October,

much stronger than expected. And the good news was that you had both strength in new orders and shipments together, as well as employment inside of the report. Again, that's just one region, but nonetheless a positive omen in the manufacturing sector of the economy. You also had in there the beige book from the Fed released. There wasn't a large amount of disparity in the economic numbers this report versus the prior report. And out of all the districts, you had eight of them report either the same or slightly growing areas, and then four of them reporting slightly weaker, but employment was balanced in there. So a sanguine report overall in the beige book from the Fed.

If you recall, there was a couple of days ago where Powell had comments that were much more dovish than otherwise expected. It was right after some of the China, U.S. trade rhetoric started to heat back up again. Some of the things we wanted to mention in there today, there has been more, frankly, much more, of a tendency of this administration to either do direct deals with private sector companies. We've seen that in technology. We've certainly seen that in some of the rare earth mineral companies that are located in the United States. There's reasons for that. Politics aside, that makes sense for national security and defense, but there's also a slippery slip to that.

Today, Treasury Secretary Besson was talking about the need for potential leaning in on defense contractors to do less in stock buybacks and to do more in research. In other words, don't worry so much about patting your own pocketbook and supporting your own stock price, but let's develop new weapons and do more research to do that. And I suppose in theory, the advice is fine. as a nation we would typically want, the focus to be as a fiduciary on the results of the business versus necessarily which direction the stock goes in the short term. But, you know, they have their own obligations to shareholders. They're going to steward that capital as efficiently as

they possibly can and as efficiently as the private market will allow it. And there's a benefit to that. Private markets are far more efficient than public. We know this. So having these different points in which the politics that get involved, whether it's with the independence of the Fed or whether it's with private company leadership, there's a slippery slip to those things for better and for worse. So we're talking about that a little bit. There was a question in there about artificial intelligence and is it a bubble like the 2008? Is it worse than the 2008 bubble? The difference back then in 2008 was that was a systemic issue largely related to credit and liquidity. Okay, so you had borrowers that had taken loans out that they otherwise didn't

deserved to buy homes they couldn't afford and basically a house of cards in the entire system. And everyone was affected. Everyone that has money in a bank and liquidity needs was affected. It was a systemic. There was a contagion risk with it. Artificial intelligence may be a bubble and it may not be. We don't know. But what I can tell you is that it isn't being fueled by leverage and credit.

It is being fueled largely by cash coming into that. So it's less of a levered mania and more of euphoria type of situation. with an investment in an area in which there may or may not be a future revenue stream. And so there will be a point in time at which there has to either be an accretion to companies that have made all of these investments in AI or not. And the market will have to decide whether that's worth it, given the valuations that we're presently dealing with inside of the artificial intelligence situation right now. But we don't see that as necessarily systemic and bringing the entire financial system

and collapse. So different than 2008. And by the way, if you did not. get to read last Friday's dividend cafe, I highly encourage you to read it. I loved it. It was one of my favorite dividend cafes that David has written. There was a theological context to it, which I appreciated very much, and some of the wisdom that was drawn into capital markets today and in the past. And ultimately, building your house on rock is going to be much better for you than building it on sand. And what we mean by it is that if you are investing in the hope of more capital expenditure

and AI and then those stocks going higher for the sake of just more investment and the stocks going higher versus an actual revenue stream than I believe that is a house built on sand. And if you're investing because you have free cash flows that are growing and accruiting to shareholders, we like it in the form of rising dividend streams, but either way, as long as positive earnings are happening, that's a house built on rock and that's a more prudent investment structure for people, especially for your hard and money that you've worked your entire career to save. It needs to be stewarded in a very prudent way and less about gambling or manias or euphoria and much more about cash flows and predictable nature of income and these types of things

that are ever great. So again, feel free to read that. Dividend Cafe, I highly encourage you to do that. The last couple of days, we're into earning season, but it is being overshadowed by some of the rhetoric between China and the U.S., both with regard to trade and negotiations and their different leverage points. And I think until we get through that, along with government shutdown, I don't know that we're going to be anything other than a sideways market. We do have FOMC meeting coming up, and we do have more data that should be coming out in advance of that meeting. So there should be more to talk through then. But with that, I'm going to be back with you tomorrow. I encourage you to reach out with questions. We love them. And if I don't

speak to you, enjoy your evening. And we'll talk to you soon. Thank you. 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 ourselves securities. No investment process is free risk. There is no guarantee that the investment process or investment opportunities referenced TIRN will be profitable. Past performance is not indicative of current or future performance and is not a guarantee.

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